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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 21, 1998
PROFFITT'S CREDIT CARD MASTER TRUST
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PROFFITT'S CREDIT CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Nevada 333-48739 86-0852332
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
P.O. Box 20080, Jackson, Mississippi 39289
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(Addresses of Principal Executive Offices, including Zip Code)
(601) 968-4400
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(Registrant's Telephone Number, including Area Code)
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ITEM 5. OTHER EVENTS.
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Pursuant to the Prospectus Supplement dated May 14, 1998 to the Prospectus
dated April 17, 1998 filed with Registration Statement No. 333-48739 and 333-
48739-01 on Form S-3, the Proffitt's Credit Card Master Trust issued on May 21,
1998 $200,000,000 6.00% Class A Certificates, Series 1998-2 and $21,500,000
6.15% Class B Certificates, Series 1998-2.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS.
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(c) Exhibits.
The following exhibits are filed herewith:
Exhibit No. Description
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1.1 Underwriting Agreement dated as of May 14, 1998 by
and among Proffitt's Credit Corporation and
NationsBanc Montgomery Securities LLC as
Representative of the Several Underwriters
5.1 Opinion and consent of Alston & Bird LLP with
respect to legality
8.1 Opinion and consent of Alston & Bird LLP with
respect to Federal income tax matters
23.1 Consent of Alston & Bird LLP (included in its
opinion filed as Exhibit 5.1)
24.1 Consent of Alston & Bird LLP (included in its
opinion filed as Exhibit 8.1)
99.1 Series 1998-2 Supplement to the Master Pooling and
Servicing Agreement dated as of May 21, 1998 among
Proffitt's Credit Corporation, as Transferor,
Proffitt's, Inc., as Servicer, and Norwest Bank
Minnesota, National Association, as Trustee
99.2 Other Expenses of Issuance and Distribution
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROFFITT'S CREDIT CORPORATION
(REGISTRANT)
/s/ Douglas E. Coltharp
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Douglas E. Coltharp
President
Date: June 29, 1998
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INDEX TO EXHIBITS
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Exhibit
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1.1 Underwriting Agreement dated as of May 14, 1998 by and among
Proffitt's Credit Corporation and NationsBanc Montgomery
Securities LLC as Representative of the Several Underwriters
5.1 Opinion and consent of Alston & Bird LLP with respect to legality
8.1 Opinion and consent of Alston & Bird LLP with respect to Federal
income tax matters
23.1 Consent of Alston & Bird LLP (included in its opinion filed as
Exhibit 5.1)
24.1 Consent of Alston & Bird LLP (included in its opinion filed as
Exhibit 8.1)
99.1 Series 1998-2 Supplement to the Master Pooling and Servicing
Agreement dated as of May 21, 1998 among Proffitt's Credit
Corporation, as Transferor, Proffitt's, Inc., as Servicer, and
Norwest Bank Minnesota, National Association, as Trustee
99.2 Other Expenses of Issuance and Distribution
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Exhibit 1.1
Underwriting Agreement dated as of May 14, 1998 by and among
Proffitt's Credit Corporation and NationsBanc Montgomery Securities LLC,
as Representative of the Several Underwriters
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PROFFITT'S CREDIT CORPORATION
TRANSFEROR
PROFFITT'S CREDIT CARD MASTER TRUST
May 14, 1998
UNDERWRITING AGREEMENT
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NationsBanc Montgomery Securities LLC
As Representative
(the "Representative") of the
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Several Underwriters
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
1. Introductory. Proffitt's Credit Corporation (the "Transferor") has
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formed a master trust entitled the Proffitt's Credit Card Master Trust (the
"Trust"), which has issued and will issue, from time to time, asset backed
securities ("Securities") in one or more series (each, a "Series"). Each
Security evidences and will evidence a fractional, undivided percentage interest
in the Trust. The property of the Trust includes and will include receivables
(the "Receivables") generated from time to time in a portfolio of credit card
accounts owned by an affiliate of the Transferor (the "Accounts"), collections
thereon and certain related property to be conveyed to the Trust by the
Transferor (the "Trust Property").
The Transferor entered into the Master Pooling and Servicing Agreement,
dated as of August 21, 1997 (as amended or supplemented, the "Pooling and
Servicing Agreement") among the Transferor, Norwest Bank Minnesota, National
Association, a national banking association (the "Trustee") and Proffitt's Inc.,
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as servicer (the "Servicer"). The Transferor proposes to enter into the Series
1998-2 Supplement, dated as of May 21, 1998 (the "Series 1998-2 Supplement"), to
the Pooling and Servicing Agreement, pursuant to which $200,000,000 aggregate
initial principal amount of 6.00% Class A Asset Backed Certificates, Series
1998-2 (the "Class A Certificates"), $21,500,000 aggregate initial principal
amount of 6.15% Class B Asset Backed Certificates, Series 1998-2 (the "Class B
Certificates," and together with the Class A Certificates, the "Certificates"),
a Collateral Indebtedness Interest, Series 1998-2 in the initial aggregate
principal amount of $24,000,000 (the "Collateral Interest") and $16,000,000
initial aggregate principal amount of Class D Asset Backed Certificates, Series
1998-2 (the "Class D Certificates"). To the extent not defined herein,
capitalized terms used herein shall have the meanings specified in the Pooling
and Servicing Agreement and the Series 1998-2 Supplement.
The Transferor proposes to sell to the underwriters identified on Schedule
I hereto (the "Underwriters") for whom you are acting as representative (the
"Representative") the principal amount of Certificates identified on Schedule I.
The Collateral Interest will be sold to the Enhancement Provider (as defined
herein) pursuant to the Loan Agreement, to be dated as of the Closing Date (as
defined in Section 3 hereof), among the Transferor, the Trustee and the
financial institution named therein (the "Enhancement Provider") (such
agreement, the "Enhancement Agreement").
2. Representations and Warranties of the Transfer or. The Transferor
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represents and warrants to each Under writer as of the date hereof, as follows:
(a) a Registration Statement on Form S-3 (File No. 333-48739), including a
prospectus and such amendments thereto as may have been required to the
date hereof, relating to asset backed securities of various classes and
series has been filed with the Securities and Ex change Commission (the
"Commission"). Such Registration Statement has become effective. No stop
orders suspending the effectiveness of the Registration Statement have been
issued and no procedures for that purpose have been instituted or to the
Transferor's knowledge, threatened by the Commission. A prospectus
supplement (the "Prospectus Supplement") setting forth the terms of the
offering, sale and plan of distribution of the Certificates and additional
information concerning the Certificates, including the terms thereof, and
the Transferor and its affiliates' credit card business has been prepared
and will be filed timely pursuant to Rule 424(b) of the Rules and
Regulations of the Commission (the "Rules and Regulations") following the
execution of this Agreement.
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Such Registration Statement, as from time to time amended and supplemented,
is referred to as the "Registration Statement" and the final form of
Prospectus included in the Registration Statement, as supplemented by the
Prospectus Supplement in the form to be filed with the Commission pursuant
to Rule 424(b) is referred to as the "Prospectus". The Prospectus
Supplement shall be deemed to have supplemented the Prospectus only with
respect to the offering of the Certificates to which it relates; and the
conditions to the use of a registration statement on Form S-3 under the
Act, as set forth in the General Instructions to Form S-3, and the
conditions of Rule 415 under the Act, have been satisfied with respect to
the Registration Statement;
(b) as of the date of execution of this Agreement, the Registration
Statement and the Prospectus, except with respect to any modification to
which you have agreed in writing, shall be in all substantive respects in
the form furnished to you prior to such date or, to the extent not
completed on such date, shall contain only such specific additional
information and other changes (beyond that contained in the latest
preliminary Prospectus Supplement that has previously been furnished to
you) as the Transferor has advised you, prior to such time will be included
or made therein;
(c) on the effective date of the Registration Statement, the Registration
Statement and the Prospectus complied in all material respects with the
applicable requirements of the Act and the Rules and Regulations, and did
not include any untrue statement of a material fact or, in the case of the
Registration Statement, omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading
and, in the case of the Prospectus, omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and on the date hereof and on
the Closing Date (as defined in Section 3 hereof), the Registration
Statement and the Prospectus will comply in all material respects with the
applicable requirements of the Act and the Rules and Regulations, and
neither of such documents included or will include any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing does not apply to information
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contained in or omitted from either of the documents based upon written
information furnished to the Transferor by any Underwriter specifically for
use in connection with the preparation of the Registration Statement or the
Prospectus;
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(d) the Transferor is a corporation duly organized and validly existing in
good standing under the laws of the State of Nevada, with full power,
authority and legal right to own its properties and conduct its business
as described in the Prospectus, is duly qualified to do business and is in
good standing (or is exempt from such requirements), and has obtained all
necessary licenses and approvals (except with respect to the state
securities or Blue Sky laws of various jurisdictions) in each jurisdiction
in which failure to so qualify or obtain such licenses and approvals would
have a material adverse effect on the interests of Certificateholders under
the Pooling and Servicing Agreement or under the Series 1998-2 Supplement;
(e) the Certificates, the Collateral Interest and the Class D Certificates
on the date of this Agreement, will have been duly and validly authorized
and, when the Certificates and the Class D Certificates are at Closing duly
and validly executed by or on behalf of the Transferor, authenticated by
the Trustee and delivered in accordance with the Pooling and Servicing
Agreement and the Series 1998-2 Supplement and, when the Certificates, the
Collateral Interest and the Class D Certificates are delivered and paid for
as provided herein, will be validly issued and outstanding and entitled to
the benefits and security afforded by the Pooling and Servicing Agreement
and the Series 1998-2 Supplement;
(f) the execution, delivery and performance by the Transferor of this
Agreement, the Enhancement Agreement, the Pooling and Servicing Agreement,
the Series 1998-2 Supplement and the Certificates, the Collateral Interest
and the Class D Certificates, and the consummation by the Transferor of the
transactions provided for herein and therein, have been, or will have been,
duly authorized by the Transferor by all necessary corporate action on the
part of the Transferor; and neither the execution and delivery by the
Transferor of such instruments, nor the performance by the Transferor of
the transactions herein or therein contemplated, nor the compliance by the
Transferor with the provisions hereof or thereof, will (i) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default under, any of the provisions of the articles or certificate of
incorporation or by-laws of the Transferor, or (ii) conflict with any of
the provisions of any law, government rule, regulation, judgment, decree or
order binding on the Transferor or its properties or (iii) conflict with
any of the provisions of any indenture, mortgage, contract or other
instrument to which the Transferor is a party or by which it is bound or
(iv) result in the creation or imposition of any
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lien, charge or encumbrance upon any of its property pursuant to the terms
of any such indenture, mortgage, contract or other instrument other than
pursuant to the Pooling and Servicing Agreement and the Series 1998-2
Supplement;
(g) the Pooling and Servicing Agreement constitutes a legal, valid and
binding agreement of the Transferor, enforceable against the Transferor in
accordance with its terms, except to the extent that the enforce ability
thereof may be subject to bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights in general and to general
principles of equity (whether considered in a proceeding at law or in
equity);
(h) when executed and delivered by the parties thereto, the Series 1998-2
Supplement and the Enhancement Agreement will each constitute a legal,
valid and binding agreement of the Transferor, enforceable against the
Transferor in accordance with its terms, except to the extent that the
enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights in general
and to general principles of equity (whether considered in a proceeding at
law or in equity);
(i) all approvals, authorizations, consents, orders or other actions of any
person, corporation or other organization, or of any court, governmental
agency or body or official (except with respect to the foreign or state
securities or Blue Sky laws of various jurisdictions), required in
connection with the valid and proper authorization, issuance and sale of
the Certificates, the Collateral Interest and the Class D Certificates
pursuant to this Agreement, the Enhancement Agreement, the Pooling and
Servicing Agreement and the Series 1998-2 Supplement, have been or will be
taken or obtained on or prior to the Closing Date;
(j) this Agreement has been duly executed and delivered by the Transferor;
(k) except as set forth in or contemplated in the Registration Statement
and the Prospectus, there has been no material adverse change in the
condition (financial or otherwise) of the Transferor since January 21,
1998;
(l) any taxes, fees and other governmental charges in connection with the
execution, delivery and performance by
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the Transferor of this Agreement, the Pooling and Servicing Agreement, the
Series 1998-2 Supplement, the Enhancement Agreement and the Certificates
shall have been paid or will be paid by or on behalf of the Transferor at
or prior to the Closing Date to the extent then due; and
(m) the Certificates, the Collateral Interest, the Class D Certificates,
the Pooling and Servicing Agree ment, the Series 1998-2 Supplement and the
Enhancement Agreement conform in all material respects to the descriptions
thereof in the Prospectus.
3. Purchase, Sale and Delivery of Certificates. On the basis of the
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representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Transferor agrees to sell to each
Underwriter, and each Underwriter agrees, severally and not jointly, to purchase
from the Transferor, the principal amount of the Certificates set forth opposite
each Underwriter's name in Schedule I hereto at the purchase price of 99.59% of
the principal amount of such Certificates with respect to the Class A
Certificates and 99.52% of the principal amount of such Certificates with
respect to the Class B Certificates.
Delivery of and payment for the Certificates will be made at the
offices of Alston & Bird LLP, 1201 W. Peachtree Street, Atlanta, Georgia
30309-3424, on May 21, 1998 (the "Closing Date"), or at such other time
thereafter or other place as you and the Transferor shall agree upon. Delivery
of such Certificates shall be made by the Transferor to the Representative for
the respective accounts of the several Underwriters against payment by the
several Underwriters, through the Representative of the purchase price thereof
by one or more wires of funds immediately available at Closing to an account
designated by the Transferor. Delivery of the Certificates shall be made through
the facilities of The Depository Trust Company ("DTC"). The Certificates so to
be delivered shall be global certificates registered in the name of Cede & Co.,
as nominee for DTC. The number and denomination of definitive certificates so
delivered shall be specified by DTC.
4. Offering by the Underwriters. It is understood that the several
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Underwriters propose to offer the Certificates subject to this Agreement for
sale to the public as set forth in the Prospectus.
5. Covenants of the Transferor. The Transferor hereby covenants and
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agrees with each Underwriter that:
(a) prior to the execution of this Agreement, the Transferor will prepare
a Prospectus Supplement setting forth
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the amount of Certificates and the terms thereof, the price at which such
Certificates are to be purchased by the Underwriters from the Transferor,
either the initial public offering price or the method by which the price
at which the Certificates are to be sold will be determined, the selling
concessions and allowances, if any, and such other information as the
Underwriters and the Transferor may mutually agree, and which the
Transferor deems appropriate in connection with the offering of the
Certificates, but the Transferor will not file any amendments to the
Registration Statement as in effect with respect to the Certificates, or
any amendments or supplements to the Prospectus, unless it shall first have
delivered copies of such amendments or supplements to you, or if you shall
have reasonably objected thereto promptly after receipt thereof; the
Transferor will immediately advise you and your counsel (i) when notice is
received from the Commission that any post-effective amendment to the
Registration Statement has become or will become effective and (ii) of any
order or communication suspending or preventing, or threatening to suspend
or prevent, the offer and sale of the Certificates or of any proceedings or
examinations that may lead to such an order or communication, whether by or
of the Commission or any authority administering any state securities or
Blue Sky law, as soon as practicable after the Transferor is advised
thereof, and will use every reasonable effort both to prevent the issuance
of any such order or communication and to obtain as soon as possible its
lifting, if issued;
(b) if, at any time when the Prospectus is required to be delivered under
the Act, any event occurs as a result of which the Prospectus as then
amended or supplemented would include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or if it is necessary at any time to amend or supplement the
Prospectus to comply with the Act or the Rules and Regulations, the
Transferor will promptly prepare and (subject to review and no reasonable
objection by you as described in Section 5(a) hereof) file with the
Commission an amendment or supplement that will correct such statement or
omission or an amendment that will effect such compliance and, within two
Business Days thereafter, furnish to you as many copies of the Prospectus
as amended or supplemented as you may reason ably request; provided,
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however, that your consent to any amendment shall not constitute a waiver
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of any of the conditions of Section 6 hereof;
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(c) the Transferor will make generally available to the holders of the
Certificates (the "Certificate holders"), in each case as soon as
reasonably practicable and within the time specified by, a statement which
will satisfy the provisions of, Section 11(a) of the Act and Rule 158 of
the Commission with respect to the Certificates;
(d) the Transferor will furnish to each Under writer copies of the
Registration Statement (at least one copy to be delivered to the
Representative will be signed and will include all documents and exhibits
thereto or incorporated by reference therein) and all amendments thereto
and, so long as delivery of a Prospectus by an Underwriter or dealer may
be required by the Act, the Prospectus, and all amendments thereto and
supplements thereto, in each case as soon as available and in such
quantities as you reasonably request;
(e) the Transferor will assist you in arranging for the qualification of
the Certificates for sale and the determination of their eligibility for
investment under the laws of such jurisdictions as you designate and will
continue to assist you in maintaining such qualifications in effect so long
as required for the distribution and will file or cause to be filed such
statements and reports with respect to the distribution as may be required
by the laws of each jurisdiction in which the Certificates have been
qualified as provided above; provided, however, that neither the Transferor
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nor the Trust shall be required to qualify to do business in any
jurisdiction where it is now not qualified or to take any action which
would subject it to general or unlimited service of process in any
jurisdiction in which it is now not subject to service of process;
(f) except as otherwise specified in this Agreement, the Transferor will
pay all expenses incident to the performance of its obligations under this
Agreement and will reimburse the Underwriters for any expenses reasonably
incurred by them in connection with qualification of the Certificates and
determination of their eligibility for investment under the laws of such
jurisdictions as you may designate and the reproduction of memoranda
relating thereto, for any fees charged by investment rating agencies for
the rating of such Certificates and, to the extent previously agreed upon
with you, for reasonable expenses incurred in distributing the Prospectus
(including any amendments and supplements thereto) to the Underwriters and
the reasonable fees and disbursements of the Underwriter's counsel; and
(g) the Transferor will, for so long as Certificates purchased pursuant
hereto remain outstanding, deliver or
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cause to be delivered to you copies of the annual servicer's certificate
and the annual account ants' reports delivered to the Trustee pursuant to
the Pooling and Servicing Agreement.
6. Conditions to the Obligations of the Underwriters. The obligations
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of the several Underwriters to purchase and pay for the Certificates will be
subject to the accuracy of the representations and warranties on the part of the
Transferor herein as of the date hereof and the Closing Date, to the accuracy of
the statements of the Transferor made pursuant to the provisions hereof, to the
performance by the Transferor in all material respects of its obligations here
under and to the following additional conditions precedent:
(a) you shall have received a letter from Coopers & Lybrand L.L.P.,
independent public accountants, and, if requested by you, a letter from
such accountants, dated the Closing Date, each in the forms heretofore
agreed to;
(b) all actions required to be taken and all filings required to be made
by the Transferor under the Act prior to the Closing Date for the
Certificates shall have been duly taken or made; and prior to the Closing
Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been instituted or, to the knowledge of the Transferor, threatened by
the Commission;
(c) the Certificates offered by means of the Registration Statement shall
be rated at the time of issuance, in the case of the Class A Certificates,
in the highest rating category by Moody's Investors Service, Inc.
