<PAGE>
As filed with the Securities and Exchange Commission on March 26, 1998
Registration Nos. 333-________________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PROFFITT'S CREDIT CARD MASTER TRUST
(In which the Certificates represent undivided interests)
PROFFITT'S CREDIT CORPORATION
(Originator of the Trust described herein)
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Nevada 6189 86-0852332
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification No.)
Incorporation or
organization)
Proffitt's Credit Corporation
Bank of America Center
101 Convention Center Drive
Las Vegas, Nevada 89109
(702) 380-4918
(Name, address, including zip code, and telephone number,
including area code, of Registrant's principal executive office)
Brian J. Martin, Esq.
Proffitt's Credit Corporation
750 Lakeshore Parkway
Birmingham, Alabama 35211
(205) 940-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Ralph F. MacDonald, III, Esq.
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
(404) 881-7000
(404) 881-4777 (Fax)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
===================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered Registered(1) Certificate Price(1) Registration Fee
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed
Certificates $750,000,000 100% $750,000,000 $221,250.00
===================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the filing fee pursuant to Rule
457(a) under the Securities Act of 1933.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
PROFFITT'S CREDIT CARD MASTER TRUST
ASSET BACKED CERTIFICATES
PROFFITT'S CREDIT CORPORATION PROFFITT'S, INC.
TRANSFEROR SERVICER
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
The Certificates of each Series will represent undivided interests in the
Proffitt's Credit Card Master Trust (the "Trust"). The Trust has been formed
pursuant to a Master Pooling and Servicing Agreement dated as of August 21,
1997, as amended, among Proffitt's Credit Corporation, a Nevada corporation,
as transferor ("PCC" or the "Transferor"), Proffitt's, Inc., a Tennessee
corporation, as servicer (the "Servicer"), and Norwest Bank Minnesota,
National Association, a national banking association, as trustee (the
"Trustee"). The property of the Trust includes receivables (the "Receivables")
generated from time to time in a portfolio (the "Trust Portfolio") of consumer
revolving credit card accounts (the "Accounts"), all monies due or to become
due in payment of the Receivables and certain other property, as more fully
described herein and, with respect to any Series offered hereby, in the
related Prospectus Supplement. PCC owns the remaining undivided interest in
the Trust not represented by outstanding Series issued by the Trust. Such
remaining interest is evidenced by the Exchangeable Transferor Certificate.
Proffitt's, Inc. services the Receivables and McRae's, Inc. ("McRae's") and
Carson Pirie Scott & Co. ("CPS"), both of which are wholly owned subsidiaries
of the Servicer, act as the initial subservicers (the "Subservicers") for the
Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate Certificates, floating rate
Certificates or other types of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest
in the Trust, and the interest of the Certificateholders of each Class or
Series will include the right to receive a varying percentage of each month's
Collections at the time, in the manner and to the extent described herein and,
with respect to any Series offered hereby, in the related Prospectus
Supplement. Interest and principal payments with respect to each Series
offered hereby will be made as specified in the related Prospectus Supplement.
One or more Classes of a Series offered hereby may be entitled to the benefits
of a cash collateral account or guaranty, letter of credit, surety bond,
insurance policy or other form of enhancement as specified in the Prospectus
Supplement relating to such Series. In addition, any Series offered hereby may
include one or more Classes or other interests in the Trust which are
subordinated in right and priority to payment of principal of, and/or interest
on, one or more other Classes of such Series or another Series, in each case
to the extent described in the related Prospectus Supplement. Each Series of
Certificates or Class thereof offered hereby will be rated in one of the four
highest rating categories by at least one nationally recognized statistical
rating organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of,
the holders of the Certificates of any previously issued Series.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" BEGINNING ON PAGE 17. BENEFIT PLAN INVESTORS SHOULD
CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN "ERISA
CONSIDERATIONS."
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF PROFFITT'S CREDIT
CORPORATION, NATIONAL BANK OF THE GREAT LAKES, PROFFITT'S, INC. OR ANY
AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT, AND NEITHER THE
CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Certificates may be sold by PCC directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or
more managing underwriters or through one or more underwriters acting alone.
If underwriters or agents are involved in the offering of the Certificates of
any Series offered hereby, the name of the managing underwriter or
underwriters or agents will be set forth in the related Prospectus Supplement.
If an underwriter, agent or dealer is involved in the offering of the
Certificates of any Series offered hereby, the underwriter's discount, agent's
commission or dealer's purchase price will be set forth in, or may be
calculated from, the related Prospectus Supplement, and the net proceeds to
PCC from such offering will be the public offering price of such Certificates
less such discount in the case of an underwriter, the purchase price of such
Certificates less such commission in the case of an agent or the purchase
price of such Certificates in the case of a dealer, and less, in each case,
the other expenses of PCC associated with the issuance and distribution of
such Certificates. Any underwriter of the Certificates will be indemnified by
PCC against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE CERTIFICATES OF
ANY SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
THE DATE OF THIS PROSPECTUS IS MARCH 26, 1998.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series will, among other
things, set forth with respect to such Series: (a) the initial aggregate
principal amount of each Class of such Series; (b) the interest rate (or method
for determining it) of each Class of such Series; (c) certain information
concerning the Receivables allocated to such Series; (d) the expected date or
dates on which the principal amount of the Certificates will be paid to holders
of the Certificates (the "Certificateholders"); (e) the extent to which any
Class of such Series or any other Series is subordinated to any other Class of
such Series or any other Series; (f) the identity of each Class of floating rate
Certificates and fixed rate Certificates included in such Series, if any, or
such other type of Class of Certificates; (g) the Distribution Dates for the
respective Classes; (h) relevant financial information with respect to the
Receivables; (i) additional information with respect to any Enhancement relating
to such Series; and (j) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are
issued, monthly and annual reports, containing information concerning the Trust
and prepared by the Servicer, will be sent on behalf of the Trust to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the related Certificates, pursuant to the Pooling and Servicing
Agreement. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. The Transferor is not
required and does not intend to send any of its financial reports to
Certificateholders or to the owners of beneficial interests in the Certificates
("Certificate Owners"). The Servicer will file with the Securities and Exchange
Commission (the "Commission") such periodic reports with respect to the Trust as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
See "Description of the Certificates and the Pooling and Servicing Agreement --
Book-Entry Registration."
AVAILABLE INFORMATION
The Transferor has filed a Registration Statement under the Securities
Act of 1933, as amended (the "Securities Act"), with the Commission on behalf of
the Trust with respect to the Certificates offered hereby. This Prospectus,
which forms a part of the Registration Statement, omits certain information
contained in such Registration Statement pursuant to the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement (including any amendments thereof and exhibits thereto)
and any reports and other documents incorporated herein by reference as
described below under "Incorporation of Certain Documents by Reference," which
are available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
7 World Trade Center, New York, New York 10048; and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, the Commission maintains a public access site on the Internet
through a World Wide Web site at which reports, information statements and other
information, including all electronic filings, regarding the Transferor may be
viewed. The Internet address of such World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of
the Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement
contained herein or in a document deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained in any other subsequently filed document
which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as modified or superseded, to constitute a part of this
Prospectus.
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The Servicer will provide without charge to each person, including any
Certificate Owner, to whom a copy of this Prospectus is delivered, on the
written or oral request of any such person, a copy of any of or all the
documents incorporated by reference herein (other than exhibits to such
documents). Written requests for such copies should be directed to Proffitt's,
Inc., 750 Lakeshore Parkway, Birmingham, Alabama 35211. Telephone requests for
such copies should be directed to (205) 940-4000.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this Prospectus may constitute
forward-looking statements. Such forward-looking statements may involve
uncertainties and other factors that may cause the actual results and
performance of Proffitt's, Inc. (together with its subsidiaries, the "Company"),
the Trust, the Accounts and the Receivables to be materially different from
future results or performance expressed or implied by such statements.
Cautionary statements regarding the risks associated with such forward-looking
statements include, without limitation, those statements included under "Risk
Factors" and elsewhere herein or incorporated by reference herein or contained
in the Prospectus Supplement or incorporated by reference therein. Among
others, factors that could adversely affect actual results and performance
include the following: local and regional economic conditions in the areas
served by the Company; the level of consumer spending for apparel and other
consumer goods; levels of consumer debt and bankruptcies; changes in interest
rates; changes in buying, charging and payment behavior among the Company's
customers; the effects of weather conditions on seasonal sales in the Company's
market areas; competition among department and specialty stores and other
retailers, including general merchandise stores, mail order retailers and off-
price and discount stores; changes in merchandise mixes, site selection and
related traffic and demographic patterns; the Company's identification and
implementation of best practices; the Company's ability to determine and
implement appropriate merchandising strategies, merchandise flow, and inventory
turnover levels; realization of planned synergies and cost savings in the
Company's existing operations and in recent and future acquisitions; the
Company's ability to integrate recent and future acquisitions; and any adverse
effects of the Year 2000 problem on the Company, especially as a result of such
problems at third parties with which the Company does business. See "Risk
Factors -- Forward-Looking Statements."
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<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY......................................................... 1
RISK FACTORS............................................................... 17
Limited Liquidity..................................................... 17
Non-Recourse Obligation............................................... 17
Transfer of Receivables............................................... 17
Commingling of Collections............................................ 17
Bankruptcy and Insolvency Risks....................................... 18
Effects of Consumer and Debtor Protection Laws on Collectibility of
Receivables.......................................................... 19
Effect of Payment Rate on Certificates................................ 20
Effects of Convenience Use and Special Deferrals...................... 20
Ability to Change Terms of the Receivables............................ 21
Dependence on the Company's Department Stores; Competition............ 21
Competition from Other Credit and Payment Sources..................... 22
Social, Legal and Economic Factors.................................... 22
Effect of Limited Subordination....................................... 22
Issuance of Additional Series; Master Trust Considerations............ 22
Absence of Control on Certain Voting Matters.......................... 23
Effects of Prepayment Distinctions among Classes...................... 23
Effect on Certain Pre-Funded Series of Ability to Generate Additional
Receivables.......................................................... 24
Basis Risk............................................................ 24
Addition of Trust Assets.............................................. 24
Limited Nature of Certificate Rating.................................. 24
Limited Credit Enhancement............................................ 25
Effect of Discount Option............................................. 25
Book-Entry Registration............................................... 25
Geographic Concentrations............................................. 26
General Economic Conditions; Seasonality.............................. 26
Integration of Acquired Companies..................................... 26
Forward-Looking Statements............................................ 26
CREDIT CARD PROGRAM........................................................ 27
THE ACCOUNTS............................................................... 27
THE TRUST.................................................................. 28
MATURITY ASSUMPTIONS....................................................... 28
USE OF PROCEEDS............................................................ 29
THE COMPANY................................................................ 29
PCC........................................................................ 30
DESCRIPTION OF THE CERTIFICATES AND THE POOLING AND SERVICING AGREEMENT.... 30
General............................................................... 30
Book-Entry Registration............................................... 32
Definitive Certificates............................................... 34
Interest Payments..................................................... 35
Principal Payments.................................................... 35
Transfer of Receivables............................................... 36
Exchanges............................................................. 36
Representations and Warranties........................................ 38
Addition of Accounts.................................................. 40
Removal of Accounts................................................... 41
Discount Option Receivables........................................... 42
Collection and Other Servicing Procedures............................. 42
Collection and Principal Accounts..................................... 43
Funding Period........................................................ 44
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Investor Percentage and Transferor Percentage......................... 44
Application of Collections............................................ 45
Shared Principal Collections.......................................... 46
Excess Funding Account................................................ 46
Shared Excess Finance Charge Collections.............................. 46
Paired Series......................................................... 47
Allocation of Investor Default Amount; Adjustment Amounts; Investor
Charge Offs.......................................................... 47
Allocation of Adjustment Amounts...................................... 48
Defeasance............................................................ 49
Optional Repurchase; Final Payment of Principal; Termination.......... 49
Pay Out Events........................................................ 50
Servicing Compensation and Payment of Expenses........................ 51
Certain Matters Regarding the Servicer................................ 51
Servicer Default...................................................... 51
Reports to Certificateholders......................................... 53
Amendments............................................................ 54
Indemnification....................................................... 55
Amendments to the Pooling and Servicing Agreement Relating to FASIT
Election............................................................. 56
List of Certificateholders............................................ 56
The Trustee........................................................... 56
ENHANCEMENT................................................................ 57
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES................................... 59
Transfer of Receivables............................................... 59
Certain Matters Relating to Bankruptcy or Insolvency.................. 60
Certain Matters Relating to Receivership.............................. 61
Consumer and Debtor Protection Laws, Recent and Proposed Legislation.. 62
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................... 63
STATE AND LOCAL TAX CONSEQUENCES........................................... 68
ERISA CONSIDERATIONS....................................................... 68
PLAN OF DISTRIBUTION....................................................... 70
LEGAL MATTERS.............................................................. 71
INDEX OF TERMS FOR PROSPECTUS.............................................. 72
ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES...... A-1
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<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
accompanying Prospectus Supplement. Certain capitalized terms used in this
summary are defined elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. A listing of the pages on which some of such terms are
defined is found in the "Index of Terms for Prospectus." Unless the context
requires otherwise, capitalized terms used in this Prospectus and in the
accompanying Prospectus Supplement refer only to the particular Series being
offered by such Prospectus Supplement.
Type of Securities.............. Asset Backed Certificates (the "Certificates")
evidencing undivided ownership interests in the
assets of the Proffitt's Credit Card Master
Trust (the "Trust") may be issued from time to
time in one or more series (each, a "Series")
which will consist of one or more classes of
Certificates (each, a "Class").
Trust........................... The Trust was formed pursuant to a Master
Pooling and Servicing Agreement dated as of
August 21, 1997 (as amended and supplemented
the "Pooling and Servicing Agreement") among
Proffitt's Credit Corporation, as transferor
(in such capacity, and with any other entity,
including any successor or assign identified in
a Prospectus Supplement, the "Transferor"),
Proffitt's, Inc., as servicer (in such
capacity, the "Servicer"), and Norwest Bank
Minnesota, National Association, a national
banking association, as trustee (the
"Trustee"). The Trust has been created as a
master trust under which one or more Series may
be issued pursuant to a series supplement to
the Pooling and Servicing Agreement (a "Series
Supplement"). Any Series issued by the Trust
may or may not be a Series offered pursuant to
this Prospectus. Each Prospectus Supplement
will identify all then outstanding Series
previously issued by the Trust.
Trust Assets.................... The property of the Trust includes and will
include Receivables arising under consumer
revolving credit card accounts (the "Accounts")
selected by the Transferor from the portfolio
of consumer revolving credit card accounts
owned or acquired by National Bank of the Great
Lakes, a national banking association located
in Elmhurst, Illinois (the "Bank"), and all
monies due or to become due in payment of the
Receivables, all Recoveries, collections on
Receivables ("Collections"), all other proceeds
of the Receivables and proceeds of credit
insurance policies relating to the Receivables,
all monies held in certain accounts of the
Trust (including investment earnings on such
amounts unless otherwise specified in the
related Prospectus Supplement), and any
Enhancement with respect to any particular
Series or Class, as described in the related
Prospectus Supplement. The Accounts will
initially consist of accounts established under
private label credit card programs
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owned by the Bank and operated for customers of
the department stores now or hereafter owned or
operated by Proffitt's, Inc. and its
subsidiaries described in the Prospectus
Supplement (collectively, the "Department
Stores"). The term "Enhancement" means, with
respect to any Series or Class thereof, any
letter of credit, guaranteed rate agreement,
maturity guaranty, liquidity facility, cash
collateral account, cash collateral guaranty,
collateral indebtedness amount, collateral
interest, surety bond, insurance policy,
interest rate cap agreement, interest rate swap
agreement, spread account, reserve account or
other similar arrangement for the benefit of
the Certificateholders of such Series or Class.
Enhancement may also take the form of
subordination of one or more Classes of a
Series or other interests in the Trust to any
other Class or Classes of a Series or a cross-
support feature which requires Collections of
one Series to be paid as principal or interest
or both with respect to another Series.
At the time of formation of the Trust, the
Transferor conveyed to the Trustee all
Receivables existing under certain Accounts
owned by the Transferor as of July 31, 1997
(the "Initial Cut-Off Date") based on criteria
provided in the Pooling and Servicing Agreement
and all Receivables arising under such Accounts
from time to time thereafter until termination
of the Trust. In addition, the Pooling and
Servicing Agreement provides that the
Transferor may from time to time (subject to
certain limitations and conditions), and in
some circumstances will be obligated to,
designate additional eligible revolving credit
card accounts to be included as Accounts
("Additional Accounts"), the Receivables of
which will be included in the Trust. On
February 2, 1998, the Receivables generated by
the Accounts owned by the Bank and maintained
for customers of the Carson Pirie Scott, Boston
Store and Bergner's Department Stores were
conveyed by the Transferor to the Trustee,
pursuant to the terms of the Assignment No. 1
of Receivables in Additional Accounts dated as
of February 2, 1998 between the Transferor and
the Trustee. The Transferor may also, at its
option, designate eligible revolving credit
card accounts to be included automatically as
Accounts upon their creation ("Automatic
Additional Accounts"). See "-- The
Receivables" and "Description of the
Certificates and the Pooling and Servicing
Agreement -- Addition of Accounts."