("Moodys") and Standard & Poor's Ratings Service ("Standard & Poor's") and
in the case of the Class B Certificates, in one of the three highest rating
categories by Moody's and Standard and Poor's, and in each case shall not
have been placed on any credit watch with a negative implication for
downgrade;
(d) you shall have received opinions of Alston & Bird LLP, counsel to the
Transferor, of such local or corporate counsel to the Transferor and its
affiliates and of Skadden, Arps, Slate, Meagher & Flom LLP as to matters of
New York law, dated the Closing Date, substantially to the effect that:
(i) the Transferor is a corporation duly organized, validly
existing and in good standing under the laws of the state of Nevada,
with full power and authority to own its assets and operate its
business as described in the Prospectus, and had at all relevant times
and now has, the power, authority and legal right to acquire,
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own and service the Receivables transferred or proposed to be
transferred to the Trust as described in the Prospectus;
(ii) the Transferor has full power and authority to sign the
Registration Statement and to execute and deliver this Agreement, the
Enhancement Agreement and the Series 1998-2 Supplement and to
consummate the transactions contemplated herein, therein and in the
Receivables Purchase Agreement and the Pooling and Servicing
Agreement;
(iii) the agreements referred to in clause (ii) above have been
authorized by all necessary action on the part of the Transferor and
have been duly executed and delivered by the Transferor;
(iv) the Certificates have been duly authorized by all necessary
action of the Transferor;
(v) this Agreement, the Enhancement Agreement, the Receivables
Purchase Agreement, the Pooling and Servicing Agreement and the Series
1998-2 Supplement each constitutes the legal, valid and binding
agreement of the Transferor, enforceable against the Transferor in
accordance with its terms, subject, as to enforcement, to (A) the
effect of bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, conservatorship, receivership, or other
similar laws of general applicability relating to or affecting
creditors' rights generally (B) the application of general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (C) the unenforceability under
certain circumstances of provisions indemnifying a party against
liability or providing for contribution with respect to such
liability where such indemnification or contribution is contrary to
public policy;
(vi) no consent, approval, authorization or order of, or filing
with, any governmental agency or body or any court is required under
applicable law for the consummation of the transactions contemplated
herein, the Receivables Purchase Agreement, the Pooling and Servicing
Agreement, the Series 1998-2 Supplement, or the Enhancement Agree
ment, except such as have been obtained or made and such as may be
required under state securities or Blue Sky laws;
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(vii) the execution and delivery of the Series 1998-2 Supplement
and the Enhancement Agreement, the performance by the Transferor of
its obligations under this Agreement, the Receivables Purchase
Agreement, the Pooling and Servicing Agreement, the Series 1998-2
Supplement and the Enhancement Agreement, the transfer of the
Receivables to the Trust, the issuance and sale of the Certificates,
and the consummation of any other of the transactions contemplated
herein, in the Receivables Purchase Agreement, the Pooling and
Servicing Agreement, the Series 1998-2 Supplement or the Enhancement
Agreement, will not conflict with, result in a breach of or violation
of any of the terms of, or constitute a default under, the articles of
incorporation or by-laws of the Transferor, each as amended, the terms
of any indenture or other agree ment or instrument known to such
counsel to which the Transferor is a party or by which it or its
properties are bound or any rule, order known to such counsel, statute
or regulation, of any court, regulatory body, administrative agency or
govern mental body having jurisdiction over the Transfer or; provided,
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however, that such counsel need ex press no opinion as to state
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securities or Blue Sky laws or the securities laws of any foreign
jurisdiction;
(viii) except as otherwise disclosed in the Prospectus or the
Registration Statement, to the best of such counsel's knowledge, there
are no actions, proceedings or investigations pending or threatened
before any court, administrative agency or other tribunal (A)
asserting the invalidity of this Agreement, the Receivables Purchase
Agreement, the Pooling and Servicing Agreement, the Series 1998-2
Supplement, the Enhancement Agreement or the Certificates, (B) seeking
to prevent the issuance of the Certificates or the consummation of any
of the transactions contemplated by this Agreement, the Receivables
Purchase Agreement, the Pooling and Servicing Agreement, the Series
1998-2 Supplement, the Enhancement Agreement or the Certificates,
which if adversely determined would materially and adversely affect
the performance by the Transferor of its obligations under, or the
validity or enforceability of, this Agreement, the Receivables
Purchase Agreement, the Pooling and Servicing Agreement, the Series
1998-2 Supplement, the Enhancement Agreement or the Certificates, or
(C) seeking adversely to affect the federal income tax attributes of
the Certificates as described in the Prospectus under the headings
"Federal Income Tax Consequences";
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(ix) the Registration Statement has become effective under the
Act; to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or
threatened under the Act; and the Registration Statement and the
Prospectus (other than the financial, numerical and statistical
information contained therein as to which such counsel need express no
opinion) as of their respective effective date or date of issuance
complied as to form in all material respects with the requirements of
the Act and the rules and regulations promulgated thereunder;
(x) this Agreement, the Receivables Purchase Agreement, the
Pooling and Servicing Agreement, the Series 1998-2 Supplement, any
Enhancement Agreement and the Certificates conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus;
(xi) the Pooling and Servicing Agreement and the Series 1998-2
Supplement will not be required to be qualified under the Trust
Indenture Act of 1939, as amended, and neither the Transferor nor the
Trust is now, and immediately following the sale of the Certificates
pursuant hereto will be, required to be registered under the 1940 Act;
(xii) the statements in the Prospectus under the headings "Certain
Federal Income Tax Consequences" and "Certain Federal Income Tax
Consequences of the Offered Certificates" to the extent they
constitute matters of Federal law or legal conclusions with respect
thereto, have been reviewed by such counsel and are correct in all
material respects; and
(xiii) the statements in the Prospectus under the headings "Certain
Legal Aspects of the Receivables" and "ERISA Considerations," to the
extent they constitute matters of Federal law or legal conclusions
with respect thereto, have been reviewed by such counsel and are
correct in all material respects;
Such counsel also shall state that, subject to its customary practices
and limitations relating to the scope of such counsel's participation in
the preparation of the Registration Statement and the Prospectus and its
investigation or verification of information contained
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therein, it has no reason to believe that at its effective date the
Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus on the Closing Date includes any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (in each case, other than financial, numerical and statistical
information contained therein as to which such counsel need express no
opinion); in rendering such opinion, such counsel may rely as to matters of
fact, to the extent deemed proper and as stated therein, on certificates of
responsible officers of the Transferor, the Servicer, the Seller and
public officials;
(e) you shall have received opinions of Alston & Bird LLP, special counsel
for the Seller, and of such local or corporate counsel to the Seller, dated
the Closing Date, in form and substance reasonably satisfactory to you and
your counsel, to the effect that, with respect to the Seller:
(i) the Seller is a national banking association duly organized,
validly existing and in good standing under the laws of the United
States, with full power and authority to own its assets and operate
its business as described in the Prospectus, and had at all relevant
times and now has, the power, authority and legal right to acquire,
own and service the Receivables transferred or proposed to be
transferred to the Transferor as described in the Prospectus;
(ii) the Seller has full power and authority as a national banking
association to execute and deliver the Receivables Purchase Agreement
and to consummate the transactions contemplated therein;
(iii) the execution, delivery and performance of the Receivables
Purchase Agreement has been authorized by all necessary action on the
part of the Seller and such agreement has been duly executed and
delivered by the Seller;
(iv) the Receivables Purchase Agreement constitutes the legal, valid
and binding agreement of the Seller, enforceable against the Seller in
accordance with its terms, subject, as to enforce ment, to (A) the
effect of bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, conservatorship, receivership, or other similar laws of
general
-13-
<PAGE>
applicability relating to or affecting creditors' rights generally or
the rights of creditors of national banking associations, (B) the
application of general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and
(C) the unenforceability under certain circumstances of provisions
indemnifying a party against liability or providing for contribution
with respect to such liability where such indemnification or
contribution is contrary to public policy;
(v) no consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required under
applicable law for the consummation of the transactions contemplated
by the Receivables Purchase Agreement, except such as have been
obtained or made;
(vi) the execution, delivery and performance by the Seller of its
obligations under the Receivables Purchase Agreement, the transfer of
the Receivables to the Trust, the sale of the Receivables purported to
be sold thereunder, and the consummation of any other of the
transactions contemplated in such agreement, will not conflict with,
result in a breach of or violation of any of the terms of, or
constitute a default under, the articles of association or by-laws of
the Seller, each as amended, the terms of any indenture or other agree
ment or instrument known to such counsel to which the Seller is a
party or by which it or its properties are bound or any rule, order
known to such counsel, statute or regulation, of any court, regulatory
body, administrative agency or governmental body having jurisdiction
over the Seller; and
(vii) except as otherwise disclosed in the Prospectus or the
Registration Statement, to the best of such counsel's knowledge (after
reasonable investigation), there are no actions, proceedings or
investigations pending or threatened before any court, administrative
agency or other tribunal (A) asserting the invalidity of the
Receivables Purchase Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by such
agreement, which if adversely determined would materially and
adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, such agreement, or (C)
seeking adversely to affect the federal income tax attributes of the
Certificates as described in the
-14-
<PAGE>
Prospectus under the headings "Federal Income Tax Consequences".
(f) you shall have received an opinion of Alston & Bird LLP, special
counsel for the Servicer, and/or such local or corporate counsel to the
Servicer, dated the Closing Date, substantially to the effect that:
(i) the Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee, with
full power and authority to own its assets and operate its business
as described in the Prospectus, and had at all relevant times and
now has, the power, authority and legal right to service the
Receivables transferred or proposed to be transferred to the Trust
as described in the Prospectus;
(ii) the Servicer has full power and authority to execute and
deliver the Series 1998-2 Supplement and the indemnification
agreement between you and the Servicer, dated the date hereof (the
"Indemnification Agreement") and to consummate the transactions
contemplated herein, therein and in the Pooling and Servicing
Agreement;
(iii) the agreements referred to in clause (ii) above have been
authorized by all necessary action on the part of the Servicer and
have been duly executed and delivered by the Servicer;
(iv) the Pooling and Servicing Agreement and the Series 1998-2
Supplement each constitutes the legal, valid and binding agreement
of the Servicer, enforceable against the Servicer in accordance with
its terms, subject, as to enforcement, to (A) the effect of
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, conservatorship, receivership, or other similar laws of
general applicability relating to or affecting creditors' rights
generally, (B) the application of general principles of equity
(regardless of whether enforceability is considered in a proceeding
in equity or at law) and (C) the unenforceability under certain
circumstances of provisions indemnifying a party against liability
or providing for contribution with respect to such liability where
such indemnification or contribution is contrary to public policy;
(v) no consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required under
applicable laws for the consummation of the transactions
contemplated herein,
-15-
<PAGE>
the Pooling and Servicing Agreement or the Indemnification
Agreement, except such as have been obtained or made and such as may
be required under state securities or Blue Sky laws;
(vi) the execution and delivery of the Series 1998-2 Supplement, the
performance by the Servicer of its obligations under the Pooling and
Servicing Agreement and the Series 1998-2 Supplement, and the
consummation of any of the transactions contemplated by the Pooling
and Servicing Agreement, the Series 1998-2 Supplement or the
Indemnification Agreement, will not conflict with, result in a
breach of or violation of any of the terms of, or constitute a
default under, the certificate or articles of incorporation or by-
laws of the Servicer, each as amended, the terms of any indenture or
other agreement or instrument known to such counsel to which the
Servicer is a party or by which it or its properties are bound or
any rule, order known to such counsel, statute or regulation, of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over the Servicer; provided, however, that such
-------- -------
counsel need express no opinion as to state securities or Blue Sky
laws; or
(g) you shall have received an opinion or opinions from special tax
counsel to the Transferor, dated the Closing Date, and in form and
substance satisfactory to you and your counsel, to the effect that the
Certificates are properly characterized as indebtedness for Mississippi
and Illinois state income tax purposes, that the Trust is properly
characterized as not an association (or publicly traded partnership)
taxable as a corporation under the laws of the States of Illinois or
Mississippi and that the Trust will not be subject to any income,
franchise, excise or other tax under the laws of the States of Mississippi
or Illinois.
(h) you shall have received an opinion or opinions from Alston & Bird
LLP, special federal tax counsel to the Transferor, dated the Closing
Date, and in form and substance acceptable to you and your counsel, to the
effect that the Certificates are properly characterized as indebtedness
for federal income tax purposes and that the Trust is properly
characterized as not an association (or publicly traded partnership)
taxable as a corporation for federal income tax purposes.
(i) you shall have received an opinion or opinions from Alston Bird
LLP, special counsel for the Seller and the Transferor, and/or such local
counsel to the Transferor dated
-16-
<PAGE>
the Closing Date, in form and substance satisfactory to you and your
counsel, with respect to (A) the validity, perfection and priority of the
Trust's interest in the Receivables and the proceeds thereof, and the
validity, perfection and priority of the Transferor's interest in the
Receivables and the proceeds thereof, (B) the enforceability of the
transfers by the Seller to the Transferor under the Receivables Purchase
Agreement notwithstanding the insolvency of the Seller, (C) the
nonconsolidation of the assets and liabilities of the Transferor with
assets and liabilities of its parent(s) in the event of the insolvency or
bankruptcy of such parent(s), and (D) with respect to other related
matters in a form previously approved by you and your counsel; in
addition, you shall have received a reliance letter with respect to any
opinion that the Transferor is required to deliver to the Rating Agency;
(j) you shall have received from Skadden, Arps, Slate, Meagher & Flom
LLP, special counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, in form and substance satisfactory to you, with
respect to the validity of the Certificates, the Registration Statement,
the Prospectus and other related matters as you may require, and the
Transferor shall have furnished to such counsel such documents as they may
reasonably request for the purpose of enabling them to pass upon such
matters;
(k) you shall have received, with respect to the Transferor, a
certificate, dated the Closing Date, of the Treasurer or a Senior Vice
President or more senior officer of the Transferor in which such officer
shall state that, to his or her knowledge after reasonable investigation,
(A) the representations and warranties of the Transferor in this Agreement
are true and correct in all material respects on and as of the Closing
Date, (B) the Transferor has complied in all material respects with all
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date, (C) the Registration
Statement has become effective, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted, or to the knowledge of such officer, are
threatened by the Commission and (D) subsequent to the date of the
Prospectus, there has been no material adverse change in the condition
(financial or otherwise) of the Transferor except as set forth in or
contemplated in the Registration Statement and the Prospectus or as
described in such certificate;
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<PAGE>
(l) you shall have received, with respect to Proffitt's Inc.
("Proffitt's"), a certificate, dated the Closing Date, of the Treasurer or
any Senior Vice President or more senior officer of Proffitt's in which
such officer, to his or her knowledge after reasonable investigation,
shall state that subsequent to the date of the Prospectus, there has been
no material adverse change in the condition (financial or otherwise) of
Proffitt's except as set forth in or contemplated in the Registration
Statement and the Prospectus or as described in such certificate;
(m) you shall have received an opinion of Chapman and Cutler, counsel
to the Trustee, or an opinion of the Trustee's in-house counsel, addressed
to you dated the Closing Date, in form and substance satisfactory to you
and your counsel, and to the Transferor and the Servicer and their
counsel, to the effect that:
(i) the Trustee has been duly incorporated and is validly existing
as a national banking association under the laws of the United
States and has the power and authority to enter into the Series
1998-2 Supplement and the Enhancement Agreement and to perform all
actions required of it under the Pooling and Servicing Agreement,
the Series 1998-2 Supplement and the Enhancement Agreement;
(ii) each of the Pooling and Servicing Agreement, the Series 1998-2
Supplement and the Enhancement Agreement has been duly authorized,
executed and delivered by the Trustee and constitutes a legal, valid
and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its terms, except as such enforceability
may be limited by (A) bankruptcy, insolvency, liquidation,
reorganization, moratorium, conservatorship, receivership or other
similar laws now or hereafter in effect relating to the enforcement
of creditors' rights in general, as such laws would apply in the
event of a bankruptcy, insolvency, liquidation, reorganization,
moratorium, conservatorship, receivership or similar occurrence
affecting the Trustee, and (B) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(iii) the Certificates have been duly authenticated and delivered by
the Trustee;
(iv) the execution and delivery of the Series 1998-2 Supplement
and the Enhancement Agreement by the Trustee
-18-
<PAGE>
and the performance by the Trustee of the respective terms of the
Pooling and Servicing Agreement, the Series 1998-2 Supplement and
the Enhancement Agreement does not conflict with or result in a
violation of (A) any law or regulation of the United States of
America or the state of Minnesota governing the banking or trust
powers of the Trustee, or (B) the articles of association or by-laws
of the Trustee; and
(v) no approval, authorization or other action by, or filing
with, any governmental authority of the United States of America or
the state of Minnesota having jurisdiction over the banking or trust
powers of the Trustee is required in connection with the execution
and delivery by the Trustee of the Series 1998-2 Supplement and the
Enhancement Agreement or the performance by the Trustee there under
or under the Pooling and Servicing Agreement;
(n) you shall have received an opinion or opinions of counsel to the
Enhancement Provider, dated the Closing Date, and satisfactory in form
and substance to you and your counsel, to the effect that:
(i) the Enhancement Provider is duly organized and validly existing
under the laws of the jurisdiction of its incorporation, is duly
qualified and/or licensed to do business in all jurisdictions where
the nature of its operations as contemplated in the Enhancement
Agreement requires such qualification, and has the power and
authority (corporate and other) to enter into the Enhancement
Agreement and to perform its obligations thereunder; and
(ii) the Enhancement Agreement has been duly authorized, executed
and delivered by the Enhancement Provider, and constitutes the
legal, valid and binding obligation of the Enhancement Provider,
enforceable in accordance with its terms, except to the extent that
the enforceability thereof may be subject to bankruptcy, insolvency,
reorganization, conservatorship, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights as such
laws would apply in the event of the insolvency, liquidation or
reorganization or other similar occurrence with respect to the
Enhancement Provider or in the event of any moratorium or similar
occurrence affecting the Enhancement Provider.
(o) you shall have received reliance letters, if applicable, with
respect to any opinions delivered to the
-19-
<PAGE>
Transferor by foreign counsel of the Enhancement Provider for the
Enhancement Agreement, if any, which opinions shall include matters
relating to (i) the due organization of the Enhancement Provider, (ii) the
authorization, execution, delivery and performance by the Enhancement
Provider of the Enhancement Agreement and the binding effect of the
Enhancement Agreement, and (iii) the enforceability in the foreign
jurisdiction in which such Enhancement Provider is located of a judgment
obtained under the Enhancement Agreement in a United States federal court
or in a court of the State of New York; such reliance letters shall
include all matters that are contained in the opinions of foreign counsel;
The Transferor will furnish to you conformed copies of such opinions,
certificates, letters and documents as you reasonably request.
7. Indemnification.
---------------
(a) The Transferor will indemnify and hold harm less each Underwriter
and each person, if any, who controls any Underwriter within the meaning
of the Act or the Exchange Act and the respective officers, directors and
employees of each such person, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will
reimburse each Underwriter and each such officer, director, employee or
controlling person for any legal or other expenses reasonably incurred by
such Underwriter and each such officer, director, employee or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action, subject to the following proviso, as such
expenses are incurred; provided, however, that (i) the Transferor will not
-----------------
be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or
alleged untrue statement in or omission or alleged omission made in any
such documents in reliance upon and in conformity with written information
furnished to the Transferor by an Underwriter specifically for use therein
and (ii) such indemnity with
-20-
<PAGE>
respect to any untrue statement or alleged untrue statement or omission
or alleged omission in the Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or any person controlling such Underwriter)
from whom the person asserting any such loss, claim, damage or liability
purchased the Certificates which are the subject thereof, if such person
was not given or sent a copy of the Prospectus including the Prospectus
Supplement excluding documents incorporated therein by reference, at or
prior to the confirmation of the sale of such Certificates to such person
in any case where such delivery is required by the Act and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in the Preliminary Prospectus and forming the
basis for the related cause of action was corrected in the Prospectus or
the Prospectus Supplement. This indemnity agreement will be in addition to
any liability which the Transferor may otherwise have.
(b) Each Underwriter severally, and not jointly, will indemnify and
hold harmless the Transferor, each of its directors, each of its officers
who have signed the Registration Statement and each person, if any, who
controls the Transferor within the meaning of the Act or the Exchange Act
and the respective officers, directors and employees of each such person
against any losses, claims, damages or liabilities to which the Transferor
or any such director, officer or controlling person may become subject,
under the Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement, the Prospectus,
or any amendment or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Transferor by such Underwriter specifically
for use therein, and will reimburse any legal or other expenses reasonably
incurred by the Transferor or any such director, officer or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred. This indemnity
agreement will be in addition to any liability that such Underwriter may
otherwise have.
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<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement
thereof; but the omission and/or delay so to notify the indemnifying party
will not relieve it from any liability which it may have to any
indemnified party otherwise than in this Section unless such omission
caused actual prejudice to the party not notified; in case any such action
is brought against any indemnified party, and it notified the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein, and, to the extent that it may elect by written
notice jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this Section for
any legal or other expenses subsequently incurred by such indemnified
party in connection with defense thereof other than reasonable costs of
investigation. If the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available
to it and/or other indemnified parties that are different from or addition
al to those available to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action
on behalf of such indemnified party or parties. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm (in addition to local counsel,
if any) for all such indemnified parties. No indemnifying party may avoid
its duty to indemnify under this Section 7 if such indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement or compromise of, or consent to the entry of any judgement
in, any pending or threatened action in respect of which any indemnified
party is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such action. An indemnifying party
shall not be liable for any settlement of any claim effected without its
written consent.
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<PAGE>
(d) If recovery is not available under the foregoing indemnification
provisions of this Section for any reason other than as specified therein,
the parties entitled to indemnification by the terms thereof shall be
entitled to contribution to liabilities and expenses, except to the extent
that contribution is not permitted under Section 11(f) of the Act. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered (i) the relative benefit received by
the Transferor on the one hand and the Underwriters on the other hand from
the offering of the Certificates or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, the relative benefits
referred to in clause (i) above but also the relative fault of the
Transferor on the one hand and the Underwriters on the other hand in
connection with the statement or omission that resulted in such
liabilities and expenses as well as any other relevant equitable
considerations. The relative benefits received by the Transferor on the
one hand and the Underwriters on the other hand shall be deemed to be in
the same proportion as the total net proceeds of the offering of the
Certificates (before deducting expenses) received by the Transferor bear
to the total underwriting discounts and commissions received by the
Underwriters in connection with the offering of the Certificates. The
relative fault of the parties shall be determined by reference to, among
other things, the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any
other equitable considerations appropriate under the circumstances. The
Transferor and the Underwriters agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per capita
allocation (even if the Underwriters were treated as one entity for such
purpose).
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<PAGE>
8. Default of Underwriters. If any Underwriter or Underwriters
-----------------------
participating in an offering of Certificates default in their obligations to
purchase Certificates here under and the aggregate principal amount of such
Certificates which such defaulting Underwriter or Underwriters agreed, but
failed, to purchase does not exceed 10% of the total principal amount of the
Certificates, you may make arrangement satisfactory to the Transferor for the
purchase of such Certificates by other persons, including any of the
Underwriters participating in such offering, but if no such arrangements are
made within a period of 36 hours after the Closing Date, the non-defaulting
Underwriters shall be obligated severally, in proportion to their respective
total commitments hereunder, to purchase the Certificates which such defaulting
Underwriters agreed but failed to purchase. If any Underwriter or Underwriters
so default and the aggregate principal amount of Certificates with respect to
which such default or defaults occur is more than 10% of the total principal
amount of the Certificates and arrangements satisfactory to you and the
Transferor for the purchase of such Certificates by other persons are not made
within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Transferor,
except as provided in Section 10. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability for
its default.
9. Termination of the Obligations of the Underwriters. The obligations
---------------------------------------------------
of the Underwriters to purchase the Certificates on the Closing Date shall be
terminable by the Underwriters by written notice delivered to the Transferor if
at any time on or prior to the Closing Date (i) trading in securities generally
on the New York Stock Exchange shall have been suspended or materially limited,
or there shall have been any setting of minimum prices for trading on such
exchange of the securities of Proffitt's or any suspension of trading of the
securities of Proffitt's on any exchange or in the over-the-counter market, (ii)
a general moratorium on commercial banking activities in New York, Alabama,
Illinois or Mississippi shall have been declared by any of Federal, New York,
Alabama, Illinois or Mississippi authorities, (iii) there shall have occurred
any material outbreak or escalation of hostilities or other calamity or crisis,
the effect of which on the financial markets of the United States is such as to
make it, in your reasonable judgement, as representative of the Underwriters,
impracticable to market the Certificates on the terms and in the manner
contemplated in the Prospectus, (iv) any change or any development involving a
prospective change, materially and adversely affecting (A) the Trust Property
taken as whole or (B) the business or properties of
-24-
<PAGE>
the Transferor or Proffitt's occurs, which, in your reasonable judgment as
representative of the Underwriters, in the case of either (A) or (B), makes it
impracticable to market the Certificates on the terms and in the manner
contemplated in the Prospectus.
10. Survival of Certain Representations and Obligations. The respective
----------------------------------------------------
indemnities, agreements, representations, warranties and other statements by the
Transferor or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of the Underwriters, the Transferor or any of their respective officers or
directors or any controlling person, and will survive delivery of and payment
for the Certificates.
If this Agreement is terminated pursuant to Sections 8 or 9 or if for
any reason the purchase of the Certificates by the Underwriters is not
consummated, the Transferor shall remain responsible for the expenses to be paid
or reimbursed by it pursuant to Section 5(f), and the obligations of the
Transferor and the Underwriters pursuant to Section 7 shall remain in effect.
11. Representation of the Underwriters. Each of the Underwriters
----------------------------------
represents and warrants to, and agrees with, the Transferor that (w) it has only
issued or passed on and shall only issue or pass on in the United Kingdom any
document received by it in connection with the issue of the Certificates to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or who is a person to
whom the document may otherwise lawfully be issued or passed on, (x) it has
complied and shall comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (y) if that
Underwriter is an authorized person under the Financial Services Act 1986, it
has only promoted and shall only promote (as that term is defined in Regulation
1.02 of the Financial Services (Promotion of Unregulated Schemes) Regulations
1991) to any person in the United Kingdom the scheme described in the Prospectus
if that person is of a kind described either in Section 76(2) of the Financial
Services Act 1986 or in Regulation 1.04 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991.
12. Notices. All communications hereunder will be in writing and, if sent
-------
to an Underwriter, will be mailed, delivered or telecopied to NationsBanc
Montgomery Securities LLC, NationsBank Corporate Center, 100 North Tryon Street,
Charlotte, North Carolina 28255-0001, Attention: Luis O. Araneda, facsimile
number 704-388-0622 or if sent to the Transferor, will be mailed,
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<PAGE>
delivered or telecopied to Proffitt's Credit Corporation, 750 Lakeshore Parkway,
Birmingham, Alabama 35211, Attention: Douglas Coltharp, facsimile number (205)
940-4709, or such other address specified in the applicable Terms Agreement;
provided, however, that any notice to an Underwriter pursuant to Section 7 will
- -----------------
be mailed, delivered or telecopied to such Underwriter at the address furnished
by it in Schedule I hereto.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 7 hereof,
and their successors and assigns, and no other person will have any right or
obligation hereunder.
14. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
--------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon it
will become a binding agreement among the Transferor and the several
Underwriters in accordance with its terms. Alternatively, the execution of
this Agreement by the Transferor and its acceptance by or on behalf of the
Underwriters may be evidenced by an exchange of telecopied or other written
communications.
Very truly yours,
PROFFITT'S CREDIT CORPORATION,
as Transferor
By /s/ James S. Scully
-------------------------
Name: James S. Scully
Title: Treasurer
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
NATIONSBANC MONTGOMERY SECURITIES LLC
as Representative of the
several Underwriters
By /s/ Luis O. Araneda
-------------------------
Name: Luis O. Araneda
Title: Principal
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<PAGE>
Schedule I
----------
<TABLE>
<CAPTION>
Principal Amount of
Class A Certificates
--------------------
<S> <C>
NationsBanc Montgomery Securities LLC... $66,668,000
BancAmerica Robertson Stephens.......... 66,666,000
J.P. Morgan Securities Inc.............. 66,666,000
</TABLE>
<TABLE>
<CAPTION>
Principal Amount of
Class B Certificates
--------------------
<S> <C>
NationsBanc Montgomery Securities LLC... $21,500,000
</TABLE>
<PAGE>
Exhibit 5.1
Opinion and consent of Alston & Bird LLP with respect to legality
<PAGE>
[ALSTON & BIRD LLP LETTERHEAD]
May 21, 1998
Proffitt's Credit Corporation
Bank of America Center
101 Convention Center Drive, Suite 850
Las Vegas, Nevada 89109
Re: Proffitt's Credit Card Master Trust -- Series 1998-2 Class A and
Series 1998-2 Class B Asset Backed Certificates
Ladies and Gentlemen:
We have acted as counsel to Proffitt's Credit Corporation (the
"Transferor") in connection with the Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission"), as supplemented by the Prospectus Supplement thereto dated May
14, 1998, relating to the offering of 6.00% Class A Asset Backed Certificates
Series 1998-2 (the "Class A Certificates") and 6.15% Class B Asset Backed
Certificates Series 1998-2 (the "Class B Certificates", and together with the
Class A Certificates, the "Offered Certificates") representing undivided
interests in the Proffitt's Credit Card Master Trust (the "Trust"). The Offered
Certificates will be issued pursuant to the Master Pooling and Servicing
Agreement dated as of August 21, 1997 (as amended, the "Pooling and Servicing
Agreement") and the Series 1998-2 Supplement thereto dated as of May 21, 1998
(the "Series 1998-2 Supplement") by and among the Transferor, Proffitt's, Inc.,
as servicer (the "Servicer") and Norwest Bank Minnesota, National Association,
as trustee (the "Trustee").
We have examined the Pooling and Servicing Agreement and the Series 1998-2
Supplement. We also have examined and relied upon such other records, documents
and other instruments that in our judgment are necessary or appropriate in order
to express the opinions hereinafter set forth. In such examination, we have
assumed the authenticity of original documents and the genuineness of all
signatures, the conformity to the originals of all documents submitted to us as
copies, and the truth, accuracy and completeness of the information,
representations and warranties contained in the records, documents, instruments
and certificates we have reviewed.
Based on the foregoing, we are of the opinion that the Offered Certificates
are legally issued, fully paid, non-assessable and binding obligations of the
Trust, and the holders of the Offered Certificates are entitled to the benefits
of the Pooling and Servicing Agreement and the Series 1998-2 Supplement.
The foregoing opinion is subject to applicable bankruptcy, insolvency,
receivership, conservatorship, reorganization, arrangement, fraudulent
conveyance,
<PAGE>
moratorium, or other laws relating to or affecting the rights of creditors
generally and general principles of equity, including without limitation,
concepts of materiality, reasonableness, good faith and fair dealing, and the
possible unavailability of specific performance or injunctive relief, regardless
of whether such enforceability is considered in a proceeding in equity or at
law.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all references to our firm included in or made a
part of the Registration Statement. In giving such consent, we do not consider
that we are "experts," within the meaning of the term as used in the Securities
Act or the rules and regulations of the Commission issued thereunder, with
respect to any part of the Registration Statement, including this opinion as an
exhibit or otherwise.
Yours very truly,
ALSTON & BIRD LLP
By: /s/ Ralph F. MacDonald, III
---------------------------
Ralph F. MacDonald, III
<PAGE>
Exhibit 8.1
Opinion and consent of Alston & Bird LLP with respect to Federal income tax
matters
<PAGE>
[ALSTON & BIRD LLP LETTERHEAD]
May 21, 1998
Proffitt's Credit Corporation
Bank of America Center
101 Convention Center Drive, Suite 850
Nevada, Las Vegas 89109
Re: Proffitt's Credit Card Master Trust -- Class A Asset Backed
Certificates, Series 1998-2 and Class B Asset Backed Certificates, Series 1998-2
Ladies and Gentlemen:
We have acted as special Federal tax counsel to Proffitt's Credit
Corporation (the "Transferor") in connection with the offer of 6.00% Class A
Asset Backed Certificates, Series 1998-2 (the "Class A Certificates") and 6.15%
Class B Asset Backed Certificates, Series 1998-2 (the "Class B Certificates",
and together with the Class A Certificates, the "Offered Certificates")
representing undivided interests in the Proffitt's Credit Card Master Trust (the
"Trust"). The Offered Certificates will be issued pursuant to a Master Pooling
and Servicing Agreement dated as of August 21, 1997, as amended and supplemented
(the "Pooling and Servicing Agreement"), and the Series 1998-2 Supplement
thereto (the "Series 1998-2 Supplement") among the Transferor, Proffitt's, Inc.,
as servicer, and Norwest Bank Minnesota, National Association, as trustee, We
also are familiar with the Prospectus dated April 17, 1998 (the "Prospectus")
filed as part of the Registration Statement on Form S-3 (the "Registration
Statement") filed with the Securities and Exchange Commission (the
"Commission"), as supplemented by the Prospectus Supplement thereto dated May
14, 1998 (the "Prospectus Supplement"), relating to the offering of the Offered
Certificates.
We have examined the Pooling and Servicing Agreement and the Series 1998-2
Supplement, together with the Prospectus and Prospectus Supplement. Except as
limited below, we also have examined and relied upon such other records,
documents and other instruments that in our judgment are necessary or
appropriate in order to express the opinions hereinafter set forth. This
opinion is limited to the Offered Certificates and the facts existing as of the
date hereof, and we have no duty to update this opinion. Any future changes in
facts or laws, including the issuance of any other interest in the Trust, could
change this opinion and the discussions contained in the Prospectus and the
Prospectus Supplement. In such examination, we have assumed the authenticity of
original documents and the genuineness of all signatures, the conformity to the
originals of all documents submitted to us as copies, and the truth, accuracy
and completeness of the information, representations and warranties contained in
the records, documents, instruments and certificates we have reviewed.
<PAGE>
Based upon and subject to the foregoing, we hereby confirm that the
statements relating to the Offered Certificates set forth in the Prospectus
under the heading "Certain Federal Income Tax Consequences" and in the
Prospectus Supplement under the heading "Certain Federal Income Tax Consequences
of the Offered Certificates", which statements have been prepared by us, to the
extent that they constitute matters of law or legal conclusions with respect
thereto, and subject to the qualification, exceptions and limitations contained
herein and therein, are correct in all material respects.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the references to this Firm in the Prospectus and
in the Prospectus Supplement. In giving such consent, we do not admit that we
are "experts," within the meaning of the term used in the Securities Act or the
rules and regulations of the Commission issued thereunder, with respect to any
part of the Registration Statement, including this opinion as an exhibit or
otherwise.
Very truly yours,
ALSTON & BIRD LLP
By: /s/ Terence J. Greene
---------------------
Terence J. Greene, Partner
<PAGE>
Exhibit 99.1
Series 1998-2 Supplement to the Master Pooling and Servicing Agreement
dated as of May 21, 1998 among Proffitt's Credit Corporation, as Transferor,
Proffitt's, Inc., as Servicer, and Norwest Bank Minnesota, National
Association, as Trustee
<PAGE>
PROFFITT'S CREDIT CORPORATION
TRANSFEROR
PROFFITT'S, INC.
SERVICER
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
TRUSTEE
ON BEHALF OF THE CERTIFICATEHOLDERS
______________________________
SERIES 1998-2 SUPPLEMENT
DATED AS OF MAY 21, 1998
TO THE
MASTER POOLING AND SERVICING AGREEMENT
DATED AS OF AUGUST 21, 1997
______________________________
$261,500,000
PROFFITT'S CREDIT CARD MASTER TRUST
SERIES 1998-2
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
PRELIMINARY STATEMENTS......................................................................................... 1
Section A. Designation..................................................................................... 1
Section B. Definitions..................................................................................... 2
Section C. Minimum Transferor Interest Percentage.......................................................... 19
Section D. Optional Purchase; Reassignment and Transfer Terms.............................................. 20
Section E. Delivery and Payment for the Certificates....................................................... 20
Section F. Form of Delivery of the Series 1998-2 Certificates.............................................. 20
Section G. Servicing Compensation.......................................................................... 20
Section H. Article IV of the Agreement..................................................................... 21
ARTICLE IV Rights of Series 1998-2 Certificateholders and Allocation and Application of Collections........ 21
Section 4.2 Collections and Allocations..................................................................... 21
Section 4.3 Determination of Monthly Interest............................................................... 22
Section 4.4 Determination of Monthly Principal.............................................................. 24
Section 4.5 Required Amounts................................................................................ 26
Section 4.6 Application of Class A Available Funds, Class B Available Funds, Collateral Available Funds,
Class D Available Funds and Collections of Principal Receivables................................ 28
Section 4.7 Defaulted Amounts; Adjustment Amounts; Investor Charge Offs; Reductions of Adjustment Amounts... 31
Section 4.8 Excess Spread; Shared Excess Finance Charge Collections......................................... 34
Section 4.9 Reallocated Principal Collections............................................................... 36
Section 4.10 Principal Shortfall............................................................................. 37
Section 4.11 Finance Charge Shortfall........................................................................ 38
Section 4.12 Cash Collateral Account......................................................................... 38
Section 4.13 Principal Account............................................................................... 39
Section 4.14 Reserve Account................................................................................. 40
Section 4.15 Postponement of Accumulation Period............................................................. 42
Section 4.16 Additional Issuances of Class D Certificates.................................................... 42
Section I Article V of the Agreement...................................................................... 43
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS......................................................... 43
Section 5.1 Distributions...................................................................................... 43
Section 5.2 Statements to Series 1998-2 Certificateholders..................................................... 45
Section 5.3 Distributions to Collateral Indebtedness Holder.................................................... 45
Section J. Pay Out Events..................................................................................... 45
Section K. Restrictions on Transfer........................................................................... 47
Section K1. Tax Characterization of the Class D Certificates and the Collateral Indebtedness Interest.......... 48
Section L. Ratification of Master Pooling and Servicing Agreement............................................. 48
Section L1. FASIT Election..................................................................................... 48
Section L2. Paired Series...................................................................................... 49
Section M. Counterparts....................................................................................... 49
Section N. Governing Law...................................................................................... 49
Section O. Subordination of Certain Termination Payments...................................................... 49
</TABLE>
EXHIBITS
Exhibit A-1: Form of Class A Certificate
Exhibit A-2: Form of Class B Certificate
Exhibit A-3: Form of Class D Certificate
Exhibit B : Form of Monthly Payment Instructions and Notification to
Trustee [RESERVED]
Exhibit C : Form of Monthly Certificateholder's Statement
-2-
<PAGE>
SERIES 1998-2 SUPPLEMENT
THIS SERIES 1998-2 SUPPLEMENT, dated as of May 21, 1998 (this "Series
------
Supplement"), is by and among PROFFITT'S CREDIT CORPORATION, a Nevada
- ----------
corporation, as Transferor, PROFFITT'S, INC., a Tennessee corporation, as
Servicer, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States (together
with its successors in trust thereunder the "Trustee"), as trustee under the
-------
Master Pooling and Servicing Agreement, dated as of August 21, 1997 (as amended
and supplemented, the "Agreement"), by and among the Transferor, the Servicer
---------
and the Trustee.
PRELIMINARY STATEMENTS
Section 6.9 of the Agreement provides, among other things, that the
Transferor and the Trustee may at any time and from time to time enter into one
or more Supplements to the Agreement for the purpose of authorizing the issuance
by the Trust to the Transferor, for execution and redelivery to the Trustee for
authentication, one or more Series of Investor Certificates. The Transferor and
the Servicer each hereby enter into this Series Supplement with the Trustee as
required by Section 6.9(c) of the Master Pooling and Servicing Agreement to
provide for the issuance, authentication and delivery of the Investor
Certificates of Series 1998-2.
Pursuant to this Series Supplement, the Transferor and the Trustee
shall create a new Series of Investor Certificates and shall specify the
Principal Terms thereof. The Series 1998-2 Certificates shall not be
subordinated to any other Series.
SECTION A. DESIGNATION. The Certificates issued hereunder shall be
-----------
designated generally as the "Series 1998-2 Certificates." The Series 1998-2
--------------------------
Certificates shall be one of the Series of Investor Certificates in Group One
and shall be a Principal Sharing Series. The Transferor and the Servicer each
hereby enter into this Series Supplement with the Trustee as required by Section
6.9(c) of the Agreement to provide for the issuance, authentication and delivery
of the Class A Asset Backed Certificates, Series 1998-2, the Class B Asset
Backed Certificates, Series 1998-2 and the Class D Asset Backed Certificates,
Series 1998-2. In addition, this Supplement further creates a fourth Class of
uncertificated interests in the Trust which, except as expressly provided for
herein, shall be deemed to be "Investor Certificates" for all purposes under the
---------------------
Agreement and this Series Supplement and which shall be known as "Collateral
----------
Indebtedness Interest, Series 1998-2". The first Distribution Date with respect
- ------------------------------------
to Series 1998-2 shall be the June 1998 Distribution Date. In the event that
any term or provision contained herein shall conflict with or be inconsistent
with any term or provision contained in the Agreement, the terms and provisions
of this Series Supplement shall govern.
<PAGE>
SECTION B. DEFINITIONS. All capitalized terms not otherwise defined
-----------
herein are defined in the Agreement. All Article, Section or subsection
references herein shall mean Articles, Sections or subsections of the Agreement,
except as otherwise provided herein. Unless otherwise stated herein, as the
context otherwise requires or if such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall relate only to the
Series 1998-2 Certificates and no other Series of Certificates issued by the
Trust. The following words and phrases shall have the following meanings with
respect to the Series 1998-2 Certificates and the definitions of such terms are
applicable to the singular as well as the plural form of such terms and to the
masculine as well as the feminine and neuter genders of such terms:
"Accumulation Commencement Monthly Period" shall mean the Monthly
----------------------------------------
Period in which the Accumulation Period commences.
"Accumulation Period" shall mean the Class A Accumulation Period and
-------------------
the Class B Accumulation Period.
"Accumulation Period Factor" shall mean, for each Monthly Period, a
--------------------------
fraction, the numerator of which is equal to the sum of the initial investor
amounts of all outstanding Series, and the denominator of which is equal to the
sum, without duplication, of (a) the Initial Investor Amount (plus the aggregate
initial principal amount of any Additional Class D Certificates), (b) the
initial investor amounts (or other applicable amounts) of all outstanding Series
(other than Series 1998-2) which are not expected to be in their revolving
periods during such Monthly Period and (c) the initial investor amounts (or
other applicable amounts) of all other outstanding Series which are not
allocating Shared Principal Collections to other Series and are expected to be
in their revolving periods during such Monthly Period.
"Accumulation Period Length" shall have the meaning specified in
--------------------------
Section 4.15.
"Additional Class D Certificates" shall have the meaning specified in
-------------------------------
Section 4.16.
"Adjusted Investor Amount" shall mean, as of any date of
------------------------
determination, an amount equal to the sum of the Class A Adjusted Investor
Amount, the Class B Adjusted Investor Amount, the Collateral Indebtedness Amount
and the Class D Investor Amount, in each case as of such date.
"Allocable Amounts" shall mean with respect to any Distribution Date,
-----------------
the sum of the Class A Allocable Amount, the Class B Allocable Amount, the
Collateral Allocable Amount and the Class D Allocable Amount.
"Amortization Period" shall mean the Accumulation Period or the Rapid
-------------------
Amortization Period.
<PAGE>
"Available Cash Collateral Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the amount held in and available to be withdrawn from the
Cash Collateral Account on such date.
"Available Enhancement Amount" shall mean an amount equal to the sum
----------------------------
of the Available Cash Collateral Amount, the Collateral Indebtedness Amount and
the Class D Investor Amount.
"Available Principal Collections" shall mean, with respect to any
-------------------------------
Distribution Date, an amount equal to (a) the applicable Investor Percentage of
Collections of Principal Receivables for the related Monthly Period, plus (b)
amounts designated as Available Principal Collections pursuant to Section 4.8,
minus (c) Reallocated Principal Collections applied pursuant to Section 4.9 for
the related Monthly Period, plus (d) Shared Principal Collections allocated to
Series 1998-2.
"Available Reserve Account Amount" shall mean, with respect to any
--------------------------------
Distribution Date, the lesser of (a) the amount held in and available to be
withdrawn from the Reserve Account on such date (before giving effect to any
deposit or withdrawal to be made to or from the Reserve Account on such date)
and (b) the Required Reserve Account Amount for such Distribution Date.
"Base Rate" shall mean, with respect to any Monthly Period, the sum of
---------
(a) the annualized percentage equivalent of a fraction, the numerator of which
is equal to the Monthly Interest payable on the Series 1998-2 Certificates on
the Distribution Date immediately following the last day of such Monthly Period
and the denominator of which is the Investor Amount as of the last day of the
preceding Monthly Period and (b) the product of (i) 2.00% per annum and (ii) a
fraction the numerator of which is an amount equal to the Adjusted Investor
Amount and the denominator of which is the Investor Amount, in each case
determined as of the last day of such preceding Monthly Period.
"Business Day" shall have the meaning provided in the Agreement.
------------
"Cash Collateral Account" shall have the meaning specified in Section
-----------------------
4.12(a).
"Cash Enhancement Surplus" shall mean, as of any date of
------------------------
determination, the lesser of (a) the Enhancement Surplus and (b) the excess of
the amount held in and available to be withdrawn from the Cash Collateral
Account over the Required Cash Collateral Amount.
"Class A Accumulation Period" shall mean, unless a Pay Out Event with
---------------------------
respect to Series 1998-2 shall have occurred prior thereto, the period
commencing at the close of business on the last day of the April 2000 Monthly
Period, or such later date as shall be determined in accordance with Section
4.15, and ending on the first to occur of
<PAGE>
(a) the commencement of the Rapid Amortization Period, (b) the payment in full
to Class A Certificateholders of the Class A Investor Amount or (c) the Stated
Series Termination Date.
"Class A Additional Interest" shall have the meaning specified in
---------------------------
Section 4.3(a).
"Class A Adjusted Investor Amount" shall mean, on any date of
--------------------------------
determination while the Class A Certificates are outstanding, an amount equal to
the Class A Investor Amount minus the Principal Account Balance, but in no event
shall the Class A Adjusted Investor Amount be less than zero.
"Class A Adjustment Amount" shall mean, with respect to each
-------------------------
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1998-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class A
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period.
"Class A Allocable Amount" shall mean, with respect to any
------------------------
Distribution Date, the sum of the Class A Investor Default Amount and the Class
A Adjustment Amount.
"Class A Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the sum of (a) the applicable Class A Investor
Percentage of Collections of Finance Charge Receivables and any other amounts
that are to be treated as Collections of Finance Charge Receivables in
accordance with the Agreement, (b) if such Monthly Period immediately precedes a
Distribution Date that occurs prior to the Class B Principal Commencement Date,
the amount of the Principal Investment Proceeds if any, with respect to such
Monthly Period, (c) the amount, if any, to be withdrawn from the Reserve Account
on the Distribution Date immediately following the last day of such Monthly
Period and included in Class A Available Funds pursuant to Section 4.14(d), and
(d) amounts required to be included in Class A Available Funds pursuant to
Section 4.14(b).
"Class A Certificate Rate" shall mean, with respect to the Class A
------------------------
Certificates and each Interest Period, a per annum rate of 6.00%.
"Class A Certificateholder" shall mean any Person in whose name a
-------------------------
Class A Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any one of the Certificates executed
--------------------
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-1.
-----------
<PAGE>
"Class A Expected Payment Date" shall mean the May 2001 Distribution
-----------------------------
Date.
"Class A Initial Investor Amount" shall mean the aggregate initial
-------------------------------
principal amount of the Class A Certificates, which is $200,000,000.
"Class A Interest Shortfall" shall have the meaning specified in
--------------------------
Section 4.3(a).
"Class A Investor Amount" shall mean, on any date of determination, an
-----------------------
amount equal to (a) the Class A Initial Investor Amount, minus (b) the aggregate
amount of principal payments made to the Class A Certificateholders prior to
such date, minus (c) the excess, if any, of the aggregate amount of Class A
Investor Charge Offs for all prior Distribution Dates over the sum of the
aggregate amount of Class A Investor Charge Offs reimbursed pursuant to Section
4.8(b) and, without duplication, the aggregate amount of the reductions of the
Series Adjustment Amounts allocable to the Class A Certificates pursuant to
Section 4.7(f) prior to such date; provided, however, that the Class A Investor
Amount may not be reduced below zero.