Securities Offered.............. Each Series will represent an undivided
interest in the assets of the Trust. Each
Certificate of a Series will represent the
right to receive (i) payments of interest at
the specified rate or rates per annum (each, a
"Certificate
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<PAGE>
Rate"), which may be fixed, floating or another
type of rate and (ii) payments of principal
during or at the end of the Controlled
Amortization Period, Principal Amortization
Period, Accumulation Period, Rapid Amortization
Period or other type of amortization period
(each, an "Amortization Period"), all as
specified in the related Prospectus Supplement.
Each Series will consist of one or more
Classes, one or more of which may be Senior
Certificates ("Senior Certificates") and one or
more of which may be Subordinated Certificates
("Subordinated Certificates"). Each Class of a
Series may evidence the right to receive a
specified portion of each distribution of
principal or interest or both. The
Certificates of a Class may also differ from
Certificates of other Classes of the same
Series in, among other things, the amounts
allocated to principal payments, priority of
payments, payment dates, maturity, interest
rate computation, and availability and form of
Enhancement. A Series may also include other
interests in the Trust, which may be held by
Enhancement Providers or others.
The assets of the Trust will be allocated among
the Certificateholders of each Series, the
holder of the Exchangeable Transferor
Certificate and, in certain circumstances,
Enhancement Providers. The interest of the
Certificateholders of a Series in Receivables
is based on the aggregate amount of Principal
Receivables in the Trust and amounts held in
the Excess Funding Account, if any, allocated
to such Series (the "Investor Amount"). The
interest of the holder of the Exchangeable
Transferor Certificate in Receivables is
referred to herein as the Transferor Amount and
is based on the aggregate amount of Principal
Receivables in the Trust and amounts held in
the Excess Funding Account, if any, not
allocated to the Certificateholders or any
Enhancement Provider (the "Transferor Amount").
See "Description of the Certificates and the
Pooling and Servicing Agreement -- General."
The Certificateholders of each Series will have
the right to receive (but only to the extent
needed to make required payments under the
Pooling and Servicing Agreement and related
Series Supplement and subject to any
reallocation of such amounts if the related
Series Supplement so provides) varying
percentages of the Collections of Finance
Charge Receivables and Principal Receivables
for each month and will be allocated a varying
percentage of the amount of Receivables in
Accounts that are written off as uncollectible
("Defaulted Accounts") for such month (each
such percentage, an "Investor Percentage").
The related Prospectus
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<PAGE>
Supplement will specify the Investor
Percentages with respect to the allocation of
Collections of Principal Receivables, Finance
Charge Receivables and Receivables in Defaulted
Accounts during the Revolving Period and any
Amortization Period. If the Certificates of a
Series offered hereby include more than one
Class, or if a Series includes an interest held
by an Enhancement Provider, the assets of the
Trust allocable to such Series may be further
allocated among each Class in such Series and
the interest held by the Enhancement Provider
as described in the related Prospectus
Supplement. See "Description of the
Certificates and the Pooling and Servicing
Agreement -- Investor Percentage and Transferor
Percentage."
The Certificates of each Series will represent
interests in the Trust only and will not
represent interests in or recourse obligations
of PCC, Proffitt's, the Bank or any of their
affiliates. A Certificate is not a deposit and
neither the Certificates nor the underlying
Accounts or Receivables are insured or
guaranteed by the Federal Deposit Insurance
Corporation (the "FDIC") or any other
governmental agency.
Receivables..................... The Receivables consist of amounts charged by
cardholders to purchase or obtain merchandise
and other services and/or cash advances or to
finance credit insurance premiums related to
the Accounts (such amount, less the Discount
Option Receivables, the "Principal
Receivables"). The Receivables also include
"Finance Charge Receivables" which consist of
(i) the related periodic finance charges and
any amounts charged to the Accounts in respect
of late fees, over limit fees, returned check
fees or other fees and charges (collectively,
the "Finance Charges"); and (ii) the Discount
Option Receivables. An amount equal to the
product of the Discount Percentage and the
amount of Receivables arising in the Accounts
on and after the date the Discount Option is
exercised that otherwise would be Principal
Receivables will be treated as Finance Charge
Receivables. In addition, if MasterCard(R) or
VISA(R)* credit card accounts are included in
the Accounts at any time and if so specified in
the related Prospectus Supplement, certain
interchange fees ("Interchange") attributed to
cardholder charges in the Accounts may be
allocated to a Series or any Class thereof and
treated as Collections of Finance Charge
Receivables for purposes of such Series or
Class thereof or may be applied in such other
manner as described in the related Prospectus
- ----------------------
* MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Inc. and VISA U.S.A., Inc., respectively.
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<PAGE>
Supplement. See "Description of the
Certificates and the Pooling and Servicing
Agreement -- Discount Option Receivables."
During the term of the Trust, all new
Receivables arising in the Accounts will be
transferred automatically to the Trust by the
Transferor. The total amount of Receivables in
the Trust fluctuates from day to day, because
the amount of new Receivables arising in the
Accounts and the amount of payments collected
on existing Receivables usually differ each
day.
Pursuant to the Pooling and Servicing
Agreement, the Transferor has the right
(subject to certain limitations and
conditions), and in some circumstances will be
obligated, to designate Additional Accounts and
to convey to the Trust all of the Receivables
in the Additional Accounts, whether such
Receivables are then existing or thereafter
created. The Transferor also has the right to
designate eligible revolving credit card
accounts to be included automatically as
Automatic Additional Accounts upon their
creation. See "Description of the Certificates
and the Pooling and Servicing Agreement --
Addition of Accounts."
Pursuant to the Pooling and Servicing
Agreement, the Transferor has the right
(subject to limitations and conditions) to
designate Accounts and to accept the
reconveyance of all of the Receivables in such
Accounts (the "Removed Accounts"), whether such
Receivables are then existing or thereafter
created. See "Description of the Certificates
and the Pooling and Servicing Agreement --
Removal of Accounts."
Under the Pooling and Servicing Agreement, the
Servicer may estimate the amount of Collections
with respect to the Accounts to be allocated
between Principal Receivables and Finance
Charge Receivables. For each Monthly Period,
the amount of Collections allocated to Finance
Charge Receivables for all Accounts shall be
equal to the amount of Finance Charges actually
assessed on all Accounts in the immediately
preceding Monthly Period. If the Servicer is
able to determine the actual amount of
Collections proceeds which are Collections of
Finance Charge Receivables and Collections of
Principal Receivables, the Servicer may at its
option allocate Collections in accordance with
such actual amounts.
Record Date..................... The close of business on the last business day
of the month preceding any Distribution Date
shall be the "Record Date."
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Exchanges....................... The Pooling and Servicing Agreement authorizes
the Trustee to issue two types of certificates:
(i) one or more Series of Certificates which
may be in one or more Classes and which will be
transferable and have the characteristics
described below and (ii) a certificate
evidencing an undivided interest in the assets
of the Trust not allocated to the
Certificateholders or any Enhancement Provider
or other investor (the "Exchangeable Transferor
Certificate"), which initially will be held by
the Transferor and which generally will not be
transferable. Additional interests in the
Trust relating to a Series may also be issued
to Enhancement Providers or other investors.
The Pooling and Servicing Agreement also
provides that, pursuant to any one or more
Series Supplements to the Pooling and Servicing
Agreement, the Transferor may tender the
Exchangeable Transferor Certificate or, if
permitted by the applicable Series Supplement,
Certificates or other interests representing
any Series and the Exchangeable Transferor
Certificate, to the Trustee in exchange for one
or more new Series (which may include
Certificates offered hereby) and a reissued
Exchangeable Transferor Certificate (any such
tender, an "Exchange"). Under the Pooling and
Servicing Agreement, the Transferor may define,
with respect to any Series, the Principal Terms
of the Series. The Transferor may offer any
Series to the public or other investors under a
prospectus or other disclosure document (a
"Disclosure Document") in transactions either
registered under the Securities Act, or exempt
from registration thereunder, directly or
through one or more underwriters or placement
agents, in fixed-price offerings or in
negotiated transactions or otherwise. See
"Description of the Certificates and the
Pooling and Servicing Agreement -- Exchanges."
Under the Pooling and Servicing Agreement and
pursuant to a Series Supplement, an Exchange
may occur only upon delivery to the Trustee of
the following: (i) a Series Supplement
specifying the principal terms of such Series
(the "Principal Terms"), (ii) an opinion of
counsel to the effect that the Certificates of
such Series under existing law will be
characterized either as indebtedness or an
interest in a partnership (that is not taxable
as a corporation) for Federal income tax
purposes and that the issuance of such Series
will not materially adversely affect the
Federal income tax characterization of any
outstanding Series or result in the Trust being
subject to Federal or specified state taxes at
the entity level, (iii) if required by the
related Series Supplement, a form of
Enhancement and any related agreement, (iv)
written confirmation from the applicable Rating
Agency that the Exchange will not result in the
Rating Agency reducing or withdrawing its
rating on any then outstanding Series
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<PAGE>
rated by it, and (v) the existing Exchangeable
Transferor Certificate and, if applicable, the
Certificates or other interests representing
the Series to be exchanged.
Denominations................... Unless otherwise specified in the related
Prospectus Supplement, beneficial interests in
the Certificates will be offered for purchase
in denominations of $1,000 and integral
multiples thereof.
Registration of Certificates.... Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each
Series offered hereby initially will be
represented by Certificates registered in the
name of Cede, as the nominee of DTC (in the
United States) or the Cedel Bank societe
anonyme ("Cedel") or Euroclear (in Europe).
Transfers within DTC, Cedel or Euroclear, as
the case may be, will be made in accordance
with the usual rules and operating procedures
of the relevant system. Cross-market transfers
between persons holding directly or indirectly
through DTC, on the one hand, and
counterparties holding directly or indirectly
through Cedel or Euroclear, on the other, will
be effected by DTC through the relevant
Depositaries of Cedel or Euroclear. No
Certificate Owner will be entitled to receive a
definitive certificate representing such
person's interest, except in the event that
Definitive Certificates (as defined herein) are
issued under the limited circumstances
described herein. See "Description of the
Certificates and the Pooling and Servicing
Agreement -- Definitive Certificates."
Transferor...................... Unless otherwise designated in any Prospectus
Supplement, PCC is the Transferor of the
Receivables. PCC is a wholly owned (directly
and indirectly), limited purpose subsidiary of
Proffitt's. The principal executive offices of
PCC are located at Bank of America Center, 101
Convention Center Drive, Las Vegas, Nevada
89109, telephone number (702) 380-4918.
Servicer........................ Proffitt's, Inc. ("Proffitt's") is the Servicer
of the Receivables and McRae's and CPS act as
Subservicers. The principal executive offices
of Proffitt's are located at 750 Lakeshore
Parkway, Birmingham, Alabama 35211, telephone
number (205) 940-4000. The Servicer will
receive a fee as servicing compensation from
the Trust in respect of each Series in the
amounts and at the times specified in the
related Prospectus Supplement (the "Investor
Servicing Fee"), from which it will pay the
Subservicers for their respective servicing
activities. The Investor Servicing Fee may be
payable from Finance Charge Receivables,
Interchange or other amounts as specified in
the related Prospectus Supplement. In certain
limited circumstances, Proffitt's may resign or
be removed as Servicer, in which event the
Trustee or a
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<PAGE>
third-party servicer may be appointed as
successor servicer (Proffitt's, in its capacity
as servicer, or any such successor servicer, is
referred to herein as the "Servicer"). See
"Description of the Certificates and the
Pooling and Servicing Agreement -- Servicing
Compensation and Payment of Expenses" and "--
Certain Matters Regarding the Servicer."
Collections..................... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Series, the Servicer will deposit all
Collections allocable to such Series (subject
to certain exceptions) in a segregated
corporate trust account (the "Collection
Account"). All amounts deposited in the
Collection Account will be allocated by the
Servicer between Collections of Principal
Receivables and Collections of Finance Charge
Receivables. If so specified in the related
Prospectus Supplement, Principal Receivables
and/or Finance Charge Receivables may otherwise
be recharacterized. All such amounts will then
be allocated in accordance with the respective
interests of the Certificateholders of such
Series or any Class thereof or any other
interest in the Trust included in such Series.
See "Description of the Certificates and the
Pooling and Servicing Agreement -- Discount
Option Receivables" and "-- Investor Percentage
and Transferor Percentage."
Excess Funding Account.......... The Servicer also maintains, in the name of the
Trustee on behalf of the Trust, a segregated
trust account entitled the "Excess Funding
Account" which is held for the benefit of
Certificateholders. The Servicer may, in
writing, direct that the funds held in the
Excess Funding Account be invested, and on each
Distribution Date, all interest and other
investment earnings (net of losses and
investment expenses) shall be applied as
collections of Finance Charge Receivables with
respect to the related Monthly Period. On each
business day, to the extent the Servicer
determines that the Transferor Amount exceeds
the Minimum Transferor Amount, such excess
amount shall be paid to the holder of the
Exchangeable Transfer Certificate prior to a
Pay Out Event occurring.
Interest Payments............... Each Series of Certificates represents an
undivided interest in the Trust, and each
Certificate offered by a Prospectus Supplement
("Offered Certificate") represents the right to
payments of interest at the Certificate Rate
specified in the related Prospectus Supplement.
Unless otherwise specified in a Prospectus
Supplement, all payments in respect of` the
Offered Certificates will be made in United
States Dollars.
Interest on each Series of Certificates or
Class thereof for each interest accrual period
(each, an "Interest Period") specified in the
related Prospectus Supplement will be
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<PAGE>
distributed in the amounts and on the dates
(which may be monthly, quarterly, semiannually
or otherwise as specified in the related
Prospectus Supplement) (each, a "Distribution
Date") specified in the related Prospectus
Supplement. Interest payments on each
Distribution Date will generally be funded from
the Collections of Finance Charge Receivables
allocated to the Investor Amount during the
preceding monthly period or periods (each, a
"Monthly Period"), as described in the related
Prospectus Supplement, and may be funded from
certain investment earnings on funds held in
certain accounts of the Trust, from any
applicable Enhancement or from other sources
specified in the related Prospectus Supplement.
If the Distribution Dates for payment of
interest for a Series or Class occur less
frequently than monthly, such Collections or
other amounts allocable to such Series or Class
may be deposited in one or more trust accounts
pending distribution to the Certificateholders
of such Series or Class, all as described in
the related Prospectus Supplement. See
"Description of the Certificates and the
Pooling and Servicing Agreement -- Application
of Collections," "Enhancement" and "Risk
Factors -- Limited Credit Enhancement."
Revolving Period................ Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Series and any Class thereof, no principal will
be payable to Certificateholders until the
Principal Commencement Date or the Scheduled
Payment Date with respect to such Series or
Class. For the period beginning on the date of
issuance of the related Series (the "Closing
Date") and ending with the commencement of an
Amortization Period (the "Revolving Period"),
Collections of Principal Receivables otherwise
allocable to the Investor Amount will, subject
to certain limitations, be paid from the Trust
to the holder of the Exchangeable Transferor
Certificate or, under certain circumstances and
if so specified in the related Prospectus
Supplement, will be treated as Shared Principal
Collections and paid to the holders of other
Series of Certificates issued by the Trust, as
described herein and in the related Prospectus
Supplement. See "Description of the
Certificates and the Pooling and Servicing
Agreement -- Pay Out Events" for a discussion
of the events which might lead to early
termination of the Revolving Period.
Principal Payments;
Amortization Period............. The principal of the Certificates of each
Series offered hereby will be scheduled to be
paid either in installments commencing on a
Distribution Date specified in the related
Prospectus Supplement (the "Principal
Commencement Date"), in which case such Series
will have either a Controlled Amortization
Period or a
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<PAGE>
Principal Amortization Period, as described
below, or on an expected date specified in the
related Prospectus Supplement (the "Scheduled
Payment Date"), in which case such Series will
have an Accumulation Period, as described
below, or in such other manner specified in the
related Prospectus Supplement with respect to
any other type of Amortization Period. If a
Series has more than one Class of Certificates,
a different method of paying principal or
determining the Principal Commencement Date or
the Scheduled Payment Date may be assigned to
each Class. The payment of principal with
respect to the Certificates of a Series or
Class may commence earlier than the applicable
Principal Commencement Date or Scheduled
Payment Date, and the final principal payment
with respect to the Certificates of a Series or
Class may be made later than the applicable
expected payment date or Scheduled Payment
Date, if a Pay Out Event occurs and the Rapid
Amortization Period commences with respect to
such Series or Class or under certain other
circumstances described herein or in the
Prospectus Supplement. See "Description of the
Certificates and the Pooling and Servicing
Agreement -- Pay Out Events."