"Class A Investor Charge Offs" shall have the meaning specified in
----------------------------
Section 4.7(a).
"Class A Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Default Amount for
the related Monthly Period and (ii) the applicable Class A Investor Percentage
for such Monthly Period.
"Class A Investor Percentage" shall be calculated by substituting the
---------------------------
Class A Adjusted Investor Amount and the Class A Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount,
respectively, in the definition of Investor Percentage.
"Class A Monthly Interest" shall have the meaning specified in Section
------------------------
4.3(a).
"Class A Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.4(a).
"Class A Penalty Rate" shall mean the sum of the Class A Certificate
--------------------
Rate and 2.00% per annum.
"Class A Required Amount" shall have the meaning specified in Section
-----------------------
4.5(a).
<PAGE>
"Class A Servicing Fee" shall have the meaning specified in Section G
---------------------
hereof.
"Class B Accumulation Amount" means for any Distribution Date with
---------------------------
respect to the Class B Accumulation Period, an amount equal to the Class B
Investor Amount as of the beginning of the Accumulation Period.
"Class B Accumulation Period" shall mean, unless a Pay Out Event with
---------------------------
respect to Series 1998-2 shall have occurred prior thereto, the period
commencing on the Distribution Date on which the Class A Investor Amount is paid
in full or if the Class A Investor Amount is paid in full on the Class A
Expected Payment Date, at the close of business on the Class A Expected Payment
Date, and ending on the first to occur of (a) the commencement of the Rapid
Amortization Period, (b) the payment in full to Class B Certificateholders of
the Class B Investor Amount or (c) the Stated Series Termination Date.
"Class B Additional Interest" shall have the meaning specified in
---------------------------
Section 4.3(b).
"Class B Adjusted Investor Amount" shall mean, on any date of
--------------------------------
determination, an amount equal to the Class B Investor Amount minus, prior to
the payment in full of the Class A Investor Amount, the excess of the Principal
Account Balance over the Class A Investor Amount, and after the payment in full
of the Class A Investor Amount, the Principal Account Balance, if any, but in no
event shall the Class B Adjusted Investor Amount be less than zero.
"Class B Adjustment Amount" shall mean, with respect to each
-------------------------
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1998-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class B
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period.
"Class B Allocable Amount" shall mean, with respect to any
------------------------
Distribution Date, the sum of the Class B Investor Default Amount and the Class
B Adjustment Amount.
"Class B Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the sum of (i) the applicable Class B Investor
Percentage of Collections of Finance Charge Receivables and any other amounts
that are to be treated as Collections of Finance Charge Receivables in
accordance with the Agreement, (b) if such Monthly Period immediately precedes a
Distribution Date that occurs on or after the Class B Principal Commencement
Date, the amount of Principal Investment Proceeds, if any, with respect to such
Monthly Period, (c) the amount, if any, to be withdrawn from the Reserve Account
on the Distribution Date immediately following the last day of such
<PAGE>
Monthly Period and included in Class B Available Funds pursuant to Section
4.14(d), and (d) the amount, if any, required to be included in Class B
Available Funds pursuant to Section 4.14(b).
"Class B Certificate Rate" shall mean, with respect to the Class B
------------------------
Certificates and each Interest Period, a per annum rate of 6.15%.
"Class B Certificateholder" shall mean any Person in whose name a
-------------------------
Class B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any one of the Certificates executed
--------------------
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-2.
-----------
"Class B Expected Payment Date" shall mean the June 2001 Distribution
-----------------------------
Date.
"Class B Initial Investor Amount" shall mean the aggregate initial
-------------------------------
principal amount of the Class B Certificates, which is $21,500,000.
"Class B Interest Shortfall" shall have the meaning specified in
--------------------------
Section 4.3(b).
"Class B Investor Amount" shall mean, on any date of determination, an
-----------------------
amount equal to (a) the Class B Initial Investor Amount, minus (b) the aggregate
amount of principal payments made to the Class B Certificateholders prior to
such date, minus (c) the aggregate amount of Class B Investor Charge Offs for
all prior Distribution Dates, minus (d) the amount of Class B Subordinated
Principal Collections allocated on all prior Distribution Dates pursuant to
Section 4.9(a), minus (e) an amount equal to the amount by which the Class B
Investor Amount has been reduced on all prior Distribution Dates pursuant to
Section 4.7(a), plus (f) the sum of the amount of Excess Spread and Shared
Excess Finance Charge Collections allocated and available on all prior
Distribution Dates pursuant to Section 4.8(e) for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c), (d) and (e) and, without
duplication, the aggregate amount of the reductions of the Series Adjustment
Amounts allocable to the Class B Investor Amount pursuant to Section 4.7(f)
prior to such date; provided, however, that the Class B Investor Amount may not
be reduced below zero.
"Class B Investor Charge Offs" shall have the meaning specified in
----------------------------
Section 4.7(b).
"Class B Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Default Amount for
the related Monthly Period and (ii) the applicable Class B Investor Percentage
for such Monthly Period.
<PAGE>
"Class B Investor Percentage" shall be calculated by substituting the
---------------------------
Class B Adjusted Investor Amount and the Class B Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount
respectively, in the definition of Investor Percentage.
"Class B Monthly Interest" shall have the meaning specified in Section
------------------------
4.3(b).
"Class B Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.4(b).
"Class B Penalty Rate" shall mean the sum of the Class B Certificate
--------------------
Rate and 2.00% per annum.
"Class B Principal Commencement Date" shall mean the Distribution Date
-----------------------------------
on which the Class A Investor Amount is paid in full or, if the Class A Investor
Amount is paid in full on the Class A Expected Payment Date and a Pay Out Event
has not commenced, the Distribution Date following the Class A Expected Payment
Date.
"Class B Required Amount" shall have the meaning specified in Section
-----------------------
4.5(b).
"Class B Servicing Fee" shall have the meaning specified in Section G
---------------------
hereof.
"Class B Subordinated Principal Collections" shall mean, with respect
------------------------------------------
to any Monthly Period, an amount equal to the product of (i) the applicable
Class B Investor Percentage with respect to Collections of Principal Receivables
and (ii) the aggregate amount of Collections of Principal Receivables for such
Monthly Period.
"Class D Additional Interest" shall have the meaning specified in
---------------------------
Section 4.3(d).
"Class D Adjustment Amount" shall mean, with respect to each
-------------------------
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1998-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class D
Investor Amount and the denominator of which is the Adjusted Investor Amount,
each as of the last day of the Monthly Period preceding the related Monthly
Period.
"Class D Allocable Amount" shall mean, with respect to any
------------------------
Distribution Date, the sum of the Class D Investor Default Amount and the Class
D Adjustment Amount.
<PAGE>
"Class D Available Funds" shall mean, with respect to any Monthly
-----------------------
Period, an amount equal to the applicable Class D Investor Percentage of
Collections of Finance Charge Receivables and any other amounts that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement.
"Class D Certificate Rate" shall mean, for any Interest Period with
------------------------
respect to the Class D Certificates, the rate designated in the letter
agreement, dated as of May 21, 1998, between the Transferor and the Trustee;
provided, in no event shall the Class D Certificate Rate exceed LIBOR plus 1.00%
per annum.
"Class D Certificateholder" shall mean any Person in whose name a
-------------------------
Class D Certificate is registered in the Certificate Register.
"Class D Certificates" shall mean any one of the Certificates executed
--------------------
by the Transferor and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A-3.
-----------
"Class D Initial Investor Amount" shall mean the aggregate initial
-------------------------------
principal amount of the Class D Certificates, which is $16,000,000.
"Class D Interest Shortfall" shall have the meaning specified in
--------------------------
Section 4.3(d).
"Class D Investor Amount" shall mean, on any date of determination, an
-----------------------
amount equal to (a) the Class D Initial Investor Amount (plus the aggregate
initial principal amount of any Additional Class D Certificates issued during
the Revolving Period), minus (b) the aggregate amount of principal payments made
to the Class D Certificateholders prior to such date, minus (c) the amount of
Class D Subordinated Principal Collections allocated on all prior Distribution
Dates pursuant to Section 4.9(a), (b) and (c), minus (d) an amount equal to the
amount by which the Class D Investor Amount has been reduced on all prior
Distribution Dates pursuant to Section 4.7(a), (b), (c) and (d), plus (e) the
sum of the amount of Excess Spread and Shared Excess Finance Charge Collections
allocated and available on all prior Distribution Dates pursuant to Section
4.8(n) for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c) and (d) and, without duplication, the aggregate amount of the
reductions of the Series Adjustment Amounts allocable to the Class D Investor
Amount pursuant to Section 4.7(f) prior to such date; but in no event shall the
Class D Investor Amount be reduced below zero.
"Class D Investor Charge Off" shall have the meaning provided in
---------------------------
Section 4.7(d).
"Class D Investor Default Amount" shall mean, with respect to each
-------------------------------
Distribution Date, an amount equal to the product of (i) the Default Amount for
the
<PAGE>
related Monthly Period and (ii) the applicable Class D Investor Percentage
for such Monthly Period.
"Class D Investor Percentage" shall be calculated by substituting the
---------------------------
Class D Investor Amount and the Class D Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount,
respectively, in the definition of Investor Percentage.
"Class D Monthly Interest" shall have the meaning specified in Section
------------------------
4.3(d).
"Class D Monthly Principal" shall have the meaning specified in
-------------------------
Section 4.4(d).
"Class D Penalty Rate" shall mean, for any Interest Period, the sum of
--------------------
the Class D Certificate Rate for such Interest Period and 2.00% per annum.
"Class D Servicing Fee" shall have the meaning specified in Section G
---------------------
hereof.
"Class D Subordinated Principal Collections" shall mean, with respect
------------------------------------------
to any Monthly Period, an amount equal to the product of (i) the applicable
Class D Investor Percentage with respect to Collections of Principal Receivables
and (ii) the aggregate amount of Collections of Principal Receivables for such
Monthly Period.
"Closing Date" shall mean May 21, 1998.
------------
"Collateral Additional Interest" shall have the meaning specified in
------------------------------
Section 4.3(c).
"Collateral Adjustment Amount" shall mean, with respect to each
----------------------------
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1998-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Collateral
Indebtedness Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period.
"Collateral Allocable Amount" shall mean, with respect to any
---------------------------
Distribution Date, the sum of the Collateral Default Amount and the Collateral
Adjustment Amount.
"Collateral Available Funds" shall mean, with respect to any Monthly
--------------------------
Period, an amount equal to the applicable Collateral Investor Percentage of
Collections of Finance Charge Receivables and any other amounts that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement.
<PAGE>
"Collateral Default Amount" shall mean, with respect to each
-------------------------
Distribution Date, an amount equal to the product of (i) the Default Amount for
the related Monthly Period and (ii) the applicable Collateral Investor
Percentage during such Monthly Period.
"Collateral Indebtedness Amount" shall mean, on any date of
------------------------------
determination, an amount equal to (a) the Collateral Initial Indebtedness
Amount, minus (b) the aggregate amount of principal payments made to the
Collateral Indebtedness Holder on or prior to such date, minus (c) the amount of
Collateral Subordinated Principal Collections allocated on all prior
Distribution Dates pursuant to Sections 4.9(a) and 4.9(b), minus (d) an amount
equal to the amount by which the Collateral Indebtedness Amount has been reduced
on all prior Distribution Dates pursuant to Sections 4.7(a) and 4.7(b), plus (e)
the sum of the Excess Spread and Shared Excess Finance Charge Collections
allocated and available on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d) and,
without duplication, reductions of the Series Adjustment Amount allocable to the
Collateral Indebtedness Interest pursuant to Section 4.7(f) prior to such date;
but in no event shall the Collateral Indebtedness Amount be reduced below zero.
"Collateral Indebtedness Charge Off" shall have the meaning specified
----------------------------------
in Section 4.7(c).
"Collateral Indebtedness Holder" shall mean the entity designated as
------------------------------
such in the Loan Agreement.
"Collateral Indebtedness Interest" shall mean a fractional undivided
--------------------------------
interest in the Trust which shall consist of the right to receive, to the extent
necessary to make the required payments to the Collateral Indebtedness Holder
under this Series Supplement, the portion of Collections allocable thereto under
the Agreement and this Series Supplement, funds held in the Collection Account
allocable thereto pursuant to the Agreement and this Series Supplement and,
subject to the rights of the Series 1998-2 Certificateholders with respect
thereto, funds held in the Cash Collateral Account and the Reserve Account.
"Collateral Initial Indebtedness Amount" shall mean the aggregate
--------------------------------------
initial principal amount of the Collateral Indebtedness Interest, which is
$24,000,000.
"Collateral Interest Shortfall" shall have the meaning specified in
-----------------------------
Section 4.3(c).
"Collateral Investor Percentage" shall be calculated by substituting
------------------------------
the Collateral Indebtedness Amount and the Collateral Initial Indebtedness
Amount in all references to the Adjusted Investor Amount and the Initial
Investor Amount, respectively, in the definition of Investor Percentage.
"Collateral Interest Shortfall" shall have the meaning specified in
-----------------------------
Section 4.3(c).
<PAGE>
"Collateral Monthly Interest" shall have the meaning specified in
---------------------------
Section 4.3(c).
"Collateral Monthly Principal" shall have the meaning specified in
----------------------------
Section 4.4(c).
"Collateral Penalty Rate" shall mean, for any Interest Period, the sum
-----------------------
of the Collateral Rate for such Interest Period and 2.00% per annum.
"Collateral Rate" shall mean the rate designated as such in the Loan
---------------
Agreement.
"Collateral Required Amount" shall have the meaning specified in
--------------------------
Section 4.5(c).
"Collateral Servicing Fee" shall have the meaning specified in Section
------------------------
G hereof.
"Collateral Subordinated Principal Collections" shall mean, with
---------------------------------------------
respect to any Monthly Period, an amount equal to the product of (i) the
applicable Collateral Investor Percentage with respect to Collections of
Principal Receivables and (ii) the aggregate amount of Collections of Principal
Receivables for such Monthly Period.
"Controlled Accumulation Amount" shall mean (a) for any Distribution
------------------------------
Date with respect to the Class A Accumulation Period, $16,666,667; provided,
however, if the Accumulation Period Length shall be determined to be less than
12 months in accordance with Section 4.15, the Controlled Accumulation Amount
with respect to the Class A Certificates shall be equal to (i) the product of
(x) the Class A Initial Investor Amount and (y) the Accumulation Period Factor
for such Monthly Period divided by (ii) the Required Accumulation Factor Number
and (b) for any Distribution Date with respect to the Class B Accumulation
Period, $21,500,000.
"Controlled Deposit Amount" shall mean, for any Distribution Date with
-------------------------
respect to the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.
"Covered Amount" shall mean (a) for any Distribution Date with respect
--------------
to the Class A Accumulation Period or the first Special Distribution Date, if
such Special Distribution Date occurs on or prior to the Distribution Date on
which the Class A Investor Amount shall be paid in full, an amount equal to the
product of (i) a fraction, the numerator of which is the actual number of days
in the related Interest Period and the denominator of which is 360, (ii) the
Class A Certificate Rate and (iii) the Principal Account Balance, if any, as of
the preceding Distribution Date and (b) for any Distribution
<PAGE>
Date with respect to the Class B Accumulation Period or the first Special
Distribution Date, if such Special Distribution Date occurs after the
Distribution Date on which the Class A Investor Amount shall have been paid in
full, an amount equal to the product of (i) a fraction, the numerator of which
is the actual number of days in the related Interest Period and the denominator
of which is 360, (ii) the Class B Certificate Rate and (iii) the Principal
Account Balance, if any, as of the preceding Distribution Date.
"Defaulted Receivables" shall mean for any Monthly Period, the
---------------------
Principal Receivables in Accounts which became Defaulted Accounts during such
Monthly Period.
"Deficit Controlled Accumulation Amount" shall mean (a) on the first
--------------------------------------
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the applicable Controlled
Accumulation Amount for such Distribution Date over the amount deposited into
the Principal Account as Class A Monthly Principal or Class B Monthly Principal,
as the case may be, for such Distribution Date, and (b) on each subsequent
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the applicable Controlled Deposit
Amount for such subsequent Distribution Date over the amount deposited into the
Principal Account as Class A Monthly Principal or Class B Monthly Principal, as
the case may be, for such subsequent Distribution Date.
"Enhancement Provider" shall mean the CIA Lenders and other Collateral
--------------------
Indebtedness Holders identified in the Loan Agreement.
"Enhancement Surplus" shall mean, with respect to any Distribution
-------------------
Date, the excess, if any, of (a) the sum of the amount held in and available to
be withdrawn from the Cash Collateral Account, the Collateral Indebtedness
Amount and the Class D Investor Amount over (b) the Required Enhancement Amount.
"Excess Spread" shall mean, with respect to any Distribution Date, the
-------------
sum of the amounts, if any, specified pursuant to Sections 4.6(a)(iv),
4.6(b)(iii), 4.6(c)(ii), 4.6(d)(ii) and 4.12(b) with respect to such
Distribution Date.
"Finance Charge Shortfall" shall have the meaning specified in Section
------------------------
4.11.
"Initial Investor Amount" shall mean the aggregate initial principal
-----------------------
amount of the Series 1998-2 Certificates, which is $261,500,000.
"Interest Period" shall mean, with respect to any Distribution Date,
---------------
the period from and including the Distribution Date immediately preceding such
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to, but excluding, such Distribution Date.
<PAGE>
"Investor Amount" shall mean, as of any date of determination, an
---------------
amount equal to the sum of the Class A Investor Amount, the Class B Investor
Amount, the Collateral Indebtedness Amount and the Class D Investor Amount, in
each case as of such date.
"Investor Default Amount" shall mean, with respect to any Distribution
-----------------------
Date, an amount equal to the product of (a) the Default Amount for the
immediately preceding Monthly Period and (b) the applicable Investor Percentage
applicable to Allocable Amounts for such Monthly Period.
"Investor Monthly Servicing Fee" shall have the meaning specified in
------------------------------
Section G hereof.
"Investor Percentage" shall mean:
-------------------
(a) with respect to (A) Principal Receivables during any Monthly
Period with respect to the Revolving Period, (B) Finance Charge Receivables
during any Monthly Period other than during a Rapid Amortization Period,
and (C) the Allocable Amount during any Monthly Period, the percentage
equivalent of a fraction the numerator of which is equal to the Adjusted
Investor Amount as of the last day of the immediately preceding Monthly
Period (or the Initial Investor Amount, in the case of the first Monthly
Period applicable to Series 1998-2) and the denominator of which is the
greater of (i) the sum of the Aggregate Principal Receivables and the
Excess Funding Amount, in each case at the close of business on the last
day of the immediately preceding Monthly Period and (ii) the sum of the
numerators used to calculate the applicable investor percentages with
respect to Principal Receivables, Finance Charge Receivables or the
Allocable Amount, as applicable, for all Series outstanding as of the date
on which such determination is being made;
(b) with respect to Finance Charge Receivables (and any other amounts
treated as Finance Charge Receivables) during any Monthly Period with
respect to a Rapid Amortization Period, the percentage equivalent of a
fraction the numerator of which is equal to the Investor Amount as of the
last day of the Revolving Period and the denominator of which is the
greater of (i) the sum of the Aggregate Principal Receivables and the
Excess Funding Amount, in each case at the close of business on the last
day of the immediately preceding Monthly Period and (ii) the sum of the
numerators use to calculate the investor percentages with respect to
Finance Charge Receivables for all Series outstanding as of the date on
which such determination is being made; and
(c) with respect to Principal Receivables during any Monthly Period
with respect to an Amortization Period, the percentage equivalent of a
fraction the numerator of which is equal to the Investor Amount as of the
last day of the Revolving Period and the denominator of which is the
greater of (i) the sum of the
<PAGE>
Aggregate Principal Receivables and the Excess Funding Amount, in each case
at the close of business on the last day of the immediately preceding
Monthly Period and (ii) the sum of the numerators used to calculate the
investor percentages with respect to Principal Receivables for all Series
outstanding as of the date on which such determination is being made;
provided, however, that if the Series 1998-2 Certificates are paired with a
Paired Series and a Rapid Amortization Period commences for such Paired
Series, the Transferor may, by written notice to the Trustee and Servicer,
designate a different numerator to be used to determine such percentage,
(provided that such numerator is not less than the Adjusted Investor Amount
as of the last day of the revolving period for such Paired Series).
"LIBOR" shall have the meaning specified in the Loan Agreement.
-----
"Loan Agreement" shall mean the agreement among the Transferor, the
--------------
Servicer, the Trustee and the Collateral Indebtedness Holder, dated as of the
date hereof, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"Minimum Transferor Interest Percentage" shall have the meaning
--------------------------------------
specified in Section C.
"Monthly Interest" shall mean, with respect to any Distribution Date,
----------------
the sum of the Class A Monthly Interest, the Class B Monthly Interest, the
Collateral Monthly Interest and the Class D Monthly Interest for such
Distribution Date.
"Paired Series" shall have the meaning specified in Section L2.
-------------
"Portfolio Adjusted Yield" shall mean, with respect to any Monthly
------------------------
Period, the Portfolio Yield with respect to such Monthly Period minus the Base
Rate with respect to such Monthly Period.
"Portfolio Yield" shall mean, with respect to any Monthly Period, the
---------------
annualized percentage equivalent of a fraction, the numerator of which is (x)
the sum of (i) the amount of collections of Finance Charge Receivables and
Shared Excess Finance Charge Collections allocated to the Series 1998-2
Certificates for such Monthly Period, plus (ii) the amount of investment
earnings (net of investment expenses and losses), if any, on the Principal
Account and Reserve Account balances, plus (iii) interest and earnings (net of
investment expenses and losses), if any, on funds held in the Cash Collateral
Account and included as Excess Spread pursuant to Section 4.12(b), plus (iv) the
amount of funds withdrawn from the Reserve Account minus (v) an amount equal to
the Default Amount allocable to the Series 1998-2 Certificates for such Monthly
Period, and the denominator of which is (y) the Investor Amount as of the last
day of the preceding Monthly Period.
"Principal Account" shall have the meaning specified in Section
-----------------
4.13(a).
<PAGE>
"Principal Account Balance" shall mean, with respect to any date of
-------------------------
determination during the Accumulation Period, the amount, if any, of funds held
in the Principal Account on such date of determination.
"Principal Investment Proceeds" shall have the meaning specified in
-----------------------------
Section 4.13(b).
"Principal Shortfall" shall have the meaning specified in Section
-------------------
4.10.
"Rapid Amortization Period" shall mean the period commencing at the
-------------------------
close of business on the day on which a Pay Out Event with respect to Series
1998-2 is deemed to have occurred, and ending on the first to occur of (a) the
payment in full of the Class A Investor Amount, the Class B Investor Amount, the
Collateral Indebtedness Amount and the Class D Investor Amount, respectively or
(b) the Stated Series Termination Date.
"Rating Agencies" shall mean Moody's, Standard & Poor's, and, if
---------------
applicable, such other nationally recognized statistical rating organization
that has rated the Certificates at the request of the Company.
"Reallocated Principal Collections" shall mean, with respect to any
---------------------------------
Monthly Period, an amount equal to the sum of Class B Subordinated Principal
Collections, Collateral Subordinated Principal Collections and Class D
Subordinated Principal Collections for such Monthly Period.
"Reference Banks" shall mean four major banks in the London interbank
---------------
market selected by the Servicer upon notice to the Trustee.
"Required Accumulation Factor Number" shall be a fraction, rounded
-----------------------------------
upwards to the nearest whole number, the numerator of which is one and the
denominator of which is equal to the lowest monthly principal payment rate on
the Accounts for the 12 months preceding the date of such calculation (or any
lower monthly principal payment rate selected by the Servicer at its option in
its sole discretion), expressed as a decimal.
"Required Cash Collateral Amount" shall mean the amount specified as
-------------------------------
such in the Loan Agreement or such higher amount designated by the Transferor.
"Required Draw Amount" shall have the meaning specified in Section
--------------------
4.12(c).
"Required Enhancement Amount" shall mean, with respect to any
---------------------------
Distribution Date, an amount equal to the product of the Adjusted Investor
Amount (after giving effect to all reductions thereof to be made on such
Distribution Date) and 15%, but not less than $7,845,000; provided, however,
that (i) if a Pay Out Event shall have
<PAGE>
occurred, the Required Enhancement Amount for each Distribution Date thereafter
(subject to clause (ii) below) shall equal the Required Enhancement Amount for
the Distribution Date immediately preceding the occurrence of such Pay Out
Event, (ii) in no event shall the Required Enhancement Amount exceed the sum of
the Class A Adjusted Investor Amount and the Class B Adjusted Investor Amount on
such date and (iii) the Required Enhancement Amount may be reduced without the
consent of the Series 1998-2 Certificateholders if (x) the Transferor shall have
received written notice from each Rating Agency (with a copy delivered to the
Trustee) that the Rating Agency Condition is satisfied, (y) the Transferor shall
have delivered to the Trustee an Officer's Certificate to the effect that, based
on the facts known to such officer at such time, in the reasonable belief of the
Transferor, such reduction will not cause a Pay Out Event or an event that,
after the giving of notice or the lapse of time, would constitute a Pay Out
Event, to occur with respect to Series 1998-2 and (z) the Transferor shall have
provided an Opinion of Counsel addressed to the Trustee, dated the date of such
reduction, that such reduction will not (a) adversely affect the tax
characterization of any outstanding Series or Class with respect to which an
Opinion of Counsel addressed to the Trustee was delivered at the time of their
issuance that such Investor Certificates would be characterized as debt, (b)
cause the Trust to be classified, for federal income tax purposes, as an
association (or publicly traded partnership) taxable as a corporation and (c)
cause or constitute an event in which gain or loss would be recognized by any
Certificateholder.
"Required Reserve Account Amount" shall mean, with respect to any
-------------------------------
Distribution Date prior to the Reserve Account Funding Date, $0, and on or after
the Reserve Account Funding Date, an amount no less than (a) 1.50% of the Class
A Investor Amount as of the preceding Distribution Date (after giving effect to
all changes therein on such date) or (b) any other amount designated by the
Transferor; provided, however, that if such designation pursuant to (b) above is
of a lesser amount, (i) the Rating Agency Condition shall have been satisfied,
(ii) the Enhancement Provider shall have consented to such lower amount and
(iii) the Transferor shall have delivered to the Trustee an Officer's
Certificate to the effect that, based on the facts known to such officer at such
time, in the reasonable belief of such officer, such designation will not cause
a Pay Out Event or an event that, after the giving of notice or the lapse of
time, would cause a Pay Out Event, to occur with respect to Series 1998-2.
"Reserve Account" shall have the meaning specified in Section 4.14(a).
---------------
"Reserve Account Funding Date" shall mean the Distribution Date with
----------------------------
respect to the Monthly Period which commences no later than three (3) months
prior to the Class A Accumulation Period, provided that the Reserve Account
Funding Date shall be accelerated to (a) the Distribution Date with respect to
the Monthly Period which commences no later than four (4) months prior to the
Class A Accumulation Period if the average of the Portfolio Adjusted Yields for
any three consecutive Monthly Periods shall be less than 6.0%; (b) the
Distribution Date with respect to the Monthly Period which commences no later
than six (6) months prior to the Class A Accumulation Period if the average of
the Portfolio Adjusted Yields for any three (3) consecutive Monthly Periods
<PAGE>
shall be less than 3.0%; or (c) the Distribution Date which commences no later
than nine (9) months prior to the Class A Accumulation Period if the average of
the Portfolio Adjusted Yields for any three (3) consecutive Monthly Periods
shall be less than 2.0%.
"Reserve Account Surplus" shall mean, as of any date of determination,
-----------------------
the amount, if any, by which the amount held in the Reserve Account exceeds the
Required Reserve Account Amount.
"Reserve Draw Amount" shall have the meaning specified in Section
-------------------
4.14(c).
"Revolving Period" shall mean the period beginning on the Closing Date
----------------
and ending on the earlier of (a) the close of business on the day preceding the
commencement of the Class A Accumulation Period and (b) the close of business on
the day preceding the commencement of the Rapid Amortization Period.
"Series Adjustment Amount" shall mean, with respect to each
------------------------
Distribution Date, an amount equal to the product of (i) any unpaid Adjustment
Payment Obligation for the related Monthly Period and (ii) the Investor
Percentage applicable to allocations of Allocable Amounts during the related
Monthly Period, as calculated on the last day of the Monthly Period preceding
the related Monthly Period.
"Series 1998-2" shall mean the Series the terms of which are specified
-------------
in this Series Supplement.
"Series 1998-2 Certificate" shall mean a Class A Certificate, a Class
-------------------------
B Certificate, a Class D Certificate and/or, unless the context requires
otherwise, the Collateral Indebtedness Interest.
"Series 1998-2 Certificateholder" shall mean a Class A
-------------------------------
Certificateholder, a Class B Certificateholder, a Class D Certificateholder
and/or, unless the context requires otherwise, the Collateral Indebtedness
Holder.
"Servicing Fee" shall mean the amount paid monthly from the Trust to
-------------
the Servicer and which shall be equal to one-twelfth (1/12th) of the product
of the Servicing Fee Percentage and the Adjusted Investor Amount.
"Servicing Fee Percentage" shall mean 2.00% per annum.
------------------------
"Shared Excess Finance Charge Collections" shall mean, with respect to
----------------------------------------
any Monthly Period, the aggregate amount for all outstanding Series in Group One
of Collections of Finance Charge Receivables which the related Supplements
specify are to be treated as "Shared Excess Finance Charge Collections" for such
Monthly Period.
<PAGE>
"Shared Principal Collections" shall mean, with respect to any Monthly
----------------------------
Period, the aggregate amount for all outstanding Series in Group One of
Collections of Principal Receivables available after covering required
distributions and deposits under each Series Supplement and that are to be
treated as "Shared Principal Collections" pursuant to Section 4.6(e)(iii) and
Section 4.6(f)(v) and the respective applicable sections of any Supplement for
other Series in Group One.
"Special Distribution Date" shall mean each Distribution Date with
-------------------------
respect to the Rapid Amortization Period.
"Stated Series Termination Date" shall mean the September 2004
------------------------------
Distribution Date.
"Telerate Page 3750" shall mean the display page currently so
------------------
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service for the purpose of displaying comparable rates or
prices).
"Treasury" shall mean the United States Department of the Treasury and
--------
any successor Governmental Authority thereto.
SECTION C. MINIMUM TRANSFEROR INTEREST PERCENTAGE. The Minimum Transferor
--------------------------------------
Interest Percentage applicable to the Series 1998-2 Certificates shall be 0%;
provided, however, that (a) the Transferor may, at its option and in its sole
discretion, designate a higher percentage as the Minimum Transferor Interest
Percentage so long as, after giving effect to such designation and any
repurchase of Investor Certificates or designation of Additional Accounts, the
Transferor Amount shall equal or exceed the Minimum Transferor Amount and (b) if
on any Distribution Date during the Revolving Period (after giving effect to all
distributions and adjustments to be made on such Distribution Date), the portion
of the Class D Investor Amount owned by the Transferor is less than 2% of the
Investor Amount and the Minimum Transferor Interest Percentage is less than 2%,
---
the Transferor shall, on or before the last day of the second Monthly Period
following the Monthly Period in which such Distribution Date occurred (unless
the portion of the Class D Investor Amount owned by the Transferor shall then
equal or exceed 2% of the Investor Amount), (i) repurchase or otherwise repay
Investor Certificates (to the extent permitted by any Supplement) or designate
Additional Accounts to the extent necessary to permit the designation of a
Minimum Transferor Interest Percentage of 2% without causing the Transferor
Amount to be less than the Minimum Transferor Amount and (ii) upon compliance
with clause (i), designate 2% as the Minimum Transferor Interest Percentage. In
the event that the Transferor shall have designated a Minimum Transferor
Interest Percentage in excess of 0%, the Transferor may, during the Revolving
Period, designate a lower percentage (but not less than 0%) if the portion of
the Class D Investor Amount owned by the Transferor as a percentage of the
Investor Amount averaged over the three Distribution Dates preceding such
designation (after giving effect to all distributions and adjustments made on
each such Distribution Date) shall equal or exceed 4%; provided, however, that
such lower percentage may not be less than 2% if the portion
<PAGE>
of the Class D Investor Amount owned by the Transferor as a percentage of the
Investor Amount on the Distribution Date preceding such designation (after
giving effect to all distributions and adjustments made on such Distribution
Date) shall not equal or exceed 2%.
SECTION D. OPTIONAL PURCHASE; REASSIGNMENT AND TRANSFER TERMS. All the
--------------------------------------------------
Series 1998-2 Certificates may be repurchased by, and reassigned and transferred
to, the Transferor in the Transferor's sole discretion, on any Distribution Date
on or after the Distribution Date on which the sum of the Class A Adjusted
Investor Amount, the Class B Adjusted Investor Amount, the Collateral
Indebtedness Amount and the amount of the Class D Investor Amount held by
parties other than the Transferor or any of its Affiliates is less than or equal
to 10% of the sum of the Class A Investor Amount on the Closing Date, the Class
B Investor Amount on the Closing Date, the Collateral Indebtedness Amount on the
Closing Date and the highest amount of the Class D Investor Amount held by
parties other than the Transferor or any of its affiliates since the Closing
Date. The repurchase price for the Series 1998-2 Certificates will be equal to
(a) the Adjusted Investor Amount, plus (b) accrued and unpaid interest on the
1998-2 Certificates, less (c) the amount held in the Collection Account
allocable to Series 1998-2 to be applied other than to deposits to the Reserve
Account, with any excess payable to the Transferor as holder of the Exchangeable
Transferor Certificate. The provisions of this Section are subject to the
provisions of Section 12.2 of the Agreement.
SECTION E. DELIVERY AND PAYMENT FOR THE CERTIFICATES. The Trustee shall
-----------------------------------------
deliver the Series 1998-2 Certificates when authenticated in accordance with
Section 6.2 of the Agreement (except in the case of the Collateral Indebtedness
Interest, which shall be in uncertificated form). The Class D and Collateral
Indebtedness Interest shall bear legends appropriately limiting their transfer
in accordance herewith and applicable securities laws.
SECTION F. FORM OF DELIVERY OF THE SERIES 1998-2 CERTIFICATES. The Class
--------------------------------------------------
A Certificates and the Class B Certificates shall be delivered as provided in
Section 6.11 of the Agreement. The Class A Certificates and the Class B
Certificates will initially be held by the Trustee as custodian for The
Depository Trust Company, and will be registered in the name of Cede & Co., as
nominee of The Depository Trust Company. The Class D Certificates shall be
delivered in registered form. The Collateral Indebtedness Interest shall be
issued in uncertificated form.
SECTION G. SERVICING COMPENSATION. The share of the Monthly Servicing
----------------------
Fee allocable to the Series 1998-2 Certificateholders with respect to any
Distribution Date (the "Investor Monthly Servicing Fee") shall be equal to one
------------------------------
twelfth (1/12th) of the product of (a) the Servicing Fee Percentage and (b) each
of the Class A Adjusted Investor Amount, the Class B Adjusted Investor Amount,
the Collateral Indebtedness Amount and the Class D Investor Amount,
respectively, as of the last day of the immediately preceding Monthly Period;
provided, however, with respect to the first Distribution Date, the Investor
Monthly Servicing Fee shall be equal to $348,667. The share of the Investor
Monthly
<PAGE>
Servicing Fee allocable to the Class A Certificateholders with respect to any
Distribution Date (the "Class A Servicing Fee") shall be equal to the product
---------------------
of (a) one-twelfth (1/12th) of the Servicing Fee Percentage and (b) the Class
A Adjusted Investor Amount; provided, however, that with respect to the first
Distribution Date, the Class A Servicing Fee shall be equal to $266,667. The
share of the Investor Monthly Servicing Fee allocable to the Class B
Certificateholders with respect to any Distribution D ate (the "Class B
-------
Servicing Fee") shall be equal to the product of (a) (1/12th) of the Servicing
- -------------
Fee Percentage and (b) the Class B Adjusted Investor Amount; provided, however,
that with respect to the first Distribution Date, the Class B Servicing Fee
shall be equal to $28,667. The share of the Investor Monthly Servicing Fee
allocable to the Collateral Indebtedness Holder with respect to any Distribution
Date (the "Collateral Servicing Fee") shall be equal to the product of (a) one-
------------------------
twelfth (1/12th) of the Servicing Fee Percentage and (b) the Collateral
Indebtedness Amount; provided, however, that with respect to the first
Distribution Date, the Collateral Servicing Fee shall be equal to $32,000. The
share of the Investor Monthly Servicing Fee allocable to the Class D
Certificateholders with respect to any Distribution Date (the "Class D Servicing
-----------------
Fee") shall be equal to the product of (a) one-twelfth (1/12th) of the
- ---
Servicing Fee Percentage and (b) the Class D Investor Amount; provided, however,
that with respect to the first Distribution Date, the Class D Servicing Fee
shall be equal to $21,333. The Class A Servicing Fee, the Class B Servicing
Fee, the Collateral Servicing Fee and the Class D Servicing Fee shall be payable
solely to the extent amounts are available for distribution in respect thereof
pursuant to this Series Supplement. The remainder of the Monthly Servicing Fee
shall be paid from amounts allocable to other Series (as provided in the
Agreement and the Supplements relating to such other Series) or by the
Transferor and in no event shall the Trust, the Trustee or the Series 1998-2
Certificateholders be liable for the share of the Monthly Servicing Fee to be
paid from amounts allocable to any other Series or by the Transferor.
SECTION H. ARTICLE IV OF THE AGREEMENT. Any provisions of Article
---------------------------
IV of the Agreement which distribute Collections to the Transferor on the basis
of the Transferor Percentage shall continue to apply irrespective of the
issuance of the Series 1998-2 Certificates. Section 4.1 of the Agreement shall
read in its entirety as provided in the Agreement. Article IV of the Agreement
(except for Section 4.1) as it relates to Series 1998-2 shall read in its
entirety as follows:
ARTICLE IV
RIGHTS OF SERIES 1998-2 CERTIFICATEHOLDERS AND
----------------------------------------------
ALLOCATION AND APPLICATION OF COLLECTIONS
-----------------------------------------
SECTION 4.2. COLLECTIONS AND ALLOCATIONS. The Servicer shall apply, or
----------------------------
shall instruct the Trustee to apply, all Collections, and other funds held in
the Collection Account that are allocated to the Series 1998-2 Certificates as
described in this Article IV. Provided that daily deposits of Collections into
the Collection Account are required pursuant to Section 4.1(f) of the Agreement,
the applicable Investor Percentage of Finance Charge Collections shall be
deposited into the Collection Account on a daily basis. During
<PAGE>
the Revolving Period, so long as the Available Enhancement Amount is not less
than the Required Enhancement Amount, Collections of Principal Receivables
allocable to Series 1998-2 with respect to each Monthly Period need not be
deposited into the Collection Account on a daily basis during such Monthly
Period; provided, however, that in the event that the Minimum Transferor Amount
exceeds the Transferor Amount on any date, such Collections of Principal
Receivables shall be deposited into the Excess Funding Account until the
Transferor Amount equals the Minimum Transferor Amount; and provided, further,
that on any date on which the sum of the Aggregate Principal Receivables and the
Excess Funding Amount is less than the Aggregate Adjusted Investor Amount, such
Collections of Principal Receivables shall be deposited into the Collection
Account on a daily basis. During the Accumulation Period, after an amount of
Collections of Principal Receivables allocable to Series 1998-2 equal to the
Controlled Deposit Amount with respect to each Monthly Period has been deposited
into the Collection Account, and so long as the Available Enhancement Amount is
not less than the Required Enhancement Amount, Collections of Principal
Receivables allocable to Series 1998-2 with respect to each Monthly Period need
not be deposited into the Collection Account on a daily basis during such
Monthly Period; provided, however, that in the event that the Minimum Transferor
Amount exceeds the Transferor Amount on any date, such Collections of Principal
Receivables shall be deposited into the Excess Funding Account until the
Transferor Amount equals the Minimum Transferor Amount; and, provided, further,
that on any date on which the sum of the Aggregate Principal Receivables and the
Excess Funding Amount is less than the Aggregate Investor Amount, such
Collections of Principal Receivables shall be deposited into the Collection
Account on a daily basis. Notwithstanding the foregoing, the Servicer need not
make daily deposits of Collections into the Collection Account at any time when
the requirements of Section 4.1(f) of the Agreement are satisfied.
SECTION 4.3 DETERMINATION OF MONTHLY INTEREST.
---------------------------------
(a) The amount of monthly interest ("Class A Monthly Interest")
------------------------
distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount equal to one-twelfth
(1/12th) of the product of (i) the Class A Certificate Rate for the related
Interest Period, and (ii) the outstanding principal amount of the Class A
Certificates as of the preceding Record Date; provided, however, with respect to
the first Distribution Date, Class A Monthly Interest shall be equal to
$800,000.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class A Interest Shortfall"),
--------------------------
of (x) the Class A Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class A Monthly
Interest on such Distribution Date. If the Class A Interest Shortfall with
respect to any Distribution Date is greater than zero, an additional amount
("Class A Additional Interest") equal to one-twelfth (1/12th) of the product of
---------------------------
(i) the Class A Penalty Rate for the related Interest Period, and (ii) such
Class A Interest Shortfall (or the portion thereof which has not theretofore
been paid to Class A
<PAGE>
Certificateholders), shall be payable as provided herein with respect to the
Class A Certificates on each Distribution Date following such Distribution Date
to and including the Distribution Date on which such Class A Interest Shortfall
is paid to Class A Certificateholders. Notwithstanding anything to the contrary
herein, Class A Additional Interest shall be payable or distributed to Class A
Certificateholders only to the extent permitted by applicable law.
(b) The amount of monthly interest ("Class B Monthly Interest")
------------------------
distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to one-twelfth
(1/12th) of the product of (i) the Class B Certificate Rate for the related
Interest Period, and (ii) the outstanding principal amount of the Class B
Certificates as of the preceding Record Date; provided, however, with respect to
the first Distribution Date, Class B Monthly Interest shall be equal to $88,150.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class B Interest Shortfall"),
--------------------------
of (x) the Class B Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class B Monthly
Interest on such Distribution Date. If the Class B Interest Shortfall with
respect to any Distribution Date is greater than zero, an additional amount
("Class B Additional Interest") equal to one-twelfth (1/12th) of the product of
---------------------------
(i) the Class B Penalty Rate for the related Interest Period, and (ii) such
Class B Interest Shortfall (or the portion thereof which has not theretofore
been paid to Class B Certificateholders), shall be payable as provided herein
with respect to the Class B Certificates on each Distribution Date following
such Distribution Date to and including the Distribution Date on which such
Class B Interest Shortfall is paid to Class B Certificateholders.
Notwithstanding anything to the contrary herein, Class B Additional Interest
shall be payable or distributed to Class B Certificateholders only to the extent
permitted by applicable law.
(c) The amount of monthly interest ("Collateral Monthly Interest")
---------------------------
distributable from the Collection Account with respect to the Collateral
Indebtedness Interest on any Distribution Date shall be an amount equal to the
product of (i) the outstanding principal amount of the Collateral Indebtedness
Interest as of the preceding Record Date,(ii) the Collateral Rate for the
related interest Period, and (iii) a fraction, the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360; provided, however, with respect to the first Distribution Date, the
Collateral Monthly Interest shall be equal to $106,770.83.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Collateral Interest
-------------------
Shortfall"), of (x) the Collateral Monthly Interest for such Distribution Date
- ---------
over (y) the aggregate amount of funds allocated and available to pay such
Collateral Monthly Interest on such Distribution Date. If the Collateral
Interest Shortfall with respect to any Distribution Date is greater than zero,
an additional amount ("Collateral Additional Interest") equal to the product of
------------------------------
(i)
<PAGE>
(A) a fraction, the numerator of which is the actual number of days in such
Interest Period and the denominator of which is 360, times (B) the Collateral
-----
Penalty Rate and (ii) such Collateral Interest Shortfall (or the portion thereof
which has not theretofore been paid to the Collateral Indebtedness Holder) shall
be payable as provided herein with respect to the Collateral Indebtedness
Interest on each Distribution Date following such Distribution Date to and
including the Distribution Date on which such Collateral Interest Shortfall is
paid to the Collateral Indebtedness Holder. Notwithstanding anything to the
contrary herein, Collateral Additional Interest shall be payable or distributed
to the Collateral Indebtedness Holder only to the extent permitted by applicable
law.