Controlled Amortization Period.. If the Prospectus Supplement relating to a
Series so specifies, unless a Rapid
Amortization Period with respect to such Series
commences, the Certificates of such Series or
any Class thereof will have an amortization
period (the "Controlled Amortization Period")
during which Collections of Principal
Receivables allocable to such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be used on
each Distribution Date to make principal
distributions in scheduled amounts to the
Certificateholders of such Series or any Class
of such Series then scheduled to receive such
distributions. The amount to be distributed on
any Distribution Date during the Controlled
Amortization Period will be limited to an
amount (the "Controlled Distribution Amount")
equal to an amount specified in the related
Prospectus Supplement (the "Controlled
Amortization Amount") plus the amount of any
shortfalls arising from the failure to pay the
Controlled Amortization Amount on any prior
Distribution Dates. If a Series has more than
one Class of Certificates, each Class may have
a separate Controlled Amortization Amount. In
addition, the related Prospectus Supplement may
describe certain priorities among such Classes
with respect to such distributions. The
Controlled Amortization Period will commence at
the close of business on the Principal
Commencement Date and continue until the
earliest of (a) the commencement of the Rapid
Amortization Period, (b) payment in full of the
Investor Amount of such Series
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<PAGE>
or Class and (c) the Stated Series Termination
Date with respect to such Series.
Principal Amortization Period... If the Prospectus Supplement relating to a
Series so specifies, unless a Rapid
Amortization Period with respect to such Series
commences, the Certificates of such Series or
any Class thereof will have an amortization
period (the "Principal Amortization Period")
during which Collections of Principal
Receivables allocable to such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be used on
each Distribution Date to make principal
distributions in the amount of such Collections
to the Certificateholders of such Series or any
Class of such Series then scheduled to receive
such distributions. If a Series has more than
one Class of Certificates, the related
Prospectus Supplement may describe certain
priorities among such Classes with respect to
such distributions. The Principal Amortization
Period will commence at the close of business
on the Principal Commencement Date and continue
until the earliest of (a) the commencement of
the Rapid Amortization Period, (b) payment in
full of the Investor Amount of such Series or
Class and (c) the Stated Series Termination
Date with respect to such Series.
Accumulation Period............. If the Prospectus Supplement relating to a
Series so specifies, unless a Rapid
Amortization Period with respect to such Series
commences, the Certificates of such Series or
any Class thereof will have an accumulation
period (the "Accumulation Period") during which
Collections of Principal Receivables allocable
to such Series (and other amounts if so
specified in the related Prospectus Supplement)
will be deposited prior to each Distribution
Date in a trust account established for the
benefit of the Certificateholders of such
Series or Class (a "Principal Account") and
used to make principal distributions to the
Certificateholders of such Series or any Class
of such Series on the Scheduled Payment Date.
The amount to be deposited in the Principal
Account on any date may be limited to an amount
(the "Controlled Deposit Amount") equal to an
amount specified in the related Prospectus
Supplement (the "Controlled Accumulation
Amount") plus the amount of any shortfalls
arising from the failure to deposit the
Controlled Accumulation Amount into the
Principal Account with respect to any prior
Distribution Dates. If a Series has more than
one Class of Certificates, each Class may have
a separate Principal Account and Controlled
Accumulation Amount. In addition, the related
Prospectus Supplement may describe certain
priorities among such Classes with respect to
deposits of principal into such Principal
Accounts. The Accumulation Period
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<PAGE>
will commence at the close of business on a
date specified in or determined in the manner
specified in the related Prospectus Supplement
and continue until the earliest of (a) the
commencement of the Rapid Amortization Period,
(b) payment in full of the Investor Amount of
such Series or Class and (c) the Stated Series
Termination Date with respect to such Series.
Funds held in any Principal Account may be
invested in Permitted Investments or subject to
a guaranteed rate or investment agreement or
other arrangement intended to assure a
specified return on the investment of such
funds. Investment earnings on such funds may
be applied to pay interest on the related
Series of Certificates. In order to enhance
the likelihood of payment in full of principal
at the end of an Accumulation Period with
respect to a Series of Certificates, such
Series may be subject to a principal guaranty
or other similar arrangement.
Rapid Amortization Period....... During the period from the day on which a Pay
Out Event has occurred with respect to a
Series, to the earlier of the date on which the
Investor Amount of such Series has been paid in
full or the related Stated Series Termination
Date (the "Rapid Amortization Period"), unless
otherwise provided in the related Prospectus
Supplement, Collections of Principal
Receivables allocable to the Investor Amount of
such Series (and certain other amounts if so
specified in the related Prospectus Supplement)
will be distributed as principal payments to
the Certificateholders of such Series monthly
on each Distribution Date with respect to such
Series in the manner and order of priority set
forth in the related Prospectus Supplement.
During the Rapid Amortization Period with
respect to a Series, distributions of principal
to Certificateholders will not be limited by
any Controlled Distribution Amount or
Controlled Deposit Amount. In addition, upon
the commencement of the Rapid Amortization
Period with respect to a Series, unless
otherwise specified in the related Prospectus
Supplement, any funds held in a Principal
Account with respect to such Series or any
Class thereof will be paid to the
Certificateholders of such Series or Class on
the first Distribution Date in the Rapid
Amortization Period. See "Description of the
Certificates and the Pooling and Servicing
Agreement -- Pay Out Events" for a discussion
of the events which might lead to commencement
of the Rapid Amortization Period.
Shared Excess Finance
Charge Collections.............. Any Series may be included in a group of Series
(a "Group"). Subject to certain limitations
described under "Description of the
Certificates and the Pooling and Servicing
Agreement -- Shared Excess Finance Charge
Collections," Shared Excess Finance Charge
Collections,
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<PAGE>
if any, with respect to a Series included in a
Group will be applied to cover any shortfalls
with respect to amounts payable from
Collections of Finance Charge Receivables
allocable to any other Series in such Group,
pro rata based upon the amount of the
shortfall, if any, with respect to each Series
in such Group. See "Description of the
Certificates and the Pooling and Servicing
Agreement -- Shared Excess Finance Charge
Collections."
Shared Principal Collections.... Collections of Principal Receivables and
certain other amounts otherwise allocable to a
Series included in a Group may, as provided in
any Series Supplement, and to the extent such
Collections are not needed to make payments to
or deposits for the benefit of the
Certificateholders of such Series, be applied
to cover principal payments and deposits to the
Principal Account for any Series in such Group
which are scheduled or permitted, and which
have not been covered by Collections of
Principal Receivables and certain other
amounts. See "Description of the Certificates
and the Pooling and Servicing Agreement --
Shared Principal Collections."
Funding Period.................. The Prospectus Supplement relating to a Series
of Certificates may specify that for a period
beginning on the Closing Date and ending on a
specified date before the commencement of an
Amortization Period with respect to such Series
(the "Funding Period"), the aggregate amount of
Principal Receivables in the Trust and amounts
in the Excess Funding Account allocable to such
Series may be less than the aggregate principal
amount of the Certificates of such Series and
that the amount of such deficiency (the "Pre-
Funded Amount") will be held in a trust account
established with the Trustee for the benefit of
such Series (the "Pre-Funding Account") pending
the transfer of additional Principal
Receivables to the Trust or pending the
reduction of the Investor Amounts of other
Series. The related Prospectus Supplement will
specify the initial Investor Amount on the
Closing Date with respect to such Series, the
aggregate principal amount of such Series (the
"Full Investor Amount") and the date by which
the Investor Amount is expected to equal the
Full Investor Amount. The Investor Amount of
such Series will increase as Principal
Receivables are created or as the Investor
Amounts of other Series are reduced. The
Investor Amount may also decrease due to
Investor Charge Offs.
During the Funding Period, funds on deposit in
the Pre-Funding Account for a Series will be
withdrawn and paid to the Transferor or its
assignees to the extent of any increases in the
Investor Amount. In the event that the
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<PAGE>
Investor Amount does not for any reason equal
the Full Investor Amount by the end of the
Funding Period, any amount remaining in the
Pre-Funding Account and any additional amounts
specified in the related Prospectus Supplement
will be payable to Certificateholders of such
Series in a manner and at such time as set
forth in the related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, monies in the Pre-Funding Account
with respect to any Series will be invested by
the Trustee in Permitted Investments or will be
subject to a guaranteed rate or investment
agreement or other similar arrangement, and
investment earnings and any applicable payment
under any such investment arrangement will be
applied to pay interest on the Certificates of
such Series.
Paired Series................... If so specified in the related Prospectus
Supplement, a Series of Certificates may be
paired with another Series (a "Paired Series").
The Prospectus Supplement for such Series and
the Prospectus Supplement for the Paired Series
will each specify the relationship between the
Series.
Enhancement..................... Enhancement with respect to a Series or any
Class thereof may be provided as specified in
the related Prospectus Supplement.
The type, characteristics and amount of the
Enhancement will be determined based on several
factors, including the characteristics of the
Receivables and Accounts underlying or
comprising the Trust Portfolio as of the
Closing Date with respect to any Series, and
will be established on the basis of the
requirements of each Rating Agency rating the
Certificates of such Series. If so specified
in the related Prospectus Supplement, any such
Enhancement will apply only in the event of
certain types of losses and the protection
against losses provided by such Enhancement
will be limited. The terms of Enhancement, if
any, with respect to a Series, and the
conditions under which such Enhancement may be
increased, reduced or replaced, will be
described in the related Prospectus Supplement.
See "Enhancement" and "Risk Factors -- Limited
Nature of Certificate Rating."
Optional Repurchase............. With respect to each Series of Certificates,
the Investor Amount of such Series will be
subject to optional repurchase by the
Transferor on any Distribution Date after such
Investor Amount is reduced to an amount less
than or equal to 10% of the initial Investor
Amount (the "Initial Investor Amount"), or such
other amount specified in the related
Prospectus Supplement, if certain conditions
set forth in the Pooling and Servicing
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<PAGE>
Agreement are met. Unless otherwise specified
in the related Prospectus Supplement, the
repurchase price will be equal to the Investor
Amount of such Series plus accrued and unpaid
interest thereon. See "Description of the
Certificates and the Pooling and Servicing
Agreement -- Optional Repurchase; Final Payment
of Principal; Termination."
Defeasance...................... The Transferor may, at its option and subject
to the conditions specified in "Description of
the Certificates and the Pooling and Servicing
Agreement -- Defeasance," terminate its
substantive obligations in respect of a Series
or all Series (the "Defeased Series") by
irrevocably depositing with the Trustee monies
or Permitted Investments or both sufficient to
pay and discharge all remaining scheduled
interest and principal payments on all Defeased
Series on the dates scheduled for such payments
and all amounts owing to any provider of
Enhancement with respect to the Defeased
Series. See "Description of the Certificates
and the Pooling and Servicing Agreement --
Defeasance."
Tax Status...................... Except to the extent otherwise specified in the
related Prospectus Supplement, Special Tax
Counsel to the Transferor will render an
opinion in connection with the issuance of each
Series that under existing law the Certificates
of such Series that are publicly offered will
be characterized as indebtedness for Federal
income tax purposes. Except to the extent
otherwise specified in the related Prospectus
Supplement, the Certificate Owners will agree
to treat the Certificates as indebtedness for
Federal, state and local income and franchise
tax purposes. See "Certain Federal Income Tax
Consequences" for additional information
concerning the application of Federal income
tax laws.
ERISA Considerations............ Under regulations issued by the Department of
Labor, the Trust's assets would not be deemed
"plan assets" of any Benefit Plan holding
interests in the Certificates of a Series if
certain conditions are met. If the Trust's
assets were deemed to be "plan assets" of a
Benefit Plan, there is uncertainty as to
whether existing exemptions from the
"prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code would apply to
all transactions involving the Trust's assets.
No assurance can be made with respect to any
offering of the Certificates of any Series that
the conditions which would allow the Trust
assets not to be deemed "plan assets" will be
met, although the intention of the underwriters
(but not their assurance) as to whether the
Certificates of a particular Series will be
"publicly offered securities," and therefore
eligible for an ERISA exemption, will be set
forth in the
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<PAGE>
related Prospectus Supplement. Accordingly,
such acquisition could result in excise taxes
and other liabilities under ERISA and the Code.
Plan fiduciaries contemplating purchasing
interests in Certificates must carefully
determine whether the acquisition and holding
of Certificates and the operation of the Trust
would result in such excise taxes and other
liabilities to their Benefit Plan. See "ERISA
Considerations."
Certificate Rating.............. It will be a condition to the issuance of each
Series of Certificates or Class thereof offered
hereby that they be rated in one of the four
highest rating categories by at least one
nationally recognized statistical rating
organization (each such rating organization
rating any Series, a "Rating Agency"). The
rating or ratings applicable to the
Certificates of each Series or Class thereof
offered hereby will be set forth in the related
Prospectus Supplement.
A rating is not a recommendation to buy, sell
or hold securities and may be subject to
revision or withdrawal at any time by the
assigning Rating Agency. Each rating should be
evaluated independently of any other rating.
See "Risk Factors -- Limited Nature of
Certificate Rating."
Listing......................... If so specified in the Prospectus Supplement
relating to a Series, application will be made
to list the Certificates of such Series, or all
or a portion of any Class thereof, on the
Luxembourg Stock Exchange or any other
specified exchange.
Risk Factors.................... See "Risk Factors" beginning on page 17 of this
Prospectus for a discussion of certain factors
that should be considered by prospective
purchasers of the Offered Certificates.
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<PAGE>
RISK FACTORS
Potential investors should consider, among other things, the following
risk factors and any risk factors in the related Prospectus Supplement in
connection with the purchase of the Certificates.
Limited Liquidity
It is anticipated that, to the extent permitted, the underwriters of
any Series of Certificates offered hereby will make a market in such
Certificates, but in no event will any such underwriter be under an obligation
to do so. There is no assurance that a secondary market will develop with
respect to the Certificates of any Series offered hereby, or if it does develop,
that it will provide Certificateholders with liquidity of investment or that it
will continue for the life of such Certificates.
Non-Recourse Obligation
Certificateholders will have no recourse to any assets of any of the
Transferor, the Servicer, the Bank or any of their affiliates, in the event
payments on Certificates are not timely made. Consequently, Certificateholders
must rely solely upon payments on the Receivables and the Enhancement, if any,
applicable to the Series for the payment of principal of and interest on the
Certificates of any Series. Furthermore, under the Pooling and Servicing
Agreement, the Certificateholders have an interest in the Receivables and
Collections thereon only to the extent of the Investor Amount.
Transfer of Receivables
The Transferor has represented and warranted in the Pooling and
Servicing Agreement that its transfer of the Receivables to the Trust is either
a valid transfer and assignment of the Receivables to the Trust or the grant to
the Trust of a security interest in the Receivables. The Transferor has taken
and will take all actions as are required under applicable law to perfect the
Trust's interest in the Receivables and has represented and warranted that if
the transfer of the Receivables by the Transferor to the Trust is the grant to
the Trust of a security interest in the Receivables, such security interest
constitutes a first priority perfected security interest therein and, to the
extent provided under the applicable Uniform Commercial Code (the "UCC"), in the
proceeds thereof (except for liens for local taxes and government charges not
due and payable or being contested in good faith by the Transferor). The Bank,
for itself and as successor to Proffitt's, Inc., Parisian, Inc., G.R.
Herberger's, Inc. and McRae's, Inc. (each, an "Initial Seller" and collectively
the "Initial Sellers"), under the Receivables Purchase Agreements between each
of the Initial Sellers and the Transferor (each a "Receivables Purchase
Agreement" and collectively, with the Receivables Purchase Agreement between the
Bank and the Transferor dated as of February 2, 1998, the "Receivables Purchase
Agreements"), has similarly represented and warranted that the Transferor's
interest in the Receivables constitutes a first priority perfected ownership
interest in the Receivables and the proceeds thereof (except for liens for local
taxes and governmental charges not due and payable or being contested in good
faith by the applicable Initial Seller or the Bank). Nevertheless, a tax or
government lien on property of an Initial Seller, the Bank or the Transferor
arising before any Receivable comes into existence may have priority over the
Transferor's or the Trust's interest in such Receivable. The Transferor, each
of the Initial Sellers and the Bank have also covenanted not to sell, pledge,
assign, transfer or grant any lien on any Receivable included in the Trust other
than to the Trust. See "Certain Legal Aspects of the Receivables -- Transfer of
Receivables," "-- Certain Matters Relating to Receivership" and "-- Certain
Matters Relating to Bankruptcy or Insolvency."