(d) The amount of monthly interest ("Class D Monthly Interest")
------------------------
distributable from the Collection Account with respect to the Class D
Certificates on any Distribution Date shall be an amount equal to the product of
(i) the Class D Certificate Rate for the related Interest Period; (ii) the
outstanding principal amount of the Class D Certificates as of the preceding
Record Date; and (iii) a fraction, the numerator of which is the actual number
of days in such Interest Period and the denominator of which is 360; provided,
however, with respect to the first Distribution Date, Class D Monthly Interest
shall be equal to $73,958.33.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class D Interest Shortfall"),
--------------------------
of (x) the Class D Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class D Monthly
Interest on such Distribution Date. If the Class D Interest Shortfall with
respect to any Distribution Date is greater than zero, an additional amount
("Class D Additional Interest") equal to the product of (i) (A) the actual
---------------------------
number of days in the related Interest Period divided by 360, times (B) the
-----
Class D Penalty Rate and (ii) such Class D Interest Shortfall (or the portion
thereof which has not theretofore been paid to Class D Certificateholders) shall
be payable as provided herein with respect to the Class D Certificates on each
Distribution Date following such Distribution Date to and including the
Distribution Date on which such Class D Interest Shortfall is paid to Class D
Certificateholders. Notwithstanding anything to the contrary herein, Class D
Additional Interest shall be payable or distributed to Class D
Certificateholders only to the extent permitted by applicable law.
SECTION 4.4 DETERMINATION OF MONTHLY PRINCIPAL.
----------------------------------
(a) The amount of monthly principal ("Class A Monthly Principal")
-------------------------
distributable or available for deposit into the Principal Account from the
Collection Account with respect to the Class A Certificates on each Distribution
Date, beginning with the Distribution Date in the month following the month in
which an Amortization Period begins, shall be equal to the least of (x) the
Available Principal Collections held in the Collection Account and available for
distribution with respect to such Distribution Date, (y) with respect to the
Accumulation Period prior to the Class A Expected Payment Date, the Controlled
Deposit Amount for such Distribution Date and (z) the Class A Adjusted Investor
Amount on such Distribution Date.
<PAGE>
(b) The amount of monthly principal ("Class B Monthly Principal")
-------------------------
distributable or available for deposit into the Principal Account from the
Collection Account with respect to the Class B Certificates on each Distribution
Date relating to an Amortization Period, beginning with the Class B Principal
Commencement Date, shall be equal to the least of (x) the Available Principal
Collections held in the Collection Account and available for distribution with
respect to such Distribution Date, minus the portion of such amounts applied to
Class A Monthly Principal on such Distribution Date, (y) for each Distribution
Date with respect to the Accumulation Period prior to the Class B Expected
Payment Date, the Controlled Deposit Amount for such Distribution Date and (z)
the Class B Adjusted Investor Amount on such Distribution Date.
(c) The amount, if any, of monthly principal ("Collateral Monthly
------------------
Principal") distributable with respect to the Collateral Indebtedness Interest
- ---------
on each Distribution Date shall be equal to:
(i) on any Distribution Date prior to the payment in full of the
Class B Certificates, the lesser of (x) the Available Principal
Collections held in the Collection Account and available for
distribution with respect to such Distribution Date minus the
portion of Available Principal Collections held in the
Collection Account and available for distribution as Class A
Monthly Principal or Class B Monthly Principal on such
Distribution Date and (y) the Enhancement Surplus on such
Distribution Date, provided that the Transferor shall have
elected to pay such Collateral Monthly Principal (after giving
effect to any increase in the amount held in the Cash Collateral
Account or increase in the Class D Investor Amount on such
Distribution Date); and
(ii) beginning with the Distribution Date on which the Class B
Certificates have been paid in full, the lesser of (x) the
Available Principal Collections held in the Collection Account
and available for distribution with respect to such Distribution
Date minus the portion of such Available Principal Collections
applied to any Class A Monthly Principal or Class B Monthly
Principal on such Distribution Date and (y) the Collateral
Indebtedness Amount on such Distribution Date.
(d) The amount of monthly principal ("Class D Monthly Principal")
-------------------------
distributable with respect to the Class D Certificates on each Distribution
Date, beginning with the Distribution Date on which the Collateral Indebtedness
Amount has been paid in full, or prior thereto subject to the consent of the
Enhancement Provider and otherwise subject to the satisfaction of the
requirements of the Loan Agreement (and provided that such distribution would
not require the Transferor to designate a Minimum Transferor Interest Percentage
in accordance with Section C hereof), shall be equal to the least of (x)
<PAGE>
the Available Principal Collections held in the Collection Account with respect
to such Distribution Date minus the amount portion of such Available Principal
Collections applied to any Class A Monthly Principal, Class B Monthly Principal
or Collateral Monthly Principal on such Distribution Date, (y) the Enhancement
Surplus on such Distribution Date and (z) the Class D Investor Amount on such
Distribution Date.
SECTION 4.5 REQUIRED AMOUNTS.
----------------
(a) On each Determination Date, the Servicer shall determine the
amount (the "Class A Required Amount"), if any, by which (x) the sum of (i)
-----------------------
Class A Monthly Interest for the following Distribution Date, (ii) any Class A
Monthly Interest previously due but not paid to the Class A Certificateholders
on a prior Distribution Date, (iii) any Class A Additional Interest for the
following Distribution Date and any Class A Additional Interest previously due
but not paid to Class A Certificateholders on a prior Distribution Date, (iv)
the Class A Allocable Amount, if any, for such Distribution Date and (v) if
Proffitt's, Inc. is no longer the Servicer, the Class A Servicing Fee for the
related Distribution Date and the amount of any Class A Servicing Fee previously
due but not distributed to the Servicer on a prior Distribution Date exceeds (y)
the Class A Available Funds with respect to the preceding Monthly Period. In
the event that the Class A Required Amount for such Distribution Date is greater
than zero, the Servicer shall give written notice to the Trustee of such
positive Class A Required Amount on the date of computation and all or a portion
of the Excess Spread and the Shared Excess Finance Charge Collections allocable
to Series 1998-2 pursuant to Section 4.1(i) with respect to the related Monthly
Period in an amount equal to the Class A Required Amount for such Distribution
Date shall be distributed from the Collection Account on such Distribution Date
pursuant to Section 4.8(a). In the event that the Class A Required Amount for
such Distribution Date exceeds the amount of the Excess Spread and the Shared
Excess Finance Charge Collections allocable to Series 1998-2 with respect to the
related Monthly Period, all or a portion of the Available Cash Collateral Amount
with respect to such Distribution Date in an amount equal to such excess shall
be applied to fund the Class A Required Amount. In the event that the Class A
Required Amount for such Distribution Date exceeds the amount of the Excess
Spread, the Shared Excess Finance Charge Collections allocable to Series 1998-2
with respect to the related Monthly Period and the Available Cash Collateral
Amount with respect to such Distribution Date, all or a portion of the
Reallocated Principal Collections with respect to such Monthly Period in an
amount equal to such excess shall be distributed from the Collection Account on
such Distribution Date pursuant to Section 4.9(a).
(b) On each Determination Date, the Servicer shall determine the
amount (the "Class B Required Amount"), if any, equal to the sum of (x) the
-----------------------
amount, if any, by which the sum of (i) Class B Monthly Interest for the
following Distribution Date, (ii) any Class B Monthly Interest previously due
but not paid to the Class B Certificateholders on a prior Distribution Date,
(iii) any Class B Additional Interest for the following Distribution Date and
any Class B Additional Interest previously due but not paid to Class B
Certificateholders on a prior Distribution Date and (iv) if Proffitt's, Inc. is
no longer the
<PAGE>
Servicer, the Class B Servicing Fee for the related Distribution Date and the
amount of any Class B Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date exceeds Class B Available Funds with
respect to the preceding Monthly Period and (y) the amount, if any, by which the
Class B Allocable Amount, if any, for such Distribution Date exceeds the amount
available to make payments with respect thereto pursuant to Section 4.8(d). In
the event that the Class B Required Amount for such Distribution Date is greater
than zero, the Servicer shall give written notice to the Trustee of such
positive Class B Required Amount on the date of computation and all or a portion
of the Excess Spread and the Shared Excess Finance Charge Collections allocable
to Series 1998-2 pursuant to Section 4.1(i) with respect to the related Monthly
Period shall be distributed from the Collection Account on such Distribution
Date pursuant to Sections 4.8(c) and (d). In the event that the Class B Required
Amount for such Distribution Date exceeds such amounts distributed pursuant to
Sections 4.8(c) and (d), all or a portion of the Available Cash Collateral
Amount with respect to such Distribution Date (other than that portion of the
Available Cash Collateral Amount applied to fund the amounts described in
Sections 4.8(a) and (b) with respect to such Distribution Date) in an amount
equal to such excess shall be applied to fund the Class B Required Amount. In
the event that the Class B Required Amount for such Distribution Date exceeds
such portion of the Available Cash Collateral Amount and the amounts distributed
pursuant to Sections 4.8(c) and (d), all or a portion of the Reallocated
Principal Collections with respect to such Monthly Period (other than the
portion of the Reallocated Principal Collections applied to fund the Class A
Required Amount and other than Class B Subordinated Principal Collections) in an
amount equal to such excess shall be distributed from the Collection Account on
such Distribution Date pursuant to Section 4.9(b).
(c) On each Determination Date, the Servicer shall determine the
amount (the "Collateral Required Amount"), if any, equal to the sum of (x) the
--------------------------
amount, if any, by which the sum of (i) Collateral Monthly Interest for the
following Distribution Date, (ii) any Collateral Monthly Interest previously due
but not paid to the Collateral Indebtedness Holder on a prior Distribution Date,
(iii) any Collateral Additional Interest for the following Distribution Date and
any Collateral Additional Interest previously due but not paid to the Collateral
Indebtedness Holder on a prior Distribution Date and (iv) if Proffitt's, Inc. is
no longer the Servicer, the Collateral Servicing Fee for the related
Distribution Date and the amount of any Collateral Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution Date exceeds the
amount available to make payments with respect thereto pursuant to Sections
4.6(c)(i) and 4.8(f) with respect to the preceding Monthly Period and (y) the
amount, if any, by which the Collateral Allocable Amount, if any, for such
Distribution Date exceeds the amount available to make payments with respect
thereto pursuant to Section 4.8(h). In the event that the Collateral Required
Amount for such Distribution Date is greater than zero, the Servicer shall give
written notice to the Trustee of such positive Collateral Required Amount on the
date of computation and all or a portion of the Available Cash Collateral Amount
with respect to such Distribution Date (other than that portion of the Available
Cash Collateral Amount applied to fund the amounts described in Sections 4.8(a),
(b), (c) (d) and (e) with respect to such Distribution Date) in an amount equal
to such excess shall be applied to
<PAGE>
fund the Collateral Required Amount. In the event that the Collateral Required
Amount for such Distribution Date exceeds the portion of the Available Cash
Collateral Amount with respect to such Distribution Date not used to fund the
amounts described in Sections 4.8(a), (b), (c), (d) and (e) with respect to such
Distribution Date, all or a portion of the Reallocated Principal Collections
with respect to such Monthly Period (other than the portion of the Reallocated
Principal Collections applied to fund the Class A Required Amount or the Class B
Required Amount and other than Class B Subordinated Principal Collections or
Collateral Subordinated Principal Collections) in an amount equal to such excess
shall be distributed from the Collection Account on such Distribution Date
pursuant to Section 4.9(c).
SECTION 4.6 APPLICATION OF CLASS A AVAILABLE FUNDS, CLASS B AVAILABLE
---------------------------------------------------------
FUNDS, COLLATERAL AVAILABLE FUNDS, CLASS D AVAILABLE FUNDS AND COLLECTIONS OF
- -----------------------------------------------------------------------------
PRINCIPAL RECEIVABLES.
- ---------------------
The Servicer shall apply or shall instruct the Trustee to apply, on
each Distribution Date, Class A Available Funds, Class B Available Funds,
Collateral Available Funds, Class D Available Funds and Collections of Principal
Receivables allocable to Series 1998-2 held in the Collection Account with
respect to the Monthly Period immediately preceding such Distribution Date to
make the following distributions:
(a) On each Distribution Date, Class A Available Funds with respect
to the Monthly Period immediately preceding such Distribution Date shall be
distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly
Interest previously due but not paid to Class A
Certificateholders on a prior Distribution Date, plus the
amount of any Class A Additional Interest for such Distribution
Date and any Class A Additional Interest previously due but not
distributed to Class A Certificateholders on a prior
Distribution Date, shall be distributed to the Paying Agent for
payment to the Class A Certificateholders;
(ii) if Proffitt's, Inc. is no longer the Servicer, an amount equal
to the Class A Servicing Fee for such Distribution Date, plus
the amount of any Class A Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, shall
be distributed to the Servicer;
(iii) an amount equal to the Class A Allocable Amount for such
Distribution Date shall be treated as a portion of Available
Principal Collections allocable to Series 1998-2 for such
Distribution Date; and
<PAGE>
(iv) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as set forth in Section 4.8.
(b) On each Distribution Date, Class B Available Funds with respect
to the Monthly Period immediately preceding such Distribution Date shall be
applied in the following priority:
(i) an amount equal to the Class B Monthly Interest for such
Distribution Date plus the amount of any Class B Monthly
Interest previously due but not distributed to Class B
Certificateholders on a prior Distribution Date, plus the
amount of any Class B Additional Interest for such Distribution
Date and any Class B Additional Interest previously due but not
distributed to Class B Certificateholders on a prior
Distribution Date, shall be distributed to the Paying Agent for
payment to the Class B Certificateholders;
(ii) if Proffitt's, Inc. is no longer the Servicer, an amount equal
to the Class B Servicing Fee for such Distribution Date, plus
the amount of any Class B Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, shall
be distributed to the Servicer; and
(iii) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as set forth in Section 4.8.
(c) On each Distribution Date, Collateral Available Funds with
respect to the Monthly Period immediately preceding such Distribution Date shall
be applied in the following priority:
(i) if Proffitt's, Inc. is no longer the Servicer, an amount equal
to the Collateral Servicing Fee for such Distribution Date,
plus the amount of any Collateral Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution
Date, shall be distributed to the Servicer; and
(ii) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as set forth in Section 4.8.
(d) On each Distribution Date, Class D Available Funds with respect
to the Monthly Period immediately preceding such Distribution Date shall be
applied in the following priority:
(i) if Proffitt's, Inc. is no longer the Servicer, an amount equal
to the Class D Servicing Fee for such Distribution Date, plus
the amount of any Class D Servicing Fee previously due but not
distributed to
<PAGE>
the Servicer on a prior Distribution Date, shall be distributed
to the Servicer; and
(ii) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as set forth in Section 4.8.
(e) On each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections, shall be applied in the following
priority:
(i) an amount equal to Collateral Monthly Principal for such
Distribution Date shall be applied in accordance with the Loan
Agreement;
(ii) an amount equal to Class D Monthly Principal for such
Distribution Date shall be distributed to the Paying Agent for
payment to the Class D Certificateholders; and
(iii) the balance, if any, shall be treated as "Shared Principal
Collections" with respect to Group One to be applied in
accordance with Section 4.1(h) (and be retained in the Excess
Funding Account if required by such provision).
(f) On each Distribution Date following the commencement of an
Amortization Period, all such Available Principal Collections shall be applied
in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date shall, during the Class A Accumulation
Period, be deposited in the Principal Account for payment to
Class A Certificateholders on the earlier to occur of the Class
A Expected Payment Date or the first Special Distribution Date
or, during the Rapid Amortization Period, be distributed to the
Paying Agent for payment to the Class A Certificateholders;
(ii) an amount equal to Class B Monthly Principal for such
Distribution Date shall, during the Class B Accumulation
Period, be deposited in the Principal Account for payment to
Class B Certificateholders on the earlier to occur of the Class
B Expected Payment Date or the first Special Distribution Date
or, during the Rapid Amortization Period, be distributed to the
Paying Agent for payment to the Class B Certificateholders;
(iii) an amount equal to Collateral Monthly Principal for such
Distribution Date shall be applied in accordance with the Loan
Agreement;
<PAGE>
(iv) an amount equal to Class D Monthly Principal for such
Distribution Date shall be distributed to the Paying Agent for
payment to the Class D Certificateholders; and
(v) the balance, if any, shall be treated as "Shared Principal
Collections" as provided in Section 4.1(h) and allocated among
each Series in Group One as specified in each Supplement for
Series included in Group One.
SECTION 4.7 DEFAULTED AMOUNTS; ADJUSTMENT AMOUNTS; INVESTOR CHARGE OFFS;
------------------------------------------------------------
REDUCTIONS OF ADJUSTMENT AMOUNTS.
- --------------------------------
(a) On each Determination Date, the Servicer shall calculate the
Class A Required Amount, if any, for the related Distribution Date. If, on any
Distribution Date, the Class A Required Amount for such Distribution Date
exceeds the sum of (x) the amount of the Excess Spread and the Shared Excess
Finance Charge Collections allocable to Series 1998-2 with respect to such
Distribution Date, (y) the Available Cash Collateral Amount with respect to such
Distribution Date and (z) the amount of Reallocated Principal Collections
available pursuant to Section 4.9(a) with respect to the preceding Monthly
Period, the Class D Investor Amount (after giving effect to any reduction
thereof pursuant to Section 4.7(d)) shall be reduced by the amount of such
excess, but not by more than the excess of the Class A Allocable Amount for such
Distribution Date over the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class A
Allocable Amount for such Distribution Date. In the event that such reduction
would cause the Class D Investor Amount to be a negative number, the Class D
Investor Amount shall be reduced to zero and the Collateral Indebtedness Amount
(after giving effect to any reduction thereof pursuant to Section 4.7(c)) shall
be reduced by the amount by which the Class D Investor Amount would have been
reduced below zero, but not by more than the excess, if any, of the Class A
Allocable Amount for such Distribution Date over the amount of such reduction,
if any, of the Class D Investor Amount with respect to such Distribution Date
and the amount of Excess Spread and Shared Excess Finance Charge Collections,
the amount withdrawn from the Cash Collateral Account and the amount of
Reallocated Principal Collections used to fund the Class A Allocable Amount for
such Distribution Date. In the event that such reduction would cause the
Collateral Indebtedness Amount to be a negative number, the Collateral
Indebtedness Amount shall be reduced to zero and the Class B Investor Amount
(after giving effect to any reduction thereof pursuant to Section 4.7(b)) shall
be reduced by the amount by which the Collateral Indebtedness Amount would have
been reduced below zero, but not by more than the excess, if any, of the Class A
Allocable Amount for such Distribution Date over the aggregate amount of the
reductions, if any, of the Collateral Indebtedness Amount and the Class D
Investor Amount with respect to such Distribution Date and the amount of Excess
Spread and Shared Excess Finance Charge Collections, the amount withdrawn from
the Cash Collateral Account and the amount of
<PAGE>
Reallocated Principal Collections used to fund the Class B Allocable Amount for
such Distribution Date. In the event that such reduction would cause the Class B
Investor Amount to be a negative number, the Class B Investor Amount shall be
reduced to zero, and the Class A Investor Amount shall be reduced by the amount
by which the Class B Investor Amount would have been reduced below zero, but not
by more than the excess, if any, of the Class A Allocable Amount for such
Distribution Date over the aggregate amount of the reductions, if any, of the
Class D Investor Amount, the Collateral Indebtedness Amount and the Class B
Investor Amount for such Distribution Date and the amount of Excess Spread and
Shared Excess Finance Charge Collections, the amount withdrawn from the Cash
Collateral Account and the amount of Reallocated Principal Collections used to
fund the Class A Investor Allocable Amount for such Distribution Date (a "Class
--------
A Investor Charge Off"). Class A Investor Charge Offs shall thereafter be
- ----------------------
reimbursed and the Class A Investor Amount increased (but not by an amount in
excess of the aggregate unreimbursed Class A Investor Charge Offs) on any
Distribution Date by (i) the amount of Excess Spread and Shared Excess Finance
Charge Collections allocated and available for that purpose pursuant to Section
4.8(b), and (ii) without duplication, the aggregate amount of the reductions of
the Series Adjustment Amounts allocable to the Class A Investor Amount pursuant
to Section 4.7(f).
(b) On each Determination Date, the Servicer shall calculate the
Class B Required Amount, if any, for the related Distribution Date. If, on any
Distribution Date, the Class B Required Amount for such Distribution Date
exceeds the sum of (x) the amount of the Excess Spread and the Shared Excess
Finance Charge Collections allocable to Series 1998-2 with respect to such
Distribution Date which are not used to fund the Class A Required Amount and
Class A Investor Charge Offs on the related Distribution Date, (y) the portion,
if any, of the Available Cash Collateral Amount which is remaining after
applying the Available Cash Collateral Amount to fund the Class A Required
Amount with respect to such Distribution Date and (z) the amount of Reallocated
Principal Collections which are available to fund the Class B Required Amount on
such Distribution Date pursuant to Section 4.9(b), then the Class D Investor
Amount (after giving effect to any reduction thereof pursuant to Sections 4.7(a)
and (d)) shall be reduced by the amount of such excess, but not by more than the
excess of the Class B Allocable Amount for such Distribution Date over the
amount of Excess Spread and Shared Excess Finance Charge Collections, the amount
withdrawn from the Cash Collateral Account and the amount of Reallocated
Principal Collections used to fund the Class B Allocable Amount for such
Distribution Date. In the event that such reduction would cost the class D
Investor Amount to be a negative number,the Class D Inventor Amount shall be
reduced to zero, and the Collateral Indebtedness Amount (after giving effect to
any reduction thereof pursuant to Sections 4.7 (a) and (c)) shall be reduced by
the amount by which the Class D Inventor Amount would have been reduced bolow
zero, but not by more than the excess, if any, of the Class B Allocable Amount
for such Distribution Date over the amount of the reductions, if any, of the
Class D Investor Amount with respect to such Distribution Date and the amount of
Excess Spread and Shared Excess Finance Charged Collections, the amount withdraw
from the Cash Collateral Account and the amount of Reallocated Principal
Collections used to fund the Class B Allocable Amount
<PAGE>
for such Distribution Date. In the event that such reduction would cause the
Collateral Indebtedness Amount to be a negative number, the Collateral
Indebtedness Amount shall be reduced to zero, and the Class B Investor Amount
shall be reduced by the amount by which the Collateral Indebtedness Amount would
have been reduced below zero, but not by more than the excess, if any, of the
Class B Allocable Amount for such Distribution Date over the aggregate amount of
the reductions, if any, of the Collateral Indebtedness Amount and the Class D
Investor Amount with respect to such Distribution Date and the amount of Excess
Spread and Shared Excess Finance Charge Collections, the amount withdrawn from
the Cash Collateral Account and the amount of Reallocated Principal Collections
used to fund the Class B Allocable Amount for such Distribution Date (a "Class B
-------
Investor Charge Off"). Class B Investor Charge Offs shall thereafter be
- -------------------
reimbursed and the Class B Investor Amount increased (but not by an amount in
excess of the aggregate unreimbursed Class B Investor Charge Offs) on any
Distribution Date by (i) the amount of Excess Spread and Shared Excess Finance
Charge Collections allocated and available for that purpose pursuant to Section
4.8(e), and (ii) without duplication, the aggregate amount of the reductions of
the Series Adjustment Amounts allocable to the Class B Investor Amount pursuant
to Section 4.7(f).