Commingling of Collections
While Proffitt's, or an affiliate, is the Servicer, Collections held
by or on behalf of the Transferor may, during periods when certain conditions
specified in the Pooling and Servicing Agreement are satisfied, be commingled
and used for the Servicer's own benefit prior to each Distribution Date and, in
the event of the bankruptcy, insolvency, receivership or conservatorship of any
of the Initial Sellers, the Bank, the Servicer, the Subservicers or the
Transferor or, in certain circumstances, the lapse of certain time periods as
provided under the
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UCC, the Trust may not have a perfected interest in such Collections. During
periods when the Company fails to maintain the credit rating or meet other
criteria required by the applicable Rating Agency, the Servicer will be required
to deposit a portion of the Collections directly into the Collection Account no
later than the second business day after the date of processing of such
Collections.
Bankruptcy and Insolvency Risks
Each of the Initial Sellers originally warranted, and the Bank
represents and warrants, in the applicable Receivables Purchase Agreement, that
the sale of Receivables sold or to be sold by it to the Transferor is a valid
sale of such Receivables to the Transferor, and the Transferor represents and
warrants in the Pooling and Servicing Agreement that the transfer of the
Receivables by it to the Trust is either a valid transfer of the Receivables or
the grant of a security interest in the Receivables to the Trust. The Initial
Sellers and the Bank, and the Transferor have agreed to take such actions as are
required to perfect the sale of Receivables to the Transferor, and to perfect
the Trust's interest in the Receivable, respectively. Each of the Initial
Sellers and the Bank intends that each transfer of Receivables by it to the
Transferor constitutes a "true sale" of such Receivables to the Transferor. If
such transfer constitutes a "true sale," such Receivables and the proceeds
thereof would not be part of such Initial Seller's bankruptcy estate under
Section 541 of the United States Bankruptcy Code (Title 11, United States Code),
as amended (the "Bankruptcy Code"), or an asset of the Bank in the event a
receiver or conservator were appointed for the Bank. If any Initial Seller were
to become a debtor subject to a Bankruptcy Code proceeding, or the Bank were to
become subject to a receivership or conservatorship proceeding subsequent to
such transfer, the Receivables should not be available to creditors of such
Initial Seller or the Bank.
Notwithstanding the foregoing, if the Bank was placed in a
receivership or conservatorship, or an Initial Seller were to become a debtor in
a bankruptcy case, and a receiver, conservator, creditor or a trustee-in-
bankruptcy of such debtor or such debtor itself, as debtor-in-possession, were
to take the position that the sale of Receivables by such Initial Seller or the
Bank, as applicable, to the Transferor should be recharacterized as a pledge of
such Receivables to secure a borrowing of such debtor, then reductions and
delays in payments of Collections of Receivables to the Transferor, and
consequently to the Trust, and delays in payments on the Offered Certificates
could occur. If the court were to rule in favor of such recharacterization then
reductions in the amount of such payments could occur and Certificateholders
could experience losses in their investment in the Offered Certificates. See
"Certain Legal Aspects of the Receivables -- Certain Matters Relating to
Bankruptcy or Insolvency" and "-- Certain Matters Relating to Receivership."
The Transferor has taken steps in structuring the transactions
contemplated hereby that are intended to reduce the risk that a bankruptcy case
with respect to any Initial Seller or the Transferor would result in
consolidation of the assets and liabilities of any Initial Seller or the
Transferor with each other or their affiliates. The Transferor also has been
organized in a manner intended to reduce the risk that it would become subject
to a bankruptcy case. If an individual Initial Seller or the Transferor were to
become a debtor in a bankruptcy case, or a receiver or conservator were
appointed for the Bank, or certain other events relating to the insolvency of an
Initial Seller, the Bank or the Transferor were to occur, causing a Pay Out
Event pursuant to the Pooling and Servicing Agreement, no new Principal
Receivables would be transferred to the Trust. If any such events were to occur
with respect to the Transferor, the Trustee would sell the Receivables (unless
holders of more than 50% of the principal amount of outstanding Certificates of
each Class under each Series instruct otherwise), which would cause a
termination of the Trust and a loss to the Certificateholders, if the net
proceeds from such sale were insufficient to pay the Certificateholders in full.
If no Servicer Default other than such insolvency event were to exist, the
debtor-in-possession may have the power to prevent either the Trustee or the
Certificateholders from appointing a successor Servicer. If, notwithstanding the
foregoing, (i) the Transferor were to become a debtor in a bankruptcy
proceeding, or (ii) a court were to conclude that the assets and liabilities of
the Transferor should be consolidated with the assets and liabilities of any
Initial Seller and/or the Bank; or (iii) a creditor, a trustee-in-bankruptcy of
such debtor, or the debtor itself, as debtor-in-possession, were to litigate the
consolidation issue, then delays in distributions in respect of the Offered
Certificates and possible reductions in the amounts of such distributions could
occur. See "Certain Legal Aspects of the Receivables -- Certain Matters Relating
to Bankruptcy or Insolvency" and "--Certain Matters Relating to Receivership."
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Payments made by the Bank to the Transferor pursuant to the
Receivables Purchase Agreement in respect of repurchases of Ineligible
Receivables or in respect of Adjustments might be recoverable by a receiver or
conservator for the Bank, as applicable, from the Transferor or the
Certificateholders as an avoidable transfer, if such payments were made within
one year or other applicable period under state law prior to the commencement of
a bankruptcy case in respect of an Initial Seller.
The Bank is a national bank that is subject to regulation and
supervision by the United States Office of the Comptroller of the Currency (the
"OCC"). If the Bank were to become insolvent or be in an unsound condition or if
certain other circumstances were to occur, the OCC is authorized to appoint the
FDIC as receiver. The Federal Deposit Insurance Act ("FDIA"), as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"),
sets forth certain powers that the FDIC may exercise as receiver for the Bank.
With respect to the appointment of a receiver or conservator for the Bank,
subject to certain qualifications, a valid perfected security interest of the
Trust in the Receivables should be enforceable (to the extent of the Trust's
"actual direct compensatory damages" as described below) and payments to the
Trust with respect to the Receivables (up to the amount of such damages) should
not be subject to an automatic stay of payment or to recovery by such a
conservator or receiver. If, however, the conservator or receiver were to assert
that the security interest was unperfected or unenforceable, or were to require
the Trustee to establish its right to those payments by submitting to and
completing the administrative claims procedure established under FIRREA, or the
conservator or receiver were to request a stay of judicial proceedings with
respect to the Bank as provided under FIRREA, delays in payments on the
Certificates and possible reductions in the amount of those payments could
occur. In the event of a repudiation of obligations by a conservator or
receiver, FIRREA provides that a claim for the repudiated obligation is limited
to "actual direct compensatory damages" determined as of the date of the
appointment of the conservator or receiver (which in most cases are expected to
include the outstanding principal on the Certificates plus interest accrued
thereon to the date of payment). The FDIC has not adopted a formal policy
statement on payment of principal and interest on collateralized borrowings of
banks which are repudiated. The Transferor believes that, as of the date of this
Prospectus, the general practice of the FDIC in such circumstances is to permit
the collateral to be applied to pay the principal owed plus interest at the
contract rate up to the date of payment, together with the costs of liquidation
of the collateral if provided for in the contract. In one case, however,
involving the repudiation by the Resolution Trust Corporation of certain secured
zero-coupon bonds issued by a savings association, a United States Federal
district court held that "actual direct compensatory damages" in the case of a
marketable security meant the market value of the repudiated bonds as of the
date of repudiation. If that court's view were applied to determine the Trust's
"actual direct compensatory damages" in the event a conservator or receiver of
the Bank repudiated its obligations under the Receivables Purchase Agreement or
to the Trust pursuant to the Pooling and Servicing Agreement, the amount paid to
Certificateholders could, depending upon circumstances existing on the date of
the repudiation, be less than the principal of the Certificates and the interest
accrued thereon to the date of payment. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Receivership."
Effects of Consumer and Debtor Protection Laws on Collectibility of Receivables
All Accounts not owned by the Bank prior to February 2, 1998 and in
existence prior to that date were contributed to the Bank at the beginning of
business on February 2, 1998. Since that time all Accounts have been owned and
administered by the Bank, and all Receivables have been originated by the Bank.
The Accounts and the Receivables are subject to numerous Federal and state
consumer protection laws that impose requirements on the making and collection
of consumer credit. Such laws, as well as any new laws or rulings which may be
adopted, may adversely affect the Servicer's ability to collect the Receivables
or the Bank's ability to maintain or improve historic levels of finance charge
income. Also, there has been increased consumer awareness with respect to the
level of finance charges and fees and other practices of credit card issuers and
other consumer revolving credit providers. As a result of these developments
and other factors, there can be no assurance that there will not be any Federal
or state legislation imposing additional requirements on the making and
collecting of consumer credit or limiting finance charges or other fees or
charges relating to the Accounts.
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State and local governments may attempt, and private parties are
attempting, to require out-of-state credit card issuers to comply with state and
local consumer protection laws. There can be no assurance that the Bank will
not be named as a defendant in future lawsuits or administrative actions
challenging the terms of its credit card programs or otherwise asserting
violations of such consumer protection laws. Such lawsuits or actions, if
resolved adversely to the Bank, could have the effect of limiting the Bank's
credit card programs and could require the Bank to pay refunds and civil
penalties to cardholders. Consequently, such lawsuits or actions could have an
adverse effect on the Bank's credit card operations. One potential effect of
any such lawsuit or action involving the Bank, if successful, would be to reduce
the yield on the Trust Portfolio. If such a reduction were to occur, a Pay Out
Event with respect to one or more Series might result.
Pursuant to the Pooling and Servicing Agreement, the Transferor has
covenanted to accept retransfer from the Trust, and pursuant to the Receivables
Purchase Agreements, the Bank has agreed to repurchase from the Transferor, each
Receivable that does not comply with all requirements of applicable law at the
time it was transferred to the Trust where the related Account becomes a
Defaulted Account or the proceeds of the Receivable are impaired. Pursuant to
such agreements, the Transferor makes to the Trust, and the Bank makes to the
Transferor, certain other representations and warranties relating to the
validity and enforceability of the Receivables. If any such representation or
warranty were breached and such breach were to continue beyond the applicable
cure period, if any, the sole remedy against the Transferor would be its
obligation to accept the retransfer of such Receivables and, if applicable, the
sole remedy against the Bank would be its obligation to repurchase such
Receivables from the Transferor. See "Description of the Certificates and the
Pooling and Servicing Agreement -- Representations and Warranties" and "Certain
Legal Aspects of the Receivables -- Consumer and Debtor Protection Laws, Recent
and Proposed Legislation."
Application of Federal and state bankruptcy and Debtor Relief Laws
could affect the interests of the Certificateholders in the Receivables if such
laws were to result in any Receivables being charged off as uncollectible. See
"Description of the Certificates and the Pooling and Servicing Agreement --
Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge
Offs."
Effect of Payment Rate on Certificates
The Receivables may be paid at any time, and there is no assurance
that there will be additional Receivables or that any particular pattern of
cardholder repayments will occur. A significant decline in the amount of
Receivables generated could result in the occurrence of a Pay Out Event for one
or more Series and commencement of the Rapid Amortization Period for each such
Series. In addition, changes in periodic Finance Charges could alter the
monthly payment rates of cardholders. A significant decrease in the monthly
payment rate could slow the return or accumulation of principal during the Rapid
Amortization Period. See "Maturity Assumptions" and "-- Ability to Change Terms
of the Receivables" for a discussion of the Bank's ability to change the terms,
including interest rates and fees, on the Accounts.
Effects of Convenience Use and Special Deferrals
From time to time the Bank, to encourage use of its credit cards,
offers to impose no Finance Charges on purchases made with such credit cards if
the obligor(s) on such card (each, an "Obligor") pays a specified percentage of
the entire amount due within a specified period. Also, the Bank from time to
time offers deferred billing on certain purchases. If the Obligor complies with
the terms of the deferred billing, no interest is charged on such a deferred
Receivable for up to 90 days. An increase in the "convenience use" of the
credit card accounts or in the level of deferred billing Receivables could have
adverse effects upon the Certificateholders. See "Credit Card Program --
Billing and Payments" in the Prospectus Supplement.
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Ability to Change Terms of the Receivables
Pursuant to the Pooling and Servicing Agreement, only the Receivables
arising in the Accounts have been transferred to the Trust. As owner of the
Accounts, the Bank retains the right to determine the monthly periodic Finance
Charges and other charges and fees which will be applicable from time to time to
the Accounts, to alter the minimum monthly payment required on the Accounts and
to change various other terms with respect to the Accounts. The Bank may change
the annual percentage rate of interest and other Finance Charges which will be
applicable from time to time to the Accounts, alter the minimum monthly payments
required on the Accounts and change any other terms with respect to the
Accounts, for various reasons, including facilitating Company sales of
merchandise and services. A decrease in the annual percentage rate or in the
other Finance Charges would decrease the effective yield on the Accounts and
could result in the occurrence of a Pay Out Event and the commencement of the
Rapid Amortization Period. The Bank has agreed that, except as otherwise
required by law or as is deemed advisable by the Bank based upon a good faith
assessment, in its sole discretion of the various factors affecting the use of
the Accounts, it will not reduce the annual percentage rate used to assess the
Finance Charges on the Receivables or other fees on the Accounts if, as a result
of such reduction, its reasonable expectation of the Portfolio Yield (as defined
in each Series Supplement) after giving effect to such reduction would be less
than the weighted average base rates of all outstanding Series. In addition,
the Bank has agreed that, unless required by law or as is deemed advisable by
the Bank based upon a good faith assessment, in its sole discretion of the
various factors affecting the use of the Accounts, it will not reduce such
annual percentage rate if its reasonable expectation of the Portfolio Yield
after giving effect to such reduction would be less than the highest Certificate
Rate for any outstanding Series. The Bank may from time to time elect to change
the terms applicable to certain segments of the respective Department Store
credit card programs, based upon its determination of credit risk or other
considerations. In servicing the Accounts, the Servicer is required to exercise
the same care and apply the same policies that it exercises in handling similar
matters for its own comparable accounts. Except as specified above, there are
no restrictions on the Bank's ability to change the terms of the Accounts or the
respective credit card guidelines (the "Credit Card Guidelines"), including
policies on credit approval. There can be no assurance that changes in
applicable law, changes in the marketplace or prudent business practice might
not result in a determination by the Bank to take actions which would change
Account terms. See "Credit Card Program" in the Prospectus Supplement and
"Description of the Certificates and the Pooling and Servicing Agreement -- Pay
Out Events."
Dependence on the Company's Department Stores; Competition
Because the Accounts (other than any VISA or MasterCard Accounts)
included in the Trust can be used for purchases of merchandise and services only
from the respective Department Stores, the Trust is completely dependent upon
sales made by the Department Stores that are charged to the Accounts. The
retailing business is highly competitive and the Department Stores compete with
other stores operating in their respective geographic areas as well as numerous
other types of retail outlets. Each of the Department Stores has many
competitors in each of its markets. The Department Stores also compete with
national and regional department stores, specialty apparel stores, general
merchandise stores, mail-order retailers, and off-price and discount store
chains, some of which are larger than the Company and may be able to devote
greater financial and other resources to marketing and other competitive
activities. The Company also competes with local stores that carry similar or
alternative categories of merchandise. The Company generally competes on the
basis of pricing, quality, merchandise selection, customer service and
amenities, and store design. The Company's success also depends in part on its
ability to anticipate and respond to changing merchandise trends and customer
preferences in a timely manner. Accordingly, any failure by the Company to
anticipate and respond to changing merchandise trends and customer preferences
could materially adversely affect sales of the Company's private brands and
product lines, which in turn could materially adversely affect the Company's
business, financial condition or results of operations. There can be no
assurance that the Department Stores will continue to compete successfully with
such other stores or that any such competition will not have a material adverse
effect on the Company's financial condition or results of operations. In
addition, the Pooling and Servicing Agreement does not prohibit the respective
Department Stores from disposing of all or any portion of its business or
assets. See "Credit Card Program" in the Prospectus Supplement.
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Many considerations enter into the competition for the consumer's
patronage, including price, quality, style, service, product mix, convenience
and credit availability and terms. There can be no assurance that the
Department Stores will continue to expand or experience sales growth at the same
rate as in prior years. In the event the Department Stores do not generate an
adequate level of Receivables, a Pay Out Event could occur.
Competition from Other Credit and Payment Sources
The Department Stores accept other credit cards in addition to the
Bank's credit cards, including American Express(R), MasterCard, VISA and the
Discover Card(R). Therefore, not all credit sales by the Department Stores will
generate Receivables. The credit card market is highly competitive and has
experienced increased advertising, targeted marketing and pricing competition,
as traditional and new credit card issuers have sought to enter the market or
expand. The use of incentive programs (e.g. awards for card usage) may also
affect the volumes charged on various credit cards. There can be no assurance
that customer purchases using Bank credit cards in the future will continue to
represent their current percentage of each Department Store's sales, compared to
sales made on other credit cards, debit cards, and by cash or check. See
"Credit Card Program -- Portfolio Information" in the Prospectus Supplement.
Social, Legal and Economic Factors
Changes in credit use and payment patterns by credit card holders may
also result from a variety of social, legal and economic factors. Economic
factors, nationally and in the regions served by the Department Stores,
including inflation, prevailing interest rates and unemployment levels, may also
be reflected in increased defaults by the Bank's credit card holders and in the
generation of new Receivables. Changes in tax laws, laws regulating permissible
Finance Charges and the Bankruptcy Code could also affect the use and terms of,
and Collections on, the Bank's credit cards. The Transferor is unable to
determine and has no basis to predict whether, or to what extent, social, legal
or economic factors will affect future use of the Bank's credit cards, repayment
patterns or Collections. A reduction in the annual percentage rate applicable to
the Accounts may result in a decline in the Portfolio Yield, which could result
in a Pay Out Event. See "Description of the Certificates and the Pooling and
Servicing Agreement -- Pay Out Events."
Effect of Limited Subordination
With respect to Certificates of a Series having a Class or Classes of
Subordinated Certificates, unless otherwise specified in the related Prospectus
Supplement, payments of principal in respect of the Subordinated Certificates of
a Series will not commence until after the final principal payment with respect
to the Senior Certificates of such Series. In addition, if so specified in the
related Prospectus Supplement, if Collections of Finance Charge Receivables or
other amounts allocable to the Certificates of a Series are insufficient to
cover required amounts due with respect to the Senior Certificates of such
Series, the Investor Amount with respect to the Subordinated Certificates will
be reduced, resulting in a reduction of the portion of Collections of Finance
Charge Receivables allocable to the Subordinated Certificates in future periods
and a possible delay or reduction in principal and interest payments on the
Subordinated Certificates. Moreover, if so specified in the related Prospectus
Supplement, in the event of a sale of Receivables in the Trust due to the
insolvency of the Transferor or the appointment of a conservator or receiver for
the Transferor, the portion of the net proceeds of such sale allocable to pay
principal to the Certificates of a Series will be used first to pay amounts due
to the Senior Certificateholders and any remainder will be used to pay amounts
due to the Subordinated Certificateholders.
Issuance of Additional Series; Master Trust Considerations
The Trust, as a master trust, may issue additional Series from time to
time. While the Principal Terms of any Series will be specified in a Series
Supplement, the provisions of a Series Supplement and, therefore, the terms of
any additional Series, will not be subject to prior review by, or consent of,
Certificateholders of any previously issued Series. Such Principal Terms may
include methods for determining applicable Investor Percentages and
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allocating Collections, provisions creating different or additional security or
other Enhancement, different Classes of Certificates (including Subordinated
Certificates), provisions subordinating such Series to another Series, and/or
including Series as part of a Paired Series or a Group, and any other amendment
or supplement to the Pooling and Servicing Agreement which is made applicable
only to such Series. In addition, the provisions of any Supplement may give the
holders of the Certificates issued pursuant thereto consent, approval or other
rights that could result in such Certificateholders having power to cause the
Transferor, the Servicer or the Trustee to take or refrain from taking certain
actions, including, without limitation, actions with respect to the exercise of
certain rights and remedies under the Pooling and Servicing Agreement, without
regard to the position or interest of the Certificateholders of any other
Series. Similar rights may also be given to the provider of any Enhancement for
any Series. For example, holders of 50% of the aggregate Investor Amount of all
outstanding Series may elect to terminate all the rights and obligations of the
Servicer under the Pooling and Servicing Agreement in the event of a Servicer
Default, or in the event of a voluntary or involuntary bankruptcy of the
Transferor. Also, if the Transferor were to become a debtor in a bankruptcy case
or certain other events relating to the insolvency of the Transferor were to
occur, holders of 50% of the Investor Amount of each Class of each Series would
have the right to preclude the Trustee from instructing the Servicer to
liquidate the Receivables. It is a condition precedent to the issuance of any
additional Series that each Rating Agency that has rated certificates of any
outstanding Series deliver written confirmation that such issuance will not
result in any such Rating Agency reducing or withdrawing its rating of the
Certificates of any outstanding Series. There can be no assurance, however, that
the Principal Terms of any other Series, including any Series issued from time
to time hereafter, might not have an adverse effect on the timing and amount of
payments received by a Certificateholder of any other Series or otherwise
adversely affect any other Series, even if there is no change in the rating of
any outstanding Series. Such adverse effect could result from, among other
things, a change in allocations of Collections among the various Series and the
Classes thereof. Such a change could occur, for example, if a Rapid Amortization
Period were to occur with respect to a Paired Series. See "--Limited Nature of
Certificate Rating" and "Description of the Certificates and the Pooling and
Servicing Agreement -- Paired Series" and " -- Exchanges."
Absence of Control on Certain Voting Matters
Subject to certain exceptions, the Certificateholders of each Series
may take certain actions, or direct certain actions to be taken, under the
Pooling and Servicing Agreement or the related Series Supplement. However, the
Pooling and Servicing Agreement or related Series Supplement may provide that
under certain circumstances the consent or approval of the holders of a
specified percentage of the aggregate unpaid principal amount of the
Certificates of all outstanding Series will be required to direct certain
actions, including requiring the appointment of a successor Servicer following a
Servicer Default, amending the Pooling and Servicing Agreement under certain
circumstances and directing a reassignment of the entire Trust Portfolio.
Certificateholders of a Series or the provider of any Enhancement with respect
thereto may have interests which do not coincide in any way with the interests
of Certificateholders of other Series. See "Description of Certificates and the
Pooling and Servicing Agreement -- Servicer Default," "-- Amendments," "--
Representations and Warranties" and "-- Definitive Certificates."
Effects of Prepayment Distinctions among Classes
Classes of Certificates may be issued to which may be allocated the
risk of early repayment within a Series. With respect to such a Class, a
Certificateholder of such Class will be more likely to receive prepayment than
would otherwise be the case. In such event such Certificateholder will not
receive the benefit of the Certificate Rate for the period of time originally
expected on the amount of any such repayment. There can be no assurance that
the Certificateholder will be able to reinvest the proceeds at a similar rate of
return and at a similar risk level. Assuming that a Certificateholder could
identify an identical reinvestment opportunity, an early repayment could benefit
a Certificateholder who acquired a Certificate of such Class at a discount and
harm a Certificateholder who acquired a Certificate of such Class at a premium.
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Effect on Certain Pre-Funded Series of Ability to Generate Additional
Receivables
With respect to Certificates of a Series having a Class that employs a
Pre-Funding Account in anticipation of the Transferor transferring additional
Receivables to the Trust if, and to the extent that, the requisite amount of
such Receivables are not created during the Pre-Funding Period specified in the
related Prospectus Supplement, the Certificateholders of such Class will receive
the balance remaining in the Pre-Funding Account at the end of the Pre-Funding
Period as an early repayment of Certificate principal. In such event the
Certificateholder will not receive the benefit of the Certificate Rate for the
period of time originally expected on the amount of such early repayment. See
"-- Dependence on the Company's Department Stores; Competition" and "Description
of Certificates and the Pooling and Servicing Agreement -- Funding Period." See
also "-- Effects of Prepayment Distinctions among Classes."
Basis Risk
As of the date of this Prospectus all Accounts have fixed interest
rates. If, in the future, Accounts bear variable rates of interest, a portion
of the Accounts in the Trust may have Finance Charges set at a variable rate
above a designated prime rate, or other designated index, or at another rate.
The Certificate Rate applicable to a Series of Certificates issued by the Trust
may be based upon an index other than such prime rate or other designated index.
If there is a decline in such prime rate or other designated index which does
not coincide with a decline in the index upon which the Certificate Rate is
based, the amount of collections of Finance Charge Receivables on such Accounts
may be reduced, whereas the amounts payable as monthly interest on such Series
of Certificates and other amounts required to be funded out of Collections of
Finance Charge Receivables with respect to such Series will not be similarly
reduced.
Addition of Trust Assets
The Transferor expects, and in some cases will be obligated, to
designate certain Additional Accounts, the Receivables in which will be conveyed
to the Trust. Such Additional Accounts are expected to include Accounts
originated using criteria different from those which were applied to the
Accounts designated on the Initial Cut-Off Date or to previously designated
Additional Accounts, because such accounts were originated at a different date,
under different underwriting criteria or by different institutions, or represent
a separate segment of the Bank's credit card business. Consequently, there can
be no assurance that Additional Accounts designated in the future will be of the
same credit quality as previously designated Accounts. In addition, the Bank
may add Participations to the Trust. The designation of Additional Accounts and
Participations will be subject to the satisfaction of certain conditions
described herein under "Description of the Certificates and the Pooling and
Servicing Agreement -- Addition of Accounts."
Limited Nature of Certificate Rating
Any rating assigned to the Certificates of a Series or a Class by a
Rating Agency will reflect such Rating Agency's assessment of the likelihood
that Certificateholders of such Series or Class will receive the payments of
interest and principal required to be made under the Pooling and Servicing
Agreement and the related Series Supplement and will be based primarily on the
value of the Receivables in the Trust and the availability of any Enhancement
with respect to such Series or Class. However, any such rating will not, unless
otherwise specified in the related Prospectus Supplement with respect to any
Class or Series offered hereby, address the likelihood that the principal of, or
interest on, any Certificates of such Class or Series will be paid on a
scheduled date. In addition, any such rating will not address the possibility
of the occurrence of a Pay Out Event with respect to such Class or Series or the
possibility of the imposition of United States withholding tax with respect to
non-U.S. Certificateholders. The rating will not be a recommendation to
purchase, hold or sell Certificates of such Series or Class, and such rating
will not comment as to the marketability of such Certificates, any market price
or suitability for a particular investor. There can be no assurance that any
rating will remain for any given period of time or that any rating will not be
lowered or withdrawn entirely by a Rating Agency if in such Rating Agency's
judgment circumstances so warrant.
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Limited Credit Enhancement
Although Enhancement may be provided with respect to a Series of
Certificates or any Class thereof, the amount available will be limited and will
be subject to certain reductions. If the amount available under any Enhancement
is reduced to zero, or if the provider of any Enhancement fails or is unable to
make the payments required thereby, Certificateholders of the Series or Class
thereof covered by such Enhancement will bear directly the credit and other
risks associated with their undivided interest in the Trust. Certificateholders
will depend solely upon payments on the Receivables for the payment of the
principal of, and interest on, their Certificates. Should any Certificates
offered by a Prospectus Supplement not be paid in full on a timely basis,
Certificateholders may not look to any assets of the Transferor, the Servicer,
the Bank or any affiliate thereof to satisfy any payment obligations under the
Certificates. See "Enhancement."
Effect of Discount Option
Pursuant to the Pooling and Servicing Agreement, the Transferor has
elected to exercise its discount option (the "Discount Option") by initially
designating 2% of the amount of Receivables that otherwise would be treated as
Principal Receivables to be treated as Finance Charge Receivables. The
Transferor may, from time to time, without notice or consent of the
Certificateholders, increase, reduce or eliminate such percentage. A
designation of Principal Receivables to be treated as Finance Charge Receivables
will increase the percentage of Collections that are treated as Collections of
Finance Charge Receivables, which will increase the Portfolio Yield to a level
higher than it would be in the absence of such designation. As a result, such
designation should decrease the likelihood of the occurrence of a Pay Out Event
based upon a reduction of the average Portfolio Yield for any three-month period
to a rate below the average Base Rate (as defined in each Series Supplement) for
such period. However, such designation will also reduce the aggregate amount of
Principal Receivables, which may increase the likelihood that the Transferor
will be required to add Principal Receivables to the Trust in accordance with
the Pooling and Servicing Agreement and which could, if additional Principal
Receivables were not available at such time, cause the occurrence of a Pay Out
Event. A decline in, or the elimination of, the percentage of Receivables
subject to the Discount Option would reduce the Portfolio Yield and may increase
the possibility of a Pay Out Event occurring, if the average Portfolio Yield for
any three-month period is less than the amounts necessary to pay interest on the
Certificates and the Investor Servicing Fee for such period. The ability of the
Transferor to adjust the Discount Percentage to change the amount of Receivables
that otherwise would be treated as Principal Receivables to be treated as
Finance Charge Receivables is limited in certain circumstances. The Transferor
must provide 30 days' prior written notice to the Servicer, the Trustee, each
Rating Agency and, in limited circumstances, Certificateholders that are not
rated, of any such increase, reduction or elimination, and such increase,
reduction or elimination will become effective on the date specified therein
unless the Transferor reasonably believes that such increase, reduction or
elimination will at the time of its occurrence cause a Pay Out Event, or an
event which with notice or the lapse of time would constitute a Pay Out Event,
to occur with respect to any Series, provided that if such designation would
cause the Discount Percentage to be less than 1% or more than 3%, the Rating
Agency Condition must be satisfied and in limited circumstances, holders of
outstanding Certificates that are not rated must consent to such action. Any
such adjustment will be publicly disclosed by the Servicer in a Current Report
on Form 8-K filed with the Commission under the Exchange Act. See "Description
of the Certificates and the Pooling and Servicing Agreement -- Discount Option
Receivables."
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series initially will be represented by one or more
Certificates registered in the name of Cede, the nominee for DTC, and will not
be registered in the names of the Certificate Owners or their nominees. Unless
and until Definitive Certificates are issued for a Series, Certificate Owners
relating to such Series will not be recognized by the Trustee as
Certificateholders, as that term will be used in the Pooling and Servicing
Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Certificateholders indirectly through DTC and its
participating organizations ("Participants"), and will receive reports and other
information provided for under the
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Pooling and Servicing Agreement only in accordance with the rules and
regulations creating and affecting DTC. However, the Trustee will deliver such
reports and other information to the Certificate Owners upon request. The
Monthly Servicer Report will be filed with the Commission on a Current Report on
Form 8-K and will be available to Certificate Owners as provided under
"Available Information." In addition, the ability of Certificate Owners to
pledge Offered Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of Offered Certificates,
may be limited due to the lack of a physical certificate for such Offered
Certificates. See "Description of the Certificates and the Pooling and Servicing
Agreement -- Book-Entry Registration" and "-- Definitive Certificates."
Geographic Concentrations
Unlike several of the Company's competitors that operate nationally,
each Department Store has a regional focus, and most of the Department Stores
are located in the Southeast or Midwest United States. Such geographic
concentration will subject the Receivables in the Trust Portfolio to the
economic, legal and other conditions present in such areas. Economic trends and
other factors in either of these regions, as described more particularly in the
related Prospectus Supplement, could adversely affect Collections, the
generation of new Receivables and payment rates. See "Credit Card Program --
Geographic Distribution" in the Prospectus Supplement.
Herberger's only began offering proprietary credit cards in May 1997,
and as the Bank expands that program, and if the Bank offers credit cards for
other department stores, the percentages of Accounts and Receivables
attributable to other states could increase, thereby potentially reducing or
shifting existing concentration levels. See "-- Social, Legal and Economic
Factors" herein and "Credit Card Program" in the Prospectus Supplement.
General Economic Conditions; Seasonality
The Company's future performance and the Bank's credit card portfolio
are subject to prevailing economic conditions and to all operating risks
normally incident to the retail and credit card industries. The Company
experiences seasonal fluctuations in sales and net income, with
disproportionately high levels typically realized during the fiscal fourth
quarter of each year. Sales are generally weakest during the fiscal second
quarter.
Integration of Acquired Companies
As part of its business strategy, the Company has successfully
consummated several acquisitions and will regularly evaluate future acquisition
opportunities, including acquisitions of other regional department store chains
and individual stores or locations. The Company's operations and earnings have
been, and will continue to be, affected by its ability to successfully integrate
the operations, including proprietary credit cards, of any acquired businesses
or store locations. While the Company has in the past been successful at
effectively integrating the operations of acquired businesses and managing the
related portfolios of proprietary credit cards, there can be no assurance that
the Company will be able to continue to do so. In addition, the successful
integration of operations, including credit card operations, will be subject to
numerous contingencies, some of which are beyond the Company's control. The
failure to successfully integrate any such operations with those of the Company
could have a material adverse effect on the Company's financial position,
results of operations and cash flows and the performance of the Bank's credit
card portfolio. See "Credit Card Program -- Department Stores" in the
Prospectus Supplement.
Forward-Looking Statements
This Prospectus and the Prospectus Supplement contain certain forward-
looking statements concerning the Company's, the Department Stores', the Bank's
and the Trust's existing and contemplated operations, economic performance and
financial condition. These statements are based upon a number of assumptions and
estimates which are inherently subject to uncertainties and contingencies, many
of which are beyond the control of the
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Company, the Department Stores, the Bank or the Trust, including, among others,
the level of consumer spending for apparel and other consumer goods carried by
the Company, economic conditions, including local and regional economic
conditions in the areas served by the Company, competition among department and
specialty stores and other retail outlets, levels of consumer debt and
bankruptcies, changes in interest rates and inflation, changes in buying,
charging and payment behavior by customers, the effects of weather conditions on
seasonal sales in the Company's markets, and the Company's ability to integrate
recent and future acquisitions. See "Cautionary Notice Regarding Forward-Looking
Statements."