(c) If, on any Distribution Date, the Collateral Required Amount
exceeds (x) the portion, if any, of the Available Cash Collateral Amount after
applying the Available Cash Collateral Amount to fund the Class A Required
Amount and the Class B Required Amount with respect to such Distribution Date
and (y) the amount of Reallocated Principal Collections which are available to
fund the Collateral Required Amount on such Distribution Date pursuant to
Section 4.9(c), then the Class D Investor Amount (after giving effect to any
reduction thereof pursuant to Sections 4.7(a), (b) and (d)) shall be reduced by
the amount of such excess, but not by more than the excess of the Collateral
Allocable Amount for such Distribution Date over the amount of Excess Spread and
Shared Excess Finance Charge Collections, the amount withdrawn from the Cash
Collateral Account and the amount of Reallocated Principal Collections used to
fund the Collateral Allocable Amount for such Distribution Date. In the event
that such reduction would cause the Class D Investor Amount to be a negative
number, the Class D Investor Amount shall be reduced to zero, and the Collateral
Indebtedness Amount shall be reduced by the amount by which the Class D Investor
Amount would have been reduced below zero, but not by more than the excess, if
any, of the Collateral Allocable Amount for such Distribution Date over the
amount of the reductions, if any, of the Class D Investor Amount with respect to
such Distribution Date and the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Collateral
Allocable Amount for such Distribution Date; provided, however, that the
Collateral Indebtedness Amount shall not be reduced below zero (a "Collateral
----------
Indebtedness Charge Off"). Collateral Indebtedness Charge Offs shall thereafter
- -----------------------
be reimbursed and the Collateral Indebtedness Amount increased (but not by an
amount in excess of the aggregate unreimbursed Collateral Indebtedness Charge
Offs) on any Distribution Date by (i) the amount of Excess Spread and Shared
Excess Finance Charge Collections allocated and available for that purpose
pursuant to Section 4.8(i), and (ii)
<PAGE>
without duplication, the aggregate amount of the reductions of the Series
Adjustment Amounts allocable to the Collateral Indebtedness Amount pursuant to
Section 4.7(f).
(d) If, on any Distribution Date, the Class D Allocable Amount
exceeds the amount of Excess Spread and Shared Excess Finance Charge Collections
available to fund the Class D Allocable Amount pursuant to Section 4.8(m) on
such Distribution Date, then the Class D Investor Amount shall be reduced by the
amount of such excess; provided, however, that the Class D Investor Amount shall
not be reduced below zero (a "Class D Investor Charge Off"). Class D Investor
---------------------------
Charge Offs shall thereafter be reimbursed and the Class D Investor Amount
increased (but not by an amount in excess of the aggregate unreimbursed Class D
Investor Charge Offs) on any Distribution Date by (i) the amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available for
that purpose pursuant to Section 4.8(n), and (ii) without duplication, the
aggregate amount of the reductions of the Series Adjustment Amounts allocable to
the Collateral Indebtedness Amount pursuant to Section 4.7(f).
(e) Whenever funds or other amounts are available hereunder in
respect of the Class A Allocable Amount, the Class B Allocable Amount, the
Collateral Allocable Amount or the Class D Allocable Amount, as the case may be,
such funds or other amounts shall be applied first to the elimination of any
deficiency resulting from Default Amounts and then to any deficiency resulting
from Series Adjustment Amounts.
(f) Any reduction of the Series Adjustment Amount for Series 1998-2
as a result of the deposit of funds into the Excess Funding Account, the
repurchase or other repayment of Investor Certificates or the increase of
Principal Receivables in the Trust shall be allocated first to the Class A
Certificates, then to the Class B Certificates, then to the Collateral
Indebtedness Interest and finally to the Class D Certificates, in each case to
the extent of any unreimbursed reduction of the Investor Amount thereof
attributable to Series Adjustment Amounts.
SECTION 4.8 EXCESS SPREAD; SHARED EXCESS FINANCE CHARGE COLLECTIONS. The
-------------------------------------------------------
Servicer shall apply, or shall instruct the Trustee to apply, on each
Distribution Date, Excess Spread (including interest and earnings on funds held
in the Cash Collateral Account and included as Excess Spread pursuant to Section
4.12(b)) and Shared Excess Finance Charge Collections allocable to Series 1998-2
pursuant to Section 4.1(i) with respect to the related Monthly Period, in the
following priority:
(a) an amount up to the Class A Required Amount, if any, with respect
to such Distribution Date shall be distributed by the Trustee to fund any
deficiency pursuant to Sections 4.6(a)(i), (ii) and (iii), in that order of
priority;
(b) an amount equal to the aggregate amount of Class A Investor
Charge Offs which have not been previously reimbursed shall be treated as a
portion of Available Principal Collections allocable to Series 1998-2 for such
Distribution Date;
<PAGE>
(c) an amount up to the Class B Required Amount, if any, with respect
to such Distribution Date shall be distributed by the Trustee to fund any
deficiency pursuant to Sections 4.6(b)(i) and (ii), in that order of priority;
(d) an amount equal to any remaining portion of the Class B Required
Amount for such Distribution Date shall be treated as a portion of Available
Principal Collections allocable to Series 1998-2 for such Distribution Date;
(e) an amount equal to the aggregate amount by which the Class B
Investor Amount has been reduced pursuant to clauses (c), (d) and (e) of the
definition of "Class B Investor Amount" (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections allocable to Series
1998-2 for such Distribution Date;
(f) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of Collateral Monthly Interest previously due
but not distributed to the Collateral Indebtedness Holder on a prior
Distribution Date, plus the amount of Collateral Additional Interest for such
Distribution Date and any Collateral Additional Interest previously due but not
distributed to the Collateral Indebtedness Holder shall be applied in accordance
with the Loan Agreement;
(g) an amount equal to the Class A Servicing Fee, the Class B
Servicing and the Collateral Servicing Fee for such Distribution Date (or if
Proffitt's, Inc. is no longer the Servicer, the portion thereof not paid
pursuant to Section 4.6), plus the amount of any Class A Servicing Fee, Class B
Servicing Fee or Collateral Servicing Fee previously due but not distributed to
the Servicer on a prior Distribution Date, shall be distributed to the Servicer;
(h) an amount equal to the Collateral Allocable Amount for such
Distribution Date shall be treated as a portion of Available Principal
Collections allocable to Series 1998-2 for such Distribution Date;
(i) an amount equal to the aggregate amount by which the Collateral
Indebtedness Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Collateral Indebtedness Amount" (but not in excess of the
aggregate amount of such reductions which have not been previously reimbursed)
shall be treated as a portion of Available Principal Collections allocable to
Series 1998-2 for such Distribution Date;
(j) an amount equal to the greater of (i) the excess, if any, of the
Required Cash Collateral Amount over the Available Cash Collateral Amount, and
(ii) the excess, if any, of the Required Enhancement Amount over the Available
Enhancement Amount (in either case, without giving effect to any deposit made on
such date hereunder and after giving effect to any payment of Collateral Monthly
Principal or Class D Monthly Principal being made on such date) shall be
deposited into the Cash Collateral Account;
<PAGE>
(k) an amount equal to the Class D Allocable Amount for such
Distribution Date shall be treated as a portion of Available Principal
Collections allocable to Series 1998-2 for such Distribution Date;
(l) an amount equal to the aggregate amount by which the Class D
Investor Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Class D Investor Amount" (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections allocable to Series
1998-2 for such Distribution Date;
(m) an amount equal to the excess, if any, of the Required Reserve
Account Amount over the amount held in the Reserve Account shall be deposited
into the Reserve Account;
(n) an amount equal to the aggregate of any other amounts then due to
the Collateral Indebtedness Holder pursuant to the Loan Agreement shall be
applied in accordance with the Loan Agreement;
(o) an amount equal to Class D Monthly Interest for such Distribution
Date, plus the amount of Class D Monthly Interest previously due but not
distributed to the Class D Certificateholders on a prior Distribution Date, plus
the amount of Class D Additional Interest for such Distribution Date and any
Class D Additional Interest previously due but not distributed shall be
distributed to the Paying Agent for payment to the Class D Certificateholders;
(p) an amount equal to the Class D Servicing Fee for such
Distribution Date (or if Proffitt's, Inc. is no longer the Servicer, the portion
of the Class D Servicing Fee for such Distribution Date not paid pursuant to
Section 4.6(d)(i)), plus the amount of any Class D Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution Date, shall be
distributed to the Servicer; and
(q) the balance, if any, shall constitute "Shared Excess Finance
Charge Collections" with respect to Group One to be applied in accordance with
Section 4.1(i).
SECTION 4.9 REALLOCATED PRINCIPAL COLLECTIONS. The Servicer shall apply,
---------------------------------
or shall instruct the Trustee to apply, on each Distribution Date, Reallocated
Principal Collections (applying all Class D Subordinated Principal Collections
prior to applying any Collateral Subordinated Principal Collections, and
applying all Collateral Subordinated Principal Collections prior to applying any
Class B Subordinated Principal Collections, and applying no Class B Subordinated
Principal Collections with respect to the Class B Required Amount pursuant to
clause (b) below and applying no Class B Subordinated Principal Collections or
Collateral Subordinated Principal Collections with respect to the Collateral
Required Amount pursuant to clause (c) below) with respect to such Distribution
Date, to make the following distributions in the following priority:
<PAGE>
(a) an amount equal to the excess, if any, of (i) the Class A
Required Amount, if any, with respect to such Distribution Date over (ii) the
sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1998-2 with respect to the related Monthly
Period and (y) the Available Cash Collateral Amount with respect to such
Distribution Date shall be distributed by the Trustee to fund any deficiency
pursuant to Sections 4.6(a)(i), (ii) and (iii), in that order of priority;
(b) an amount equal to the excess, if any, of (i) the Class B
Required Amount, if any, with respect to such Distribution Date over (ii) the
sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1998-2 with respect to the related Monthly
Period available in respect of the Class B Required Amount pursuant to Section
4.8(c) and (d) on such Distribution Date and (y) the amount withdrawn from the
Cash Collateral Account in respect of the Class B Required Amount with respect
to such Distribution Date shall be distributed by the Trustee to fund any
deficiency pursuant to Sections 4.8(c) and (d), in that order of priority; and
(c) an amount equal to the excess, if any, of (i) the Collateral
Required Amount, if any, with respect to such Distribution Date over (ii) the
sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1998-2 with respect to the related Monthly
Period available in respect of the Collateral Required Amount pursuant to
Sections 4.8(f) and (h) on such Distribution Date and (y) the amount withdrawn
from the Cash Collateral Account in respect of the Collateral Required Amount
with respect to such Distribution Date shall be distributed by the Trustee to
fund any deficiency pursuant to Section 4.6(c)(i) and Sections 4.8(f) and (h),
in that order of priority.
SECTION 4.10 PRINCIPAL SHORTFALL. The "Principal Shortfall" for Series
------------------- -------------------
1998-2 shall be equal to (a) for any Distribution Date with respect to the
Revolving Period zero, or such higher amount designated by the Servicer in an
Officer's Certificate, (b) for any Distribution Date with respect to the
Accumulation Period (on or prior to the Class B Expected Payment Date), the
excess, if any, of the Controlled Deposit Amount with respect to such
Distribution Date over the amount of Available Principal Collections for such
Distribution Date (excluding any portion thereof attributable to Shared
Principal Collections), (c) for each Distribution Date with respect to a Rapid
Amortization Period, unless and until the Collateral Indebtedness Amount has
been paid in full, the excess, if any, of the sum of the Class A Investor
Amount, the Class B Investor Amount and the Collateral Indebtedness Amount over
the amount of Available Principal Collections for such Distribution Date
(excluding any portion thereof attributable to Shared Principal Collections) and
(d) for each Distribution Date after the Class A Investor Amount and the Class B
Investor Amount have been paid in full, the excess, if any, of the Investor
Amount over the amount of Available Principal Collections for such Distribution
Date, or such lesser amount designated by the Servicer.
<PAGE>
SECTION 4.11 FINANCE CHARGE SHORTFALL. The "Finance Charge Shortfall"
------------------------ ------------------------
for Series 1998-2 for any Distribution Date shall be equal to the excess, if
any, of (a) the full amount required to be paid, without duplication, pursuant
to Sections 4.6(a), 4.6(b), 4.6(c) and 4.6(d) and Sections 4.8 (a)-(o) on such
Distribution Date over (b) the Investor Percentage of Collections of Finance
Charge Receivables with respect to the related Monthly Period.
SECTION 4.12 CASH COLLATERAL ACCOUNT.
-----------------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, for the benefit of the Series 1998-2 Certificateholders, with a
Qualified Institution a segregated trust account (the "Cash Collateral
---------------
Account"), bearing a designation clearly indicating that the funds held therein
- --------
are held for the benefit of the Series 1998-2 Certificateholders. The Cash
Collateral Account shall initially be established with the Trustee. The Trustee
shall possess all right, title and interest in all funds held from time to time
in the Cash Collateral Account and in all proceeds thereof. The Cash Collateral
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1998-2 Certificateholders. If, at any time, the
institution holding the Cash Collateral Account ceases to be a Qualified
Institution, the Trustee (or the Servicer on its behalf) shall within five (5)
Business Days establish a new Cash Collateral Account meeting the conditions
specified above with a Qualified Institution and shall transfer any cash and/or
any investments to such new Cash Collateral Account. The Trustee, at the
direction of the Servicer, shall make deposits to and withdrawals from the Cash
Collateral Account in the amounts and at the times set forth in this Agreement
and the Loan Agreement. All withdrawals from the Cash Collateral Account shall
be made in the priority set forth below. The interest of the Collateral
Indebtedness Holder in the Cash Collateral Account shall be subordinated to the
interests of the Class A Certificateholders and the Class B Certificateholders
as provided herein and in the Loan Agreement. The Collateral Indebtedness
Holder shall not be entitled to reimbursement from the Trust Property for any
withdrawals from the Cash Collateral Account except as specifically provided in
this Agreement and the Loan Agreement.
(b) Funds held in the Cash Collateral Account shall be invested at
the direction of the Servicer by the Trustee in Permitted Investments. Funds
held in the Cash Collateral Account on any Distribution Date, after giving
effect to any withdrawals from the Cash Collateral Account on such Distribution
Date, shall be invested in such investments that will mature so that such funds
will be available for withdrawal on or prior to the following Distribution Date.
No Permitted Investment shall be disposed of prior to its maturity; provided,
however, that the Trustee may sell, liquidate or dispose of a Permitted
Investment before its maturity, if so directed by the Servicer, the Servicer
having reasonably determined that the interest of the 1998-2 Certificateholders
may be adversely affected if such Permitted Investment is held to its maturity.
The proceeds of any such investments shall be invested in such investments that
will mature so that such funds will be available for withdrawal on or prior to
the Distribution Date immediately following the date of such investment. The
Trustee shall maintain for the benefit of the
<PAGE>
Series 1998-2 Certificateholders possession of the negotiable instruments or
securities, if any, evidencing such Permitted Investments. On each Distribution
Date, all interest and earnings (net of losses and investment expenses) on funds
held in the Cash Collateral Account shall be treated as a portion of Excess
Spread for such Distribution Date and applied in accordance with Section 4.8.
(c) On each Determination Date, the Servicer shall calculate the
amount (the "Required Draw Amount") by which the amounts specified in clauses
--------------------
(a) through (f) and clauses (h) and (i) of Section 4.8 with respect to the
related Distribution Date exceed the amount of Excess Spread and Shared Excess
Finance Charge Collections allocable to Series 1998-2 with respect to the
related Monthly Period available to pay such specified amounts. In the event
that for any Distribution Date the Required Draw Amount is greater than zero,
the Servicer shall give written notice to the Trustee of such positive Required
Draw Amount on the related Determination Date. On the Distribution Date, the
Required Draw Amount, if any, up to the Available Cash Collateral Amount, shall
be withdrawn from the Cash Collateral Account and distributed to fund any
deficiency pursuant to clauses (a) through (f) and clause (h) of Section 4.8 (in
the order of priority set forth in Section 4.8).
(d) In the event that the Cash Enhancement Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Cash Collateral Account and all payments of principal to Series 1998-2
Certificateholders with respect to such Distribution Date, is greater than zero,
the Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Cash Collateral Account, and apply and pay in accordance with
the Loan Agreement, an amount equal to such Cash Enhancement Surplus; provided,
however, that the Transferor, at its option, to be exercised in its sole
discretion, may instruct the Servicer not to instruct the Trustee to withdraw
such Cash Enhancement Surplus (or any portion thereof), in which event the
Trustee shall not withdraw such Cash Enhancement Surplus (or portion thereof)
from the Cash Collateral Account.
SECTION 4.13 PRINCIPAL ACCOUNT.
-----------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, for the benefit of the Series 1998-2 Certificateholders, with a
Qualified Institution a segregated trust account (the "Principal Account"),
-----------------
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Series 1998-2 Certificateholders. The Principal
Account shall initially be established with the Trustee. The Trustee shall
possess all right, title and interest in all funds held from time to time in the
Principal Account and in all proceeds thereof. The Principal Account shall be
under the sole dominion and control of the Trustee for the benefit of the Series
1998-2 Certificateholders. If, at any time, the institution holding the
Principal Account ceases to be a Qualified Institution, the Trustee (or the
Servicer on its behalf) shall within five (5) Business Days establish a new
Principal Account meeting the conditions specified above with a Qualified
Institution and shall transfer any cash and/or any investments to such new
<PAGE>
Principal Account. Pursuant to the authority granted to the Servicer in Section
3.1(b) of the Agreement, the Servicer shall have the power, revocable by the
Trustee, to make withdrawals and payments or to instruct the Trustee to make
withdrawals and payments from the Principal Account for the purposes of carrying
out the Servicer's or the Trustee's duties hereunder.
(b) Funds held in the Principal Account shall be invested at the
direction of the Servicer by the Trustee in Permitted Investments. All such
Permitted Investments shall be held by the Trustee for the benefit of the Series
1998-2 Certificateholders; provided, however, that on each Distribution Date all
interest and other investment income (net of losses and investment expenses)
("Principal Investment Proceeds") on funds held therein shall be applied as set
-----------------------------
forth in Section 4.13(c) below. Funds held in the Principal Account shall be
invested in Permitted Investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. No
Permitted Investment shall be disposed of prior to its maturity; provided,
however, that the Trustee may sell, liquidate or dispose of a Permitted
Investment before its maturity, if so directed by the Servicer, the Servicer
having reasonably determined that the interest of the 1998-2 Certificateholders
may be adversely affected if such Permitted Investment is held to its maturity.
(c) On each Distribution Date with respect to the Accumulation
Period, the Servicer shall direct the Trustee to withdraw from the Principal
Account and deposit into the Collection Account all Principal Investment
Proceeds then held in the Principal Account and such Principal Investment
Proceeds shall be treated as a portion of (x) prior to the payment in full of
the Class A Investor Amount, Class A Available Funds and (y) thereafter, Class B
Available Funds, in each case for such Distribution Date.
(d) Reinvested interest and other investment income on funds
deposited in the Principal Account shall not be considered to be principal
amounts held therein for purposes of this Agreement.
SECTION 4.14 RESERVE ACCOUNT.
---------------
(a) The Servicer shall establish and maintain, in the name of the
Trustee, for the benefit of the Series 1998-2 Certificateholders, with a
Qualified Institution a segregated trust account (the "Reserve Account"),
---------------
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Series 1998-2 Certificateholders. The Reserve
Account shall initially be established with the Trustee. The Trustee shall
possess all right, title and interest in all funds held from time to time in the
Reserve Account and in all proceeds thereof. The Reserve Account shall be under
the sole dominion and control of the Trustee for the benefit of the Series 1998-
2 Certificateholders. If at any time the institution holding the Reserve
Account ceases to be a Qualified Institution, the Trustee (or the Servicer on
its behalf) shall within five (5) Business Days establish a new Reserve Account
meeting the conditions specified above with a Qualified Institution, and shall
transfer any cash and/or any investments to such new
<PAGE>
Reserve Account. The Trustee, at the direction of the Servicer, shall (i) make
withdrawals from the Reserve Account from time to time in an amount up to the
Available Reserve Account Amount at such time, for the purposes set forth in
this Agreement, and (ii) on each Distribution Date (from and after the Reserve
Account Funding Date) prior to the termination of the Reserve Account shall make
a deposit into the Reserve Account in the amount specified in, and otherwise in
accordance with, Section 4.8(p).
(b) Funds held in the Reserve Account shall be invested at the
direction of the Servicer by the Trustee in Permitted Investments. Funds held in
the Reserve Account on any Distribution Date, after giving effect to any
withdrawals from the Reserve Account on such Distribution Date, shall be
invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. The
Trustee shall maintain for the benefit of the Series 1998-2 Certificateholders
possession of the negotiable instruments or securities, if any, evidencing such
Permitted Investments. No Permitted Investment shall be disposed of prior to its
maturity; provided, however, that the Trustee may sell, liquidate or dispose of
an Permitted Investment before its maturity, if so directed by the Servicer, the
Servicer having reasonably determined that the interest of the Series 1998-2
Certificateholders may be adversely affected if such Permitted Investment is
held to its maturity. On each Distribution Date, all interest and earnings (net
of losses and investment expenses) on funds held in the Reserve Account shall be
retained in the Reserve Account (to the extent that the Available Reserve
Account Amount is less than the Required Reserve Account Amount) and the
balance, if any, shall be deposited in the Collection Account and treated as a
portion of (x) until the payment in full of the Class A Investor Amount, Class A
Available Funds and (y) thereafter, Class B Available Funds, in each case for
such Distribution Date. For purposes of determining the availability of funds or
the balance in the Reserve Account for any reason under this Agreement, except
as otherwise provided in the preceding sentence, investment earnings on such
funds shall be deemed not to be available or held.
(c) On the Determination Date preceding each Distribution Date with
respect to the Accumulation Period (prior to the Class B Expected Payment Date)
and the first Special Distribution Date, the Servicer shall calculate the
"Reserve Draw Amount" which shall be equal to the excess, if any, of the Covered
-------------------
Amount with respect to such Distribution Date or Special Distribution Date over
the Principal Investment Proceeds with respect to such Distribution Date or
Special Distribution Date.