CREDIT CARD PROGRAM
The Bank commenced operations in February 1996 as an indirect, wholly
owned subsidiary of CPS. Since that time, the Bank has owned, originated and
administered the credit card operations of CPS, including Boston Store and
Bergner's. Following the merger of CPS with a wholly owned subsidiary of
Proffitt's on January 31, 1998, Proffitt's contributed all the accounts of its
department stores to the Bank, which now owns such accounts, establishes all new
accounts and extends credit under all accounts. As of February 2, 1998, the
Bank sold all its credit card receivables to PCC pursuant to a Receivables
Purchase Agreement. PCC's activities are limited to purchasing credit card
receivables from the Bank and any other sellers, financing those purchases and
other activities directly related to such purchases and financings.
THE ACCOUNTS
The Accounts consist of all Eligible Accounts of the Bank existing as
of the close of business on February 2, 1998 and those Accounts added
thereafter. Additional Eligible Accounts originated in the normal operation of
the Bank's credit card business generally will be added on a daily basis as
Automatic Additional Accounts. In addition, subject to the provisions of the
Pooling and Servicing Agreement, certain Eligible Accounts relating to acquired
businesses may in the future be added as Additional Accounts. The Receivables
will include all amounts payable by cardholders under such Accounts which are
Eligible Receivables. As a result, some of the Accounts may be recently
solicited, unseasoned accounts. See "Credit Card Program" in the Prospectus
Supplement and "Description of the Certificates and the Pooling and Servicing
Agreement -- Representations and Warranties" herein.
An "Eligible Receivable" is a Receivable (i) which has arisen under an
Eligible Account, (ii) which was created in compliance with all applicable
requirements of law and pursuant to an agreement which complies with all
applicable requirements of law, in either case the failure to comply with which
would have a material adverse effect upon Certificateholders, (iii) with respect
to which all material consents, licenses, approvals or authorizations of, or
registrations with, any governmental authority required to be obtained or given
by any Eligible Originator or by the Transferor in connection with the creation
of such Receivable or the execution, delivery and performance by any Eligible
Originator of the related cardholder agreement have been duly obtained or given
and are in full force and effect as of such date of creation, (iv) as to which
at the time of the transfer of such Receivable to the Trust, the Trust will have
good and marketable title, free and clear of all liens (except those permitted
by the Pooling and Servicing Agreement), (v) which has been the subject of
either a valid transfer and assignment from the Transferor to the Trust of all
of the Transferor's right, title and interest therein or the grant of a first
priority perfected security interest therein (and in the proceeds thereof to the
extent set forth in Section 9-306 of the UCC), effective until the termination
of the Trust, (vi) which will at all times be the legal, valid and binding
payment obligation of the cardholder thereof enforceable against such cardholder
in accordance with its terms, subject to certain bankruptcy and equity related
exceptions, (vii) which constitutes "chattel paper," an "account" or a "general
intangible" under and as defined in Article 9 of the UCC, (viii) which, at the
time of its transfer to the Trust, has not been waived or modified except in
accordance with the Credit Card Guidelines or as permitted by the Pooling and
Servicing Agreement, (ix) which is not at the time of its transfer to the Trust
subject, to the knowledge of the Transferor or the Servicer, to any claim of
setoff, rescission, counterclaim or other defense (including the defense of
usury), other than certain bankruptcy and equity related defenses, (x) as to
which the Transferor and any originator specified in the Pooling and Servicing
Agreement (each, an "Eligible Originator") have satisfied all obligations to be
fulfilled at the time it is transferred to the Trust and (xi) as to which the
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Transferor and the Eligible Originator have done nothing, at the time of its
transfer to the Trust, to impair the rights of the Trust or Certificateholders
therein. In order to qualify as an "Eligible Account," each such Account must,
as of the date of its selection, (i) be in existence and owned by any Eligible
Originator or the Transferor, (ii) be payable in United States Dollars, (iii)
not have the related credit card reported lost or stolen or be designated as
counterfeit or fraudulent, (iv) not be identified in the Transferor's computer
files as canceled or charged off due to the Obligor's bankruptcy, insolvency or
death, (v) not have the receivables in such Account written off as
uncollectible, (vi) not have the receivables in such Account assigned, pledged
or sold, (vii) have an Obligor who has provided a billing address in the United
States or its territories or possessions and (viii) not be an account with
respect to which the Transferor or any corporate affiliate of the Transferor is
the Obligor.
The Receivables arising from the Accounts will reflect balances which
include unpaid principal, finance charges, and credit insurance if applicable.
Pursuant to the Pooling and Servicing Agreement, the Transferor has
the right (and, under certain circumstances, the obligation), subject to certain
limitations and conditions discussed under "Description of the Certificates and
the Pooling and Servicing Agreement -- Addition of Accounts," to designate from
time to time additional qualifying credit card accounts of the Bank to be
included as Additional Accounts and to transfer to the Trust all Receivables of
such Additional Accounts, whether such Receivables are then existing or
thereafter created. New accounts generated by the Bank (including accounts
issued to customers of any stores that hereafter become Department Stores)
generally will be included automatically as Automatic Additional Accounts on an
ongoing basis, subject to the right of the Transferor in its sole discretion, to
cease such automatic additions. Further, pursuant to the Pooling and Servicing
Agreement, the Transferor has the right, subject to certain limitations and
conditions discussed under "Description of the Certificates and the Pooling and
Servicing Agreement -- Removal of Accounts," to designate certain Accounts to be
removed from the Trust and to require the Trustee to retransfer all Receivables
in such removed Accounts to the Transferor. See "Description of the
Certificates and the Pooling and Servicing Agreement -- Transfer of
Receivables."
THE TRUST
The Trust has been formed under the laws of the State of New York
pursuant to the Pooling and Servicing Agreement. The Trust will not engage in
any activity other than acquiring and holding Receivables, issuing Series of
Certificates and any related interest in the Trust and the Exchangeable
Transferor Certificate, making payments thereon and engaging in related
activities (including, with respect to any Series, obtaining any Enhancement and
entering into an Enhancement agreement relating thereto). As a consequence, the
Trust is not expected to have any need for, or sources of, additional capital
resources other than the assets of the Trust.
MATURITY ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement,
following the Revolving Period, Collections of Principal Receivables are
expected to be distributed to the Certificateholders of such Series or any
specified Class thereof on each specified Distribution Date during the
Controlled Amortization Period or the Principal Amortization Period, or are
expected to be accumulated for payment to Certificateholders of such Series or
any specified Class thereof during the Accumulation Period and distributed on a
Scheduled Payment Date; provided, however, that, if the Rapid Amortization
Period commences, Collections of Principal Receivables will be paid to
Certificateholders in the manner described herein and in the related Prospectus
Supplement. The related Prospectus Supplement will also specify when the
Controlled Amortization Period, the Principal Amortization Period or the
Accumulation Period, as applicable, will commence, the principal payments are
expected or available to be received or accumulated during such Controlled
Amortization Period, Principal Amortization Period or Accumulation Period or on
the Scheduled Payment Date, as applicable, the manner and priority of principal
accumulations and payments among the Classes of a Series of Certificates, the
payment rate assumptions on which such expected principal accumulations and
payments are based, and the Pay Out Events which, if any were to occur, would
lead to the commencement of a Rapid Amortization Period.
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No assurance can be given, however, that the Principal Receivables
allocated to be paid to Certificateholders or the holders of any specified Class
thereof will be available for distribution or accumulation for payment to
Certificateholders on each Distribution Date during the Controlled Amortization
Period, the Principal Amortization Period or the Accumulation Period, or on the
Scheduled Payment Date, as applicable. In addition, the Transferor can give no
assurance that the payment rate assumptions for any Series will prove to be
correct. The related Prospectus Supplement will provide certain historical data
relating to payments by cardholders, total charge offs and other related
information relating to the Trust Portfolio. There can be no assurance that
future events will be consistent with such historical data.
The amount of Collections may vary from month to month due to seasonal
variations, general economic conditions and payment habits of individual
cardholders. There can be no assurance that Collections of Principal
Receivables with respect to the Trust Portfolio, and thus the rate at which the
related Certificateholders could expect to receive or accumulate payments of
principal on their Certificates during an Amortization Period, or on any
Scheduled Payment Date, as applicable, will be similar to any historical
experience set forth in a related Prospectus Supplement. If a Pay Out Event
occurs, the average life and maturity of such Series of Certificates could be
significantly reduced.
The generation and collection of Receivables will also be affected by
the operations of the Company and its subsidiaries. See "Risk Factors --
Dependence on the Company's Department Stores; Competition" and "-- Competition
from Other Credit and Payment Sources."
The actual payment rate for any Series of Certificates may be slower
than the payment rate used to determine the Controlled Accumulation Amount of
Collections of Principal Receivables scheduled or available to be distributed or
accumulated for later payment to Certificateholders of a specified Class thereof
during the Controlled Amortization Period, the Principal Amortization Period or
the Accumulation Period or on the Scheduled Payment Date, as applicable, or a
Pay Out Event may occur which would initiate the Rapid Amortization Period,
there can be no assurance that the actual number of months elapsed from the date
of issuance of such Series of Certificates to the final Distribution Date with
respect to the Certificates will equal the expected number of months. The
amount of outstanding Receivables and the rates of payments, delinquencies,
charge offs and new borrowings on the Accounts depend upon a variety of factors,
including seasonal variations, availability of other sources of credit, general
economic conditions, consumer spending and borrowing patterns. Accordingly,
there can be no assurance that future cardholder and monthly payment rate
experience will be similar to historical experience.
USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates offered
hereby will be paid to the Transferor. The Transferor will use such proceeds
for its general corporate purposes, including purchase of Receivables from the
Bank on a daily basis pursuant to the Receivables Purchase Agreement and to pay
down other Series.
THE COMPANY
The Company is a leading regional department store chain that, as of
the date of this Prospectus operated over 230 department stores in 24 states,
primarily in the Southeast and Midwest, and is the fourth largest traditional
department store chain in the United States. Each chain operates primarily as a
leading branded traditional department store in its communities, with Parisian
serving as a better branded specialty department store. Most of the stores are
located in premier regional malls in the respective trade areas served. The
Company's stores offer a wide selection of fashion apparel, accessories,
cosmetics and decorative home furnishings, featuring assortments of premier
brands, private brands and specialty merchandise. Each of the Company's
Department Store chains operates with its own merchandising and store operations
team in order to tailor regional assortments to the local customer. At the same
time, the Company coordinates merchandising among the chains and consolidates
certain administrative and support functions to realize scale economies, to
promote a competitive cost
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structure and to increase margins. In addition to its department stores, the
Company also operates four furniture stores.
Under the leadership of R. Brad Martin and an experienced senior
management team, the Company has executed a disciplined acquisition strategy and
strategic approach to new store openings, growing from 11 stores and net sales
of $94.8 million in fiscal 1989 to 233 stores and estimated net sales of $3.5
billion in fiscal 1997.
The Company was incorporated under the laws of the State of Tennessee
in 1919. The principal executive offices of the Company are located at 750
Lakeshore Parkway, Birmingham, Alabama 35211, and its telephone number is (205)
940-4000.
PCC
PCC was incorporated in Nevada in January 1997, and is wholly owned,
directly and indirectly, by Proffitt's. PCC was organized for the limited
purposes of purchasing accounts receivable such as the Receivables, forming
trusts such as the Trust and transferring such accounts receivable to such
trusts. Prior to the formation of the Trust, PCC's sole activity was to act as
transferor of certain accounts receivable in connection with a receivables
purchase facility. The principal executive offices of PCC are located at Bank
of America Center, 101 Convention Center Drive, Las Vegas, Nevada 89109. Its
telephone number is (702) 380-4918.
DESCRIPTION OF THE CERTIFICATES AND THE POOLING AND SERVICING AGREEMENT
The Certificates will be issued in Series. Each Series will represent
an interest in the Trust. Each Series will be issued pursuant to the Pooling
and Servicing Agreement and a related Series Supplement thereto. The Prospectus
Supplement for each Series will describe any provisions of the Pooling and
Servicing Agreement relating to such Series which may differ materially from the
Pooling and Servicing Agreement which is incorporated herein by reference. The
following summaries describe certain provisions common to each Series of
Certificates. The summaries do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all of the provisions of
the Pooling and Servicing Agreement and the related Series Supplement.
General
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable Investor
Percentage of all cardholder payments on the Receivables in the Trust. For each
Series of Certificates, unless otherwise specified in the related Prospectus
Supplement, the Investor Amount on any date will be equal to the Initial
Investor Amount as of the related Closing Date for such Series minus the amount
of principal paid in respect of such Series prior to such date and minus the
amount of unreimbursed Investor Charge Offs with respect to such Series prior to
such date and plus the aggregate amount of reductions of the Series Adjustment
Amounts. If so specified in the Prospectus Supplement relating to any Series of
Certificates, under certain circumstances the Investor Amount may be further
adjusted by the amount of principal allocated to Certificateholders, the funds
held in any specified account, and any other amount specified in the related
Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or
more of which may be Senior Certificates and one or more of which may be
Subordinated Certificates. The Investor Amount with respect to a Series with
more than one Class will be allocated among the Classes as described in the
related Prospectus Supplement. The Certificates of a Class may differ from
Certificates of other Classes of the same Series in, among other things, the
amounts allocated to principal payments, maturity date, Certificate Rate and the
availability of Enhancement.
For each Series of Certificates, payments of interest and principal
will be made on Distribution Dates specified in the related Prospectus
Supplement, to Certificateholders in whose names the Certificates were
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registered on the Record Dates specified in the related Prospectus Supplement.
Interest will be distributed to Certificateholders in the amounts, for the
periods and on the dates specified in the related Prospectus Supplement.
For each Series of Certificates, the Transferor initially will own the
Exchangeable Transferor Certificate. The Exchangeable Transferor Certificate
will represent the undivided interest in the Trust not represented by the
Certificates issued and outstanding under the Pooling and Servicing Agreement,
any other interests in the Trust relating to any Series or the rights, if any,
of any Enhancement Providers to receive payments from the Trust. The holder of
the Exchangeable Transferor Certificate will have the right to a floating
percentage (the "Transferor Percentage") of all payments on the Receivables in
the Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates during the Revolving Period, the Investor
Amount will remain constant except under certain limited circumstances. The
amount of Principal Receivables in the Trust, however, will vary as new
Principal Receivables are added to the Trust and others are paid. The
Transferor Amount will fluctuate, therefore, to reflect the changes in the
amount of the Principal Receivables in the Trust. During the Accumulation
Period, the Investor Amount of such Series will generally decline as payments of
principal are distributed or accumulated pending distribution to the
Certificateholders. As a result, the Transferor Amount will generally increase
each month during an Amortization Period for any Series to reflect the
reductions in the Investor Amount of such Series and will also change to reflect
the variations in the amount of Principal Receivables in the related Trust. The
Transferor Amount may also be reduced as the result of an Exchange. See "--
Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge Offs"
and "-- Exchanges."
The assets of the Trust will consist of the Receivables, all monies
due or to become due in respect thereof (including all Finance Charge
Receivables), all Collections, Recoveries and other proceeds of the Receivables
and proceeds of credit insurance policies, if any, relating to the Receivables,
all rights to security, if any, for any Receivables, all proceeds and products
of all of the foregoing, and all monies held in certain accounts of the Trust,
including the Collection Account, the Excess Funding Account, the Reserve
Account and the Cash Collateral Account. For purposes of this section, the term
"Receivables" shall include all the property and rights listed in the preceding
sentence. In addition, the Transferor has assigned to the Trust the
Transferor's rights relating to the Receivables under the Receivables Purchase
Agreements, pursuant to which the Receivables transferred to the Trust by the
Transferor have been and will be purchased by the Transferor from the Bank.