(d) In the event that for any Distribution Date the Reserve Draw
Amount is greater than zero, the Reserve Draw Amount, up to the Available
Reserve Account Amount, shall be withdrawn from the Reserve Account on such
Distribution Date by the Trustee (acting in accordance with the instructions of
the Servicer), deposited into the Collection Account and included in (i) until
the payment in full of the Class A Investor Amount, Class A Available Funds and
(ii) thereafter, Class B Available Funds, in each case for such Distribution
Date.
<PAGE>
(e) In the event that the Reserve Account Surplus on any Distribution
Date, after giving effect to all deposits to and withdrawals from the Reserve
Account with respect to such Distribution Date, is greater than zero, the
Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Reserve Account, and pay an amount equal to such Reserve
Account Surplus in accordance with the Loan Agreement.
(f) Upon the earliest to occur of (i) the termination of the Trust
pursuant to Article XII of the Agreement, (ii) the day on which the Class A
Investor Amount and Class B Investor Amount have been paid in full, (iii) if the
Accumulation Period has not commenced, the occurrence of a Pay Out Event with
respect to Series 1998-2 and (iv) if the Accumulation Period has commenced, the
earlier of the first Special Distribution Date and the Class B Expected Payment
Date, the Trustee, acting in accordance with the instructions of the Servicer,
after the prior payment of all amounts owing to the Series 1998-2
Certificateholders which are payable from the Reserve Account as provided
herein, shall withdraw from the Reserve Account and pay in accordance with the
Loan Agreement all amounts, if any, held in the Reserve Account, and the Reserve
Account shall be deemed to have terminated for all purposes of the Agreement.
SECTION 4.15 POSTPONEMENT OF ACCUMULATION PERIOD. The Accumulation Period
-----------------------------------
is scheduled to commence at the end of the day on the last day of the April 2000
Monthly Period; provided, however, that, if the Accumulation Period Length
(determined as described below) shall be less than 12 months, the date on which
the Accumulation Period actually commences may, at the option of the Transferor,
be delayed to the first day of any month that is a number of whole months prior
to the Class A Expected Payment Date at least equal to the Accumulation Period
Length and, as a result, the number of Monthly Periods in the Accumulation
Period shall at least equal the Accumulation Period Length. On each
Determination Date until the Accumulation Period begins, the Servicer shall
determine the "Accumulation Period Length," which shall equal the number of
--------------------------
whole months such that the sum of the Accumulation Period Factors for each month
during such period will be equal to or greater than the Required Accumulation
Factor Number; provided, however, that the Accumulation Period Length shall not
be determined to be less than one month.
SECTION 4.16 ADDITIONAL ISSUANCES OF CLASS D CERTIFICATES.
--------------------------------------------
(a) On any day in the Revolving Period, the Trustee shall issue to
the Transferor for execution, upon the Transferor's request, and the Trustee
shall authenticate and deliver, in accordance with the Transferor's
instructions, an additional principal amount of Class D Certificates
("Additional Class D Certificates") as provided below.
-------------------------------
(b) Additional Class D Certificates may be issued, executed and
delivered upon satisfaction of the following conditions:
(i) after giving effect to the issuance of such Additional Class D
Certificates, the Transferor Amount shall be at least equal to
the
<PAGE>
Minimum Transferor Amount and the Aggregate Principal
Receivables shall be at least equal to the Minimum Aggregate
Principal Receivables;
(ii) the Transferor shall have given notice by 10:00 A.M., New York
City time, on the date such Additional Class D Certificates are
to be issued to the Trustee, the Paying Agent, the Servicer and
the Collateral Indebtedness Holder of the proposed issuance of
such Additional Class D Certificates;
(iii) on or before the date on which such Additional Class D
Certificates are issued, the Transferor shall have delivered an
Opinion of Counsel addressed to the Trustee, dated the date of
such issuance, to the effect that such issuance will not
adversely affect the tax characterization as debt of Investor
Certificates of any outstanding Series or Class with respect to
which an Opinion of Counsel addressed to the Trustee was
delivered at the time of their issuance that such Investor
Certificates would be characterized as debt, cause the Trust to
be classified, for federal income tax purposes, as an
association (or publicly traded partnership) taxable as a
corporation, and cause or constitute an event in which gain or
loss would be recognized by any Certificateholder; and
(iv) on or before the date such Additional Class D Certificates are
issued, the Transferor shall deliver to the Trustee an
Officer's Certificate confirming the matters set forth in
clause (i) above. The Trustee may conclusively rely on such
certificate, shall have no duty to make inquiries with regard
to matters set forth therein and shall incur no liability in so
relying; and
(v) consent of the Enhancement Provider shall have been obtained
(but only to the extent that the Additional Class D
Certificates are issued to satisfy the Required Cash Collateral
Amount provision pursuant to the Loan Agreement).
SECTION I. ARTICLE V OF THE AGREEMENT. Article V of the Agreement as it
--------------------------
relates to Series 1998-2 shall read in its entirety as follows:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS
SECTION 5.1 DISTRIBUTIONS.
-------------
(a) On each Determination Date, the Servicer shall deliver to the
Trustee and Paying Agent a certificate substantially in the form of Exhibit B
---------
prepared by the
<PAGE>
Servicer. The Trustee shall be under no duty to recalculate, verify or recompute
the information on such certificate.
(b) On each Distribution Date, the Paying Agent shall distribute to
each Class A Certificateholder of record as of the preceding Record Date (other
than as provided in Section 12.2 respecting a final distribution) such Class A
Certificateholder's pro rata share of the amounts that are available on such
Distribution Date to pay interest on the Class A Certificates pursuant to this
Agreement.
(c) On the Class A Expected Payment Date and each Special
Distribution Date, the Paying Agent shall distribute to each Class A
Certificateholder of record as of the preceding Record Date (other than as
provided in Section 12.2 respecting a final distribution) such Class A
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class A Certificates pursuant to this Agreement.
(d) On each Distribution Date, the Paying Agent shall distribute to
each Class B Certificateholder of record as of the preceding Record Date (other
than as provided in Section 12.2 respecting a final distribution) such Class B
Certificateholder's pro rata share of the amounts that are available on such
Distribution Date to pay interest on the Class B Certificates pursuant to this
Agreement.
(e) On the Class B Expected Final Distribution Date and each Special
Distribution Date, the Paying Agent shall distribute to each Class B
Certificateholder of record as of the preceding Record Date (other than as
provided in Section 12.2 respecting a final distribution) such Class B
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class B Certificates pursuant to this Agreement.
(f) On each Distribution Date, the Paying Agent shall distribute to
each Class D Certificateholder of record as of the preceding Record Date (other
than as provided in Section 12.2 respecting a final distribution) such Class D
Certificateholder's pro rata share of the amounts that are available on such
Distribution Date to pay interest on the Class D Certificates pursuant to this
Agreement.
(g) On each Distribution Date, the Paying Agent shall distribute to
each Class D Certificateholder of record as of the preceding Record Date (other
than as provided in Section 12.2 respecting a final distribution) such Class D
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class D Certificates pursuant to this Agreement.
(h) Except as provided in Section 12.2 with respect to a final
distribution and Section 5.3 with respect to payments to the Collateral
Indebtedness Holder, distributions to Series 1998-2 Certificateholders hereunder
shall be made by check mailed to each such Certificateholder at such
Certificateholder's address appearing in the
<PAGE>
Certificate Register without presentation or surrender of any such Series 1998-2
Certificate or the making of any notation thereon; provided, however, that with
respect to such Certificates registered in the name of a Clearing Agency, such
distributions shall be made to such Clearing Agency in immediately available
funds.
SECTION 5.2 STATEMENTS TO SERIES 1998-2 CERTIFICATEHOLDERS. On each
----------------------------------------------
Distribution Date, the Paying Agent, on behalf of the Trustee, shall forward to
each Series 1998-2 Certificateholder, including, for the avoidance of doubt, the
Collateral Indebtedness Holder, a statement substantially in the form of Exhibit
-------
C prepared by the Servicer setting forth certain information relating to the
- -
Trust and the Series 1998-2 Certificates.
On or before January 31 of each calendar year, beginning with 1998,
the Paying Agent, on behalf of the Trustee, shall furnish or cause to be
furnished to each Person who at any time during the preceding calendar year was
a Series 1998-2 Certificateholder a statement prepared by the Servicer
containing the information which is required to be contained in Exhibit C,
---------
aggregated for such calendar year or the applicable portion thereof during which
such Person was a Certificateholder of such Series, together with other
information as is required to be provided by an issuer of indebtedness under the
Code and such other customary information as is necessary to enable the
Certificateholders of such Series to prepare their tax returns. Such obligation
of the Servicer shall be deemed to have been satisfied to the extent that
substantially comparable information shall have been provided by the Paying
Agent pursuant to any requirements of the Code as from time to time in effect.
SECTION 5.3 DISTRIBUTIONS TO COLLATERAL INDEBTEDNESS HOLDER.
-----------------------------------------------
Notwithstanding the foregoing provisions of this Article V, amounts payable to
the Collateral Indebtedness Holder pursuant to this Series Supplement shall be
distributed in the manner provided for in the Loan Agreement.
[END OF ARTICLE V]
SECTION J. PAY OUT EVENTS. If any one of the events specified in Section
--------------
9.1 of the Agreement or any of the following events shall occur during either
the Revolving Period or the Accumulation Period with respect to the Series
1998-2 Certificates:
(a) failure on the part of the Transferor or the Servicer (x) to make
any payment or deposit required by the terms of the Agreement or this Series
Supplement on or before the date occurring five (5) Business Days after the date
such payment or deposit is required to be made or (y) duly to observe or perform
in any material respect any other covenants or agreements applicable to such
party set forth in the Agreement or this Series Supplement, which failure has a
material adverse effect on the Series 1998-2 Certificateholders, and which
continues unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Transferor by the Trustee, or to the Transferor and the Trustee by the
Series
<PAGE>
1998-2 Certificateholders representing not less than 50% of the Investor Amount,
and continues to materially and adversely affect the Series 1998-2
Certificateholders for such period;
(b) any representation or warranty made by the Transferor in the
Agreement or this Series Supplement, or information contained in a computer
file, microfiche or written list required to be delivered by the Transferor
pursuant to the Agreement, shall prove to have been incorrect in any material
respect when made or when delivered, (i) which continues to be incorrect in any
material respect for a period of 60 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the Trustee by the Series
1998-2 Certificateholders representing not less than 50% of the Investor Amount,
and (ii) as a result of which the interests of the Series 1998-2
Certificateholders are materially and adversely affected and continue to be
materially and adversely affected for such period; provided, however, a Pay Out
Event shall not be deemed to have occurred if the Transferor has accepted
reassignment of the related Receivable, or all of such Receivables, if
applicable, during such period in accordance with the provisions of the
Agreement;
(c) the average of the Portfolio Yields for any three (3) consecutive
Monthly Periods is less than the average Base Rate for such three (3) Monthly
Periods;
(d) the failure to pay the Class A Investor Amount on the Class A
Expected Payment Date or the failure to pay the Class B Investor Amount on the
Class B Expected Payment Date;
(e) the Transferor shall fail to designate, or be unable to
designate, Additional Accounts, the Receivables of which will be Eligible
Receivables, as required by the Agreement, and such failure shall continue for a
period of five (5) Business Days;
(f) any Servicer Default shall occur which would have a material
adverse effect on the Series 1998-2 Certificateholders; or
(g) the Available Enhancement Amount shall be less than the Required
Enhancement Amount for three consecutive Monthly Periods;
then, (i) in the case of any event described in clause (a), (b) or (f), after
the applicable grace period set forth in such subparagraphs, either the Trustee
or Series 1998-2 Certificateholders representing more than 50% of the Investor
Amount, by notice then given in writing to the Transferor and the Servicer (and
to the Trustee, if given by the Series 1998-2 Certificateholders) may declare
that a Pay Out Event has occurred with respect to only the Series 1998-2
Certificates as of the date of such notice and (ii) in the case of any event
described in Section 9.1 of the Agreement or in clauses (c), (d), (e) or (g)
above, a Pay Out Event with respect to only the Series 1998-2 Certificates will
be deemed to have occurred without any notice or other action on the part of the
Trustee or
<PAGE>
the Series 1998-2 Certificateholders or all certificateholders, as appropriate,
immediately upon the occurrence of such event.
SECTION K. RESTRICTIONS ON TRANSFER.
------------------------
(a) The Collateral Indebtedness Interest shall be subject to the
restrictions on transfer set forth in the Loan Agreement.
(b) The Transferor may at any time, without the consent of the Class
A Certificateholders and Class B Certificateholders, (i) sell or transfer all or
a portion of the Class D Certificates, provided that (A) the Transferor shall
have given notice to the Trustee, the Servicer and the Rating Agencies of such
proposed sale or transfer of the Class D Certificates at least five (5) Business
Days prior to the consummation of such sale or transfer; (B) the Rating Agency
Condition shall have been satisfied; (C) no Pay Out Event shall have occurred
prior to the consummation of such proposed sale or transfer of Class D
Certificates; (D) the Transferor shall have delivered an Officer's Certificate
dated the date of the consummation of such proposed sale or transfer to the
effect that, in the reasonable belief of the Transferor, such action will not,
based on the facts known to such officer at the time of such certification,
cause a Pay Out Event to occur with respect to any Series, and (E) the
Transferor shall have provided an Opinion of Counsel addressed to the Trustee,
dated the date of such certificate with respect to such action, that such
proposed sale or transfer will not adversely affect the tax characterization as
debt of Investor Certificates of any outstanding Series or Class with respect to
which an Opinion of Counsel addressed to the Trustee was delivered at the time
of their issuance that such Investor Certificates would be characterized as
debt, cause the Trust to be classified, for federal income tax purposes, as an
association (or publicly traded partnership) taxable as a corporation and cause
or constitute an event in which gain or loss would be recognized by any
Certificateholder.
(c) Each initial transferee of the Class D Certificates or any
interest therein and any assignee thereof or participant therein (each a
"holder") shall certify to the Transferor, the Servicer and the Trustee that it
------
has neither acquired nor will it sell, transfer, assign participate, pledge,
hypothecate, or otherwise dispose (any such act, a "transfer") of any interest
--------
in its Class D Certificates or cause an interest in its Class D Certificates to
be marketed on or through (i) an "established securities market" within the
meaning of Section 7704(b)(1) of Code and any Treasury regulation thereunder,
including, without limitation, an over-the-counter market or an interdealer
quotation system that regularly disseminates firm buy or sell quotations or (ii)
a "secondary market" within the meaning of Section 7704(b)(2) of the Code and
any Treasury regulation thereunder, including, without limitation, a market
wherein interests in the Class D Certificates are regularly quoted by any Person
making a market in such interests and a market wherein any Person regularly
makes available bid or offer quotes with respect to interests in the Class D
Certificates and stands ready to effect buy or sell transactions at the quoted
price for itself or on behalf of others. In addition, each holder shall
certify, prior to any delivery or transfer to it of a Class D Certificate or
interest therein, that it is not and will not
<PAGE>
become a partnership, Subchapter S corporation or grantor trust for United
States federal income tax purposes. If a holder cannot make the certification
described in the preceding sentence, the Transferor, the Trustee or the Servicer
may prohibit a transfer to such entity; provided, however, that if the
Transferor, the Trustee or the Servicer agrees to permit such a transfer, the
Transferor, the Servicer or the Trustee may require additional certifications in
order to prevent the Trust from being treated as a publicly traded partnership.
Each holder acknowledges that special tax counsel to the Transferor may render
Opinions of Counsel from time to time to the Transferor and others that the
Trust will not be treated as an association or as a publicly traded partnership
taxable as a corporation, and that such Opinions of Counsel will rely in part on
the accuracy of the certifications in this subsection K(c).
SECTION K1. TAX CHARACTERIZATION OF THE CLASS D CERTIFICATES AND THE
--------------------------------------------------------
COLLATERAL INDEBTEDNESS INTEREST. It is the intention of the parties hereto
- --------------------------------
that the Class D Certificates and the Collateral Indebtedness Interest be
treated under applicable tax law as indebtedness. In the event that either the
Class D Certificates or the Collateral Indebtedness Interest are not so treated,
it is the intention of the parties that the Class D Certificates or the
Collateral Indebtedness Interest, as the case may be, be treated under
applicable tax law as interests in a partnership that owns the Receivables. In
the event that either the Class D Certificates or the Collateral Indebtedness
Interest are treated under applicable tax law as interests in a partnership, it
is the intention of the parties that the Class D Certificates or the Collateral
Indebtedness Interest, as the case may be, be treated as guaranteed payments
and, if for any reason they are not so treated, that the holders of the Class D
Certificates or the Collateral Indebtedness Interest, as the case may be, be
specially allocated gross interest income equal to the interest accrued during
each Interest Period on the Class D Certificates and on the Collateral
Indebtedness Interest.
SECTION L. RATIFICATION OF MASTER POOLING AND SERVICING AGREEMENT. As
------------------------------------------------------
supplemented by this Series Supplement, the Agreement is in all respects
ratified and confirmed and the Agreement as so supplemented by this Series
Supplement shall be read, taken, and construed as one and the same instrument.
SECTION L1. FASIT ELECTION. Each Series 1998-2 Certificateholder, by
--------------
acquiring an interest in a Series 1998-2 Certificate, is deemed to consent to
any amendment to the Agreement or this Series Supplement necessary for the
Transferor to elect for the Trust or any portion thereof to be treated as a
FASIT within the meaning of Section 860L of the Code (or any successor provision
thereto), provided that, such election may not be made unless the Transferor
delivers to the Trustee (i) an Opinion of Counsel to the effect that (x) the
issuance of FASIT regular interests will not adversely affect the tax
characterization as debt of Investor Certificates of any outstanding Series or
Class with respect to which an Opinion of Counsel was delivered at the time of
their issuance that such Investor Certificates would be characterized as debt,
(y) following such issuance, the Trust will not be classified, for federal
income tax purposes, as an association (or publicly traded partnership) taxable
as a corporation, and (z) such issuance will not cause or constitute an event in
which gain or loss would be recognized by any Investor
<PAGE>
Certificateholder, and (ii) an Officer's Certificate to the effect that such
issuance will not have a material adverse effect on Investor Certificateholders
of any outstanding Series or class (viewed as a Series or a class, as
applicable).
SECTION L2. PAIRED SERIES. Subject to obtaining confirmation by each
-------------
Rating Agency of the then existing ratings of each class of Series 1998-2
Certificates which are then rated, the consent of the Enhancement Provider, and
prior to a Pay Out Event, the Series 1998-2 Certificates may be paired with one
or more other Series (each a "Paired Series"). Each Paired Series either will
-------------
be pre-funded with an initial deposit to a pre-funding account in an amount up
to the initial principal balance of such Paired Series, primarily from the
proceeds of the sale of such Paired Series or will have a variable principal
amount. Any such pre-funding account will be held for the benefit of such
Paired Series and not for the benefit of the Series 1998-2 Certificateholders.
As principal is paid with respect to the Series 1998-2 Certificates, either (i)
in the case of a pre-funded Paired Series, an equal amount of funds held in any
pre-funding account for such pre-funded Paired Series will be released (which
funds will be distributed to the Transferor) or (ii) in the case of a Paired
Series having a variable principal amount, an interest in such variable Paired
Series in an equal or lesser amount may be sold by the Trust (and the proceeds
thereof will be distributed to the Transferor) and, in either case, the invested
amount in the Trust of such Paired Series will increase by up to a corresponding
amount. Upon payment in full of the Certificates, assuming that there have been
no unreimbursed charge offs with respect to any related Paired Series, the
aggregate investor amount of such related Paired Series will have been increased
by an amount up to an aggregate amount equal to the Investor Amount paid to the
Certificateholders since the issuance of such Paired Series. The issuance of a
Paired Series will be subject to the conditions described in Section 6.9(b) of
the Agreement. The numerator of the Investor Percentage with respect to
allocations of Principal Receivables may be changed upon the occurrence of a pay
out event with respect to a Paired Series (provided that such numerator is not
less than the Adjusted Investor Amount as of the last day of the revolving
period for such Paired Series).
SECTION M. COUNTERPARTS. This Series Supplement may be executed in any
------------
number of counterparts (and by different parties on separate counterparts), each
of which so executed shall be deemed to be an original, but all of such
counterparts shall together constitute but one and the same instrument.
SECTION N. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
SECTION O. SUBORDINATION OF CERTAIN TERMINATION PAYMENTS.
---------------------------------------------
Notwithstanding anything contained in Section 12.2(c) of the Agreement, upon the
sale of Receivables or interests therein as provided in Section 12.2(c) of the
Agreement, the proceeds of any such sale payable in respect of the Series 1998-2
Certificates shall be
<PAGE>
payable first to the Class A Certificates until paid in full, then to the Class
B Certificates until paid in full, then to the Collateral Indebtedness Interest
until paid in full and then to the Class D Certificates until paid in full.
[Signatures on next page]
<PAGE>
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have
caused this Series Supplement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By: /s/ James S. Scully
---------------------------------
Name: James S. Scully
Title: Vice President and Treasurer
PROFFITT'S, INC.,
as Servicer
By: /s/ James S. Scully
----------------------------------
Name: James S. Scully
Title: Vice President and Treasurer
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By: /s/ John C. Weidner
----------------------------------
Name: John C. Weidner
Title: Account Manager
<PAGE>
Exhibit 99.2
Other Expenses of Issuance and Distribution
<PAGE>
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the shelf registration statement (the
"Shelf Registration Statement") and the distribution of the Class A and Class B
Certificates, Series 1998-2, thereunder, other than underwriting discounts, are
set forth in the following table. All amounts except the Securities and
Exchange Commission Registration Fee are estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee/1/........... $ 221,250
Legal Fees and Expenses/2/....................................... 75,000*
Accounting Fees and Expenses/2/.................................. 15,000*
Rating Agency Fees/2/............................................ 150,000*
Printing and Engraving/3/........................................ 55,000*
Blue Sky Fees and Expenses/2/.................................... 2,000*
Miscellaneous/3/................................................. 15,000*
-----------
Total................................................. $ 533,250*
</TABLE>
_________
* Estimated
/1/ Includes all fees payable with respect to the registration of $750,000,000
of asset backed securities
/2/ Includes only such fees and expenses related to the issuance and sale of
the Class A and Class B Certificates, Series 1998-2, (and in the case of legal
fees and expenses, excludes an estimated $75,000 incurred in connection with the
Shelf Registration Statement)
/3/ Includes all such expenses incurred in connection with the Shelf
Registration Statement and the issuance and distribution of the Class A and
Class B Certificates, Series 1998-2