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository") except as set forth
below. Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, beneficial interests in the Certificates
will be available for purchase in minimum denominations of $1,000 and integral
multiples thereof in book-entry form only. The Transferor has been informed by
DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be the
holder of record of each Series of Certificates. No Certificate Owner acquiring
an interest in the Certificates will be entitled to receive a certificate
representing such person's interest in the Certificates unless Definitive
Certificates are issued. Unless and until Definitive Certificates are issued
for any Series under the limited circumstances described herein, all references
herein to actions by Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references herein
to distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC procedures. See "-- Book-Entry
Registration" and "-- Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
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Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates issued in book-entry form,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe), which in turn hold through DTC, if
they are participants of such systems, or indirectly through organizations that
are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel
and Euroclear will hold omnibus positions on behalf of the Cedel Participants
and the Euroclear Participants, respectively, through customers' securities
accounts in Cedel's and Euroclear's names on the books of their respective
depositaries (each a "Depositary" and collectively, the "Depositaries") which in
turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its Participants and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in accounts of its
Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (who may
include the underwriters of any Series), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Transfers between DTC Participants will occur in accordance with the
rules and procedures of DTC (the "DTC Rules"). Transfers between Cedel
Participants and Euroclear Participants will occur in the ordinary way in
accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedel Participants or Euroclear Participants, on the other, will be
effected in DTC in accordance with the DTC Rules on behalf of the relevant
European international clearing system by its Depositary; however, such cross-
market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits or securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
Certificate Owners that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interest in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions of
principal of, and interest on, the Certificates from the Trustee through the
Participants who in turn will receive them from DTC. Under a book-entry format,
Certificate Owners may experience some delay in their receipt of payments, since
such payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC
will forward such payments to its Participants
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which thereafter will forward them to Indirect Participants or Certificate
Owners. It is anticipated that the only "Certificateholder" will be Cede, as
nominee of DTC. Certificate Owners will not be recognized by the Trustee as
Certificateholders, as such term is used in the Pooling and Servicing Agreement,
and Certificate Owners will only be permitted to exercise the rights of
Certificateholders indirectly through the Participants who in turn will exercise
the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess Certificates, Certificate Owners will receive payments and will
be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Certificates, may
be limited due to the lack of a physical certificate for such Certificates.
DTC has advised the Transferor that it will take any action permitted
to be taken by a Certificateholder under any related Agreement only at the
direction of one or more Participants to whose account with DTC the Certificates
are credited. Additionally, DTC has advised the Transferor that it will take
such actions with respect to specified percentages of the Investor Amount only
at the direction of and on behalf of Participants whose holdings include
undivided interests that satisfy such specified percentages. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of Participants whose holdings include such
undivided interests.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled by Cedel in any of 36
currencies, including United States Dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulations by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the underwriters of any Series of Certificates.
Indirect access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to
hold securities for participants of the Euroclear System ("Euroclear
Participants") and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 34 currencies, including United States
Dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear Participants.
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Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters of any Series of Certificates. Indirect access to the
Euroclear System is also available to other firms that clear through or maintain
a custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under
the Terms and Conditions only on behalf of Euroclear Participants and has no
record of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. Cedel or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a Certificateholder under the Pooling
and Servicing Agreement on behalf of a Cedel Participant or a Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf through
DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among Participants
of DTC, Cedel and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue
its services, the Transferor would seek an alternative depository (if available)
or cause the issuance of Definitive Certificates to affected Certificate Owners
or their nominees in the manner described under "-- Definitive Certificates."
Definitive Certificates
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued in fully registered, certificated
form to Certificate Owners or their nominees ("Definitive Certificates"), rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to such Series of Certificates, and
the Trustee or the Transferor is unable to locate a qualified successor, (ii)
the Transferor, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through DTC or (iii) after the occurrence of a
Servicer Default, Certificate Owners representing not less than 50% (or such
other percentage specified in the related Prospectus Supplement) of the Investor
Amount advise the Trustee and DTC through Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the Definitive Certificate representing the Certificates and instructions for
re-registration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as Certificateholders under the Pooling and Servicing
Agreement.
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Distribution of principal and interest on the Certificates will be
made by the Trustee directly to holders of Definitive Certificates in accordance
with the procedures set forth herein and in the Pooling and Servicing Agreement
and the related Series Supplement. Interest payments and any principal payments
on each Distribution Date will be made to Certificateholders in whose names the
Definitive Certificates were registered at the close of business on the related
Record Date. Distributions will be made by check mailed to the address of such
Certificateholder as it appears on the register maintained by the Trustee. The
final payment on any Certificate (whether Definitive Certificates or the
Certificates registered in the name of Cede representing the Certificates),
however, will be made only upon presentation and surrender of such Certificate
at the office or agency specified in the notice of final distribution to
Certificateholders. The Trustee will provide such notice to registered
Certificateholders not later than the fifth day of the month of such final
distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of the "Transfer Agent and Registrar," which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer or
exchange, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
Interest Payments
For each Series of Certificates and Class thereof, interest will
accrue from the date specified in the applicable Prospectus Supplement on the
applicable amount of the Investor Amount at the applicable Certificate Rate,
which may be a fixed, floating or other type of rate as specified in the related
Prospectus Supplement. Interest will be distributed to Certificateholders on
the Distribution Dates specified in the related Prospectus Supplement. Interest
payments on any Distribution Date will generally be funded from Collections of
Finance Charge Receivables available to be allocated to the Investor Amount
during the preceding Monthly Period or Periods, as described in the related
Prospectus Supplement, and may be funded from certain investment earnings on
funds held in certain accounts of the Trust, from any applicable Enhancement, if
necessary, or from certain other sources specified in the related Prospectus
Supplement. If the Distribution Dates for payment of interest for a Series or
Class occur less frequently than monthly, such Collections or other amounts (or
the portion thereof allocable to such Class) may be deposited in one or more
segregated trust accounts (each, an "Interest Funding Account") pending
distribution to the Certificateholders of such Series or Class, as described in
the related Prospectus Supplement. If a Series has more than one Class of
Certificates, each such Class may have a separate Interest Funding Account. The
Prospectus Supplement relating to each Series of Certificates and each Class
thereof will describe the amounts and sources of interest payments to be made
(including any penalty interest on overdue interest), the Certificate Rate, and,
for a Series or Class thereof bearing interest at a floating Certificate Rate,
the initial Certificate Rate, the dates and the manner for determining
subsequent Certificate Rates, and the formula, index or other method by which
such Certificate Rates are determined.
Principal Payments
Unless otherwise specified in the related Prospectus Supplement,
during the Revolving Period for each Series (which begins on the Closing Date
relating to such Series and ends on the last day of the Monthly Period preceding
the commencement of the Accumulation Period or, if earlier, the day the Rapid
Amortization Period begins), principal payments will be made to the holder of
the Exchangeable Transferor Certificate, allocated to other Series, applied as
reallocated Principal Collections, if required, or deposited in the Excess
Funding Account rather than deposited to the Principal Account or paid to
Certificateholders of such Series. Under certain circumstances, the Transferor
may postpone the commencement of the Accumulation Period, as described in the
related Prospectus Supplement. During the Controlled Amortization Period,
Principal Amortization Period or Accumulation Period, as applicable, which will
be scheduled to begin on the date specified, or determined in the manner
specified, in the related Prospectus Supplement, and during the Rapid
Amortization Period, which will begin upon the occurrence of a Pay Out Event,
principal will be paid to the Certificateholders in the amounts and on
Distribution Dates specified in the related Prospectus Supplement or will be
accumulated in a Principal Account for later distribution to Certificateholders
on the Scheduled Payment Date in the amounts specified in the related Prospectus
Supplement. Principal payments for any Series or Class thereof will be funded
from Collections of Principal Receivables received during the related Monthly
Period or Periods as specified in the related
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Prospectus Supplement and allocated to such Series or Class and from certain
other sources specified in the related Prospectus Supplement. In the case of a
Series with more than one Class of Certificates, the Certificateholders of one
or more Classes may receive payments of principal at different times. The
related Prospectus Supplement will describe the manner, timing and priority of
payments of principal to Certificateholders of each Class.
Funds held in any Principal Account applicable to a Series may be
subject to a guaranteed rate or investment agreement or other arrangement
specified in the related Prospectus Supplement intended to assure a minimum rate
of return on the investment of such funds. In order to enhance the likelihood
of the payment in full of the principal amount of a Series of Certificates or
Class thereof at the end of an Accumulation Period, such Series of Certificates
or Class thereof may be subject to a principal guaranty or other similar
arrangement specified in the related Prospectus Supplement.
Transfer of Receivables
The Transferor has transferred and assigned to the Trust all of its
right, title and interest in and to Receivables in certain Accounts selected
from the portfolio of consumer revolving credit card accounts owned as of the
date of this Prospectus by the Bank, all of the Receivables created under such
Accounts and the proceeds of all of the foregoing.
In connection with the transfer of the Receivables to the Trust, the
Transferor has caused the Servicer to indicate in the records, including any
computer files of the Bank and the Transferor, that the Receivables have been
sold and transferred to the Transferor and thereupon transferred by the
Transferor to the Trust. In addition, the Transferor has provided and will
provide to the Trustee a computer file or a microfiche list containing a true
and complete list showing for each Account (i) its account number and (ii) the
amount of Receivables in such Account as of the applicable cut-off date. Except
as set forth above, the records or agreements relating to the Accounts or the
Receivables, maintained by or on behalf of the Transferor or the Servicer will
not be segregated from those relating to other credit card accounts and
receivables and the physical documentation relating to the Accounts or
Receivables will not be stamped or marked to reflect the transfer of Receivables
to the Trust. The Trustee will have reasonable access to such records and
agreements as required by applicable law or to enforce the rights of the
Certificateholders. The Transferor has filed UCC-1 financing statements in
accordance with the UCC to perfect the Trust's interest in the Receivables
meeting the requirements of applicable state law. See "Risk Factors -- Effects
of Consumer and Debtor Protection Laws on Collectibility of Receivables" and
"Certain Legal Aspects of the Receivables."
Exchanges
The Pooling and Servicing Agreement provides for the Trustee to issue
two types of certificates: (i) one or more Series of Certificates which are
transferable and have the characteristics described below and (ii) the
Exchangeable Transferor Certificate, a certificate which evidences the
Transferor Amount, which will be held by the Transferor and generally will not
be transferable, except as described in the related Prospectus Supplement. The
Pooling and Servicing Agreement also provides that, pursuant to any one or more
Series Supplements, the Transferor may tender the Exchangeable Transferor
Certificate, or the Exchangeable Transferor Certificate and the Certificates
evidencing any Series of Certificates, to the Trustee in exchange for one or
more newly issued Series and a reissued Exchangeable Transferor Certificate.
The Pooling and Servicing Agreement contemplates that one or more Series will be
created pursuant to Series Supplements, in which the Transferor will specify the
Principal Terms with respect to each Series, including: (i) the name or
designation of such Series, (ii) its initial principal amount (or method for
calculating such amount), (iii) its Certificate Rate (or formula for the
determination thereof), (iv) the interest payment date or dates and the date or
dates from which interest shall accrue on such Series, (v) the method for
allocating Collections and Defaulted Receivables to Certificateholders of such
transferor interest, (vi) the names of any accounts to be used by such Series
and the terms governing the operation of any such accounts, (vii) the percentage
used to calculate servicing fees, (viii) the Minimum Transferor Interest
Percentage
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applicable to such Series, (ix) the minimum amount of Principal Receivables
required to be maintained with respect to such Series, (x) for certain types of
Enhancement, the issuer and terms of such Enhancement with respect to such
Series, (xi) the base rate for such Series, if applicable, (xii) the terms on
which the Certificates of such Series may be repurchased at the Transferor's
option or remarketed to other investors, (xiii) the Stated Series Termination
Date, (xiv) any requirement to deposit into any account maintained for the
benefit of Certificateholders of such Series, (xv) the number of Classes of such
Series, and any other interests in the Trust relating to such Series, and if
more than one Class, the rights and priorities of each such Class, and the
rights and priorities of any holder of any related interest, (xvi) the extent to
which the Certificates of such Series will be issuable in temporary or permanent
global form (and, in such case, the Depositary for such global certificate or
certificates, the terms and conditions, if any, upon which such global
certificate may be exchanged, in whole or in part, for Definitive Certificates,
and the manner in which any interest payable on a temporary or global
certificate will be paid), (xvii) whether the Certificates of such Series may be
issued in bearer form and any limitations imposed thereon, (xviii) the priority
of any Series with respect to any other Series, if applicable, (xix) the Group,
if any, in which such Series will be included and (xx) any other relevant terms.
None of the Transferor, the Servicer, the Trustee or the Trust is required or
intends to obtain the consent of any Certificateholder to issue any additional
Series. However, as a condition of an Exchange, the Transferor will deliver to
the Trustee written confirmation that the Exchange will not result in the
applicable Rating Agency reducing or withdrawing its rating of any outstanding
Series.
The Transferor may offer any Series of Certificates under a Disclosure
Document in offerings utilizing this Prospectus or in transactions either
registered under the Act or exempt from registration thereunder directly,
through one or more underwriters or placement agents, in fixed-price offerings
or in negotiated transactions or otherwise. Any such Series of Certificates may
be issued in fully registered or book-entry form in minimum denominations
determined by the Transferor. The Transferor intends to offer additional
Series.
The Pooling and Servicing Agreement provides that the Transferor may
perform Exchanges, and specify Principal Terms such that each Series has a
period during which amortization or accumulation of the principal amount thereof
is intended to occur which may have a different length and begin on a different
date than such period for any other Series. Further, one or more Series may be
in their Revolving Periods or Accumulation Periods while other Series are not.
Thus, certain Series may not be amortizing, while other Series are amortizing.
Each Series may have the benefits of a form of Enhancement only
available to that Series and issued by issuer(s) different from the issuers of
Enhancement with respect to any other Series. Under the Pooling and Servicing
Agreement, the Trustee will hold any such Enhancement only on behalf of the
Series to which it relates. Likewise, with respect to each such Enhancement,
the Transferor may deliver a different form of Enhancement agreement with
respect to each Series. The Pooling and Servicing Agreement also provides that
the Transferor may specify different Certificate Rates and Investor Servicing
Fees with respect to each Series. The Transferor also has the option under the
Pooling and Servicing Agreement to vary among Series the terms upon which Series
(or a particular Class within a Series) may be repurchased at the Transferor's
option or remarketed to other investors. Additionally, certain Series may be
subordinated to other Series, or Classes within a Series may have different
priorities. There is no limit to the number of Exchanges that the Transferor
may perform under the Pooling and Servicing Agreement. The Trust will terminate
only as provided in the Pooling and Servicing Agreement.
Under the Pooling and Servicing Agreement and pursuant to a Series
Supplement, an Exchange may only occur upon the satisfaction of certain
conditions provided in the Pooling and Servicing Agreement. Under the Pooling
and Servicing Agreement, the Transferor may perform an Exchange by notifying the
Trustee at least three days in advance (the "Exchange Notice") of the date upon
which the Exchange is to occur (the "Exchange Date"). An Exchange Notice will
state the designation of any Series to be issued on the Exchange Date and, with
respect to each such Series: (i) its Initial Investor Amount and Pre-Funded
Amount, if applicable (or the method for calculating such amounts) and (ii) its
Certificate Rate or Rates (or the method for allocating interest payments or
other cash flows to such Series), if any and (iii) the applicable Enhancement,
if any, for the Certificates of such new Series. On the date of the Exchange,
the Trustee will issue any such Series only upon delivery to it of the
following: (i) a Series Supplement in form satisfactory to the Trustee signed
by the Transferor and specifying the
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Principal Terms of such Series, (ii) the applicable Enhancement, if any, and the
related Enhancement agreement, (iii) an opinion of counsel to the effect that
Certificates of such Series (other than any Class required to be retained by the
Transferor) will be characterized either as indebtedness or an interest in a
partnership (that is not taxable as a corporation) under existing law for
Federal income tax purposes and that the issuance of such Series will not have a
material adverse effect on the Federal income tax characterization of any
outstanding Series of Certificates that have been the subject of a previous
opinion of tax counsel or result in the Trust being taxable as an association
for Federal or applicable state tax purposes, (iv) written confirmation from the
applicable Rating Agency that the Exchange will not result in such Rating Agency
reducing or withdrawing its rating on any outstanding Series (the "Rating Agency
Condition") and (v) the existing Exchangeable Transferor Certificate and (vi) a
written certification from the Transferor that the Transferor Amount is at least
equal to the Minimum Transferor Amount. Upon satisfaction of such conditions,
the Trustee will cancel the existing Exchangeable Transferor Certificate and the
Certificates of the exchanged Series, if applicable, and issue the new Series
and new Exchangeable Transferor Certificate.
Representations and Warranties
The Transferor has made certain representations and warranties in the
Pooling and Servicing Agreement to the Trustee on behalf of the Trust to the
effect that, as to each Series and as of the date of the related Series
Supplement and the related Closing Date of such Series, among other things, (a)
it is duly incorporated, validly existing and in good standing and has the
authority to consummate the transactions contemplated by the Pooling and
Servicing Agreement and the Receivables Purchase Agreement and (b) as of the
relevant cut-off date (or as of the related cut-off date for any such Additional
Accounts (the "Additional Account Cut-Off Date")) each Account was an Eligible
Account and no selection procedures adverse to the Investor Certificateholders
have been employed by the Transferor in selecting the Accounts. If so provided
in any Series Supplement and described in the related Prospectus Supplement, any
of these representations and warranties proves to have been incorrect in any
material respect when made, and (i) continues to be incorrect in any material
respect for 60 days after written notice of such breach is received by the
Transferor from the Trustee or by the Transferor and the Trustee from holders of
Certificates representing not less than 50% of the aggregate Investor Amounts of
all Series (the "Aggregate Investor Amount"), and (ii) as a result of which the
interests of the holders of Certificates are materially and adversely affected
and remain materially and adversely affected for such period, then the Trustee,
or the holders of Certificates representing more than 50% of the Aggregate
Investor Amount, may declare that a Pay Out Event has occurred, thereby
commencing the Rapid Amortization Period. See "-- Pay Out Events."
The Transferor has also made representations and warranties in the
Pooling and Servicing Agreement to the Trustee for the benefit of the Trust
relating to the Receivables to the effect, among other things, that (a) as of
the Cut-Off Date or the creation date (the "Creation Date"), as applicable, and
in the case of Receivables in Additional Accounts the Additional Account Cut-Off
Date, each of the Receivables then existing is an Eligible Receivable and (b)
each Receivable transferred on such date has been transferred free and clear of
any liens, other than certain liens permitted by the Pooling and Servicing
Agreement, such as liens for taxes and governmental charges not then due or
which the Transferor is contesting in good faith, the Transferor's interests in
the Receivables as holder of the Exchangeable Transferor Certificate and the
Transferor's right to receive certain interest and investment earnings under the
Pooling and Servicing Agreement and various Series Supplements thereunder. In
the event of a breach of any representation and warranty set forth in this
paragraph, and where, as a result, any Receivable becomes a Receivable in a
Defaulted Account or the Trust's rights in, to or under such Receivable or its
proceeds are materially impaired or the proceeds of such Receivables are not
available for any reason to the Trust free and clear of liens, except those
liens described in the prior sentence, then, unless such breach is cured within
90 days or such longer period specified by the Trustee upon the request of the
Servicer (not to exceed an additional 90 days) of the earlier to occur of the
discovery of any such event by the Transferor or the Servicer or the
Transferor's or the Servicer's receipt of written notice of such breach from the
Trustee, the Transferor shall accept retransfer of such Receivable (each an
"Ineligible Receivable") on the terms and conditions set forth below; provided,
however, no such retransfer shall be required to be made with respect to such
Ineligible Receivable if, on any day within such 90-day period, the
representations and warranties with respect to such Ineligible Receivable shall
then be true and correct in all material respects as if such Ineligible
Receivable has been
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transferred to the Trust on such day and the related Account is no longer a
Defaulted Account and the Trust's rights with respect to such Receivable are no
longer materially impaired and the proceeds of such Receivable are available to
the Trust, free and clear of all liens. Notwithstanding the above, in the event
of a breach of the representation and warranty set forth in clause (b) of this
paragraph and either (i) such lien (1) ranks prior to the lien created pursuant
to the Pooling and Servicing Agreement, (2) arises in favor of the United States
of America or any state or any agency or instrumentality thereof or involves
taxes or liens arising under Title IV of ERISA, or (3) has been consented to by
the Transferor, or (ii) such lien is not of the types described in clause (i)
above, but, as a result of such breach or event, such Receivable becomes a
Receivable in a Defaulted Account or the Trust's rights in, to or under such
Receivable or its proceeds are materially impaired or the proceeds of such
Receivable are not available for any reason to the Trust, free and clear of any
lien except permitted as described above, the Transferor shall immediately
repurchase and the Trustee shall convey, without recourse, all of the Trustee's
right, title and interest in each such Ineligible Receivable. The Transferor
shall accept retransfer of each such Ineligible Receivable and there shall be
deducted from the aggregate amount of Principal Receivables used to calculate
the Transferor Amount, the aggregate amount of each such Ineligible Receivable.
If the exclusion of an Ineligible Receivable from the calculation of the
Transferor Amount would reduce the Transferor Amount below the Minimum
Transferor Amount (after giving effect to the addition of any Principal
Receivables to the Trust), the Transferor will be obligated to make a deposit in
the Excess Funding Account in immediately available funds in an amount equal to
the amount by which the Minimum Transferor Amount exceeds the Transferor Amount,
or designate sufficient Additional Accounts. Such deposit will be considered a
repayment in full of the Ineligible Receivable and will be allocated as a
collection in respect of Principal Receivables. The obligation of the Transferor
to accept retransfer of any Ineligible Receivable is the sole remedy respecting
any breach of the representations and warranties set forth in this paragraph
with respect to such Receivable available to Certificateholders or the Trustee
on behalf of Certificateholders.
The Transferor has also made representations and warranties to the
Trustee for the benefit of the Trust with respect to each Series, to the effect,
among other things, that as of the Initial Cut-Off Date or the date of the
related Series Supplement and the related Closing Date of any such Series that
(a) the Pooling and Servicing Agreement constitutes a legal, valid and binding
obligation of the Transferor and (b) the Pooling and Servicing Agreement
constitutes a valid transfer to the Trust of all right, title and interest of
the Transferor in and to the Receivables, whether then existing or thereafter
created in the Accounts and acquired by the Transferor pursuant to the
Receivables Purchase Agreements and the proceeds thereof (including amounts in
any of the accounts established for the benefit of the Certificateholders), or
the grant to the Trust of a first priority perfected security interest in such
Receivables (except for certain liens permitted by the Pooling and Servicing
Agreement such as tax liens not then due or which the Company or the Transferor
is contesting in good faith) and the proceeds thereof, which is effective as to
each Receivable upon the transfer thereof to the Trust or upon its creation, as
the case may be. In the event (i) any of the representations and warranties
described in this paragraph is either not true and correct or (ii) a material
amount of Receivables are Ineligible Receivables, and in either case, such event
has a material adverse effect on the interests of Certificateholders of all
Series, either the Trustee or the holders of certificates evidencing undivided
interests in the Trust aggregating more than 50% of the Aggregate Investor
Amount, by written notice to the Transferor (and to the Trustee and the Servicer
if given by the Certificateholders), may direct the Transferor to accept
transfer of all the Receivables within 90 days of such notice or within such
longer period as may be specified in such notice (not to exceed an additional 90
days). The Transferor will be obligated to accept transfer of such Receivables
on a Distribution Date occurring within such applicable period. Such retransfer
will not be required to be made, however, if at any time during such applicable
period the representations and warranties shall then be true and correct in all
material respects or there is no longer a material amount of such Receivables
which are not Eligible Receivables. The price for such retransfer will be equal
to the Aggregate Investor Amount at the end of the business day preceding the
Distribution Date on which the retransfer is scheduled to be made less the
amount, if any, held in any Principal Account and the Excess Funding Account on
such date of transfer plus an amount equal to all accrued but unpaid interest on
all Series at the applicable Certificate Rates through the end of the respective
Interest Period(s) of such Series, plus any Enhancement required to be paid
pursuant to any Supplement. The payment of the retransfer amount shall be made
into the Collection Account in immediately available funds, and will be
considered a prepayment in full of all such Receivables and will be paid to the
Certificateholders, and the Enhancement Providers, if any. These obligations
will constitute the
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sole remedy respecting a breach of the representations and warranties set forth
in this paragraph available to the Trustee or the Certificateholders.
It is not required or anticipated that the Trustee will make any
initial or periodic general examination of the Receivables or any records
relating to the Receivables for the purpose of establishing the presence or
absence of defects, compliance with the Transferor's representations and
warranties or for any other purpose. The Servicer, however, is required to
deliver to the Trustee on or before June 30 of each calendar year, beginning
with June 30, 1998, an opinion of counsel with respect to the validity of the
security interest of the Trust in and to the Receivables.
Addition of Accounts
Subject to the conditions set forth below, the Transferor has the
right to designate from time to time Additional Accounts (which may be from any
billing cycle and which may be VISA, MasterCard or proprietary credit card
accounts) to be included as Accounts and to transfer to the Trust all
Receivables in such Additional Accounts (each such date, an "Additional Account
Closing Date"), whether such Receivables are then existing or thereafter
created. In addition, if as of the end of any Monthly Period, the Transferor
Amount (after giving effect to any amounts deposited in the Excess Funding
Account) is less than the Minimum Transferor Amount, or if, as of the end of any
Monthly Period, the aggregate Principal Receivables is less than the Minimum
Aggregate Principal Receivables, then the Transferor will, under the Pooling and
Servicing Agreement, cause the Receivables of Additional Accounts to be included
as Accounts, and the Transferor will purchase Receivables in such Additional
Accounts under the Receivables Purchase Agreements and transfer such Receivables
to the Trust in a sufficient amount so that the Transferor Amount as of the end
of such Monthly Period would have equaled or exceeded the Minimum Transferor
Amount or the aggregate Principal Receivables would have equaled or exceeded the
Minimum Aggregate Principal Receivables. "Minimum Aggregate Principal
Receivables" means the sum of the numerators used to determine Investor
Percentages with respect to Principal Receivables for each Series outstanding
for such period.
In addition to or in lieu of Additional Accounts, the Transferor is
permitted to add to the Trust participations representing undivided interests in
a pool of assets primarily consisting of receivables and collections thereon
("Participations"). Participations may be evidenced by one or more certificates
of ownership issued under a separate pooling and servicing agreement or similar
agreement (each, a "Participation Agreement") entered into by the Transferor
which entitles the Certificateholder to receive percentages of Collections
generated by the pool of assets subject to such Participation Agreement from
time to time and to certain other rights and remedies specified therein.
Participations may have their own credit enhancement, pay out events, servicing
obligations and servicer defaults, all of which are likely to be enforceable by
a separate trustee under the Participation Agreement and may be different from
those specified herein. The rights and remedies of the Trust as the holder of a
Participation (and therefore the Certificateholders) will be subject to all the
terms and provisions of the related Participation Agreement. The Pooling and
Servicing Agreement may be amended to permit the addition of a Participation in
the Trust without the consent of the related Certificateholders if (i) the
Transferor delivers to the Trustee a certificate of an authorized officer to the
effect that, in the reasonable belief of the Transferor, such amendment will not
as of the date of such amendment adversely affect in any material respect the
interest of such Certificateholders, and (ii) such amendment will not result in
a withdrawal or reduction of the rating of any outstanding Series under the
Trust. To the extent required pursuant to the Securities Act, any
Participations transferred to the Trust (a) will have been (i) registered under
the Securities Act or (ii) held for at least the Rule 144(k) holding period, and
(b) will be acquired in secondary market transactions not from the Transferor or
an affiliate.
The Transferor may designate Additional Accounts or add Participations
only upon satisfaction of the following conditions: (i) the Transferor shall
give the Trustee and the Servicer at least five business days' notice of the
proposed addition which specifies the approximate amount of Receivables or
Participations to be transferred, (ii) the Transferor shall give the Trustee an
executed transfer agreement together with a list of such Additional Accounts or
Participations, (iii) the Transferor shall represent and warrant that each
Additional Account was as of
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the date of selection an Eligible Account, no selection procedures believed by
the Transferor to be materially adverse to the interests of any outstanding
Series of Certificates were used in selecting such Additional Accounts, and that
as of the closing date of such transfer, the Transferor is not nor will it be
made insolvent by the transfer of Receivables in such Additional Accounts, (iv)
the Transferor shall represent and warrant that the transfer of such Additional
Accounts constitutes a valid transfer to the Trust of all right, title and
interest of the Transferor in and to the Receivables in such Additional
Accounts, whether then existing or thereafter created, and the proceeds thereof
(including amounts in any of the accounts established for the benefit of the
Certificateholders) or the grant to the Trust of a first priority perfected
security interest in such Receivables (except for certain liens permitted under
the Pooling and Servicing Agreement) and the proceeds thereof, which is
effective as to each Receivable upon the transfer thereof to the Trust, (v) the
Transferor shall deliver an officer's certificate confirming the items specified
in clauses (ii), (iii) and (iv) in this paragraph, (vi) with respect to the
designation of certain Additional Accounts, the Transferor shall deliver an
opinion of counsel in respect of such addition in the form specified in the
Pooling and Servicing Agreement, (vii) with respect to the designation of
certain Additional Accounts or the addition of any Participations, the
Transferor shall notify each Rating Agency of such proposed addition of
Additional Accounts or Participations and such Rating Agency shall have
delivered a letter confirming that the Rating Agency Condition shall have been
satisfied and (viii) the Transferor shall record and file appropriate financing
statements with respect to the Participations or the Receivables then existing
and thereafter created in the Additional Accounts for the transfer of accounts,
general intangibles and chattel paper meeting the requirements of applicable
state law necessary to perfect the transfer and assignment of the Receivables in
Additional Accounts by the Transferor to the Trust, or otherwise perfect the
Trust's interests in the Participations. The Transferor will deliver to the
Trustee a computer file, microfiche or written list of all such Additional
Accounts.
Accounts opened during the normal operation of the Bank's credit card
business shall be automatically added to the Accounts as Automatic Additional
Accounts on an ongoing basis; provided, however, that such automatic inclusion
and transfer shall not occur with respect to any such account if: (i) such
account does not qualify as an Eligible Account, (ii) the inclusion in the Trust
of the Receivables arising under such account would exceed the Aggregate
Automatic Addition Limit or (iii) the Transferor otherwise designates such
account as an account which is not to be included as an Account. The Transferor
will deliver to the Trustee on a quarterly basis, a computer file, microfiche or
written list of all such included Accounts and has recorded and filed, or will
record and file, all appropriate financing statements with respect to the
Receivables in such Automatic Additional Accounts. The Transferor, at its option
may, by providing written notice to the Trustee and the Bank, terminate or
suspend the automatic inclusion of Automatic Additional Accounts at any time.
"Aggregate Automatic Addition Limit" means (i) the number of Eligible
Accounts designated as Automatic Additional Accounts, which either (x) with
respect to any period of three consecutive Monthly Periods commencing in
January, April, July or October of a calendar year equals 15% of the sum of the
number of Accounts as of the last business day preceding the commencement of
such period and the number of Additional Accounts included as Accounts since
such business day or (y) with respect to any period of 12 consecutive Monthly
Periods, equals 20% of the sum of the number of Accounts as of the last business
day preceding the commencement of such period and the number of Additional
Accounts included as Accounts since such business day or (ii) such higher number
of Automatic Additional Accounts as to which Standard & Poor's and Moody's or
any other applicable Rating Agency rating any certificates shall consent to in
writing.
Although each Additional Account or Automatic Additional Account must
satisfy certain criteria set forth in the Pooling and Servicing Agreement at the
time of its selection, Additional Accounts and Automatic Additional Accounts may
not be of the same credit quality as the Accounts.
Removal of Accounts
Subject to the conditions set forth below, during the Revolving
Period, the Transferor has the right to remove from the Trust all Receivables
from certain accounts which it designates as Removed Accounts and to accept the
reconveyance of all the Receivables in the Removed Accounts, without notice to
the Certificateholders, provided, however, that the Transferor shall not make
more than one such designation in any Monthly Period.
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The Transferor shall give the Trustee and the Servicer notice of such removal 10
business days prior to the date on which the Accounts are to be reassigned to
the Transferor. The Transferor shall be permitted to designate and require
retransfer to it of Receivables from Removed Accounts only upon satisfaction of
the following conditions: (i) each Rating Agency shall have delivered a letter
confirming that the Rating Agency Condition has been satisfied, (ii) the
Transferor shall have delivered or caused to be delivered to the Trustee for
execution a written retransfer agreement and a computer file, microfiche or
written list containing a true and complete list of all Removed Accounts
identified by account number and Receivables balance in such Removed Accounts;
(iii) the Transferor shall represent and warrant that no selection procedures
believed by the Transferor to be materially adverse to the interests of the
Certificateholders of any outstanding Series or any provider of Enhancement with
respect to Certificates (each an "Enhancement Provider") were used in selecting
the Removed Accounts; (iv) such removal shall not, in the reasonable belief of
the Transferor, cause the Transferor Amount to be less than the Minimum
Transferor Amount, and the aggregate amount of Principal Receivables in the
Trust shall not be less than the Minimum Aggregate Principal Receivables; (v)
the removal of any Receivables of any Removed Accounts shall not, in the
reasonable belief of the Transferor, result in a Pay Out Event; and (vi) the
Transferor shall have delivered to the Trustee an officer's certificate
confirming the items set forth in clauses (i) through (v) above.
Discount Option Receivables
The Transferor may at any time designate a specified percentage (the
"Discount Percentage") of the amount of Receivables arising in the Accounts on
and after the date such option is exercised that otherwise would be treated as
Principal Receivables to be treated as Finance Charge Receivables (the "Discount
Option Receivables"). The Transferor established the initial Discount Percentage
as of August 21, 1997 at 2%. The Transferor may, without notice to or consent of
the Certificateholders, from time to time, exercise its Discount Option to
increase, reduce or eliminate (subject to the limitation described below) the
Discount Percentage for Discount Option Receivables arising in the Accounts on
and after the date of such change or to apply the Discount Percentage to
Receivables created in Accounts not previously subject to the Discount
Percentage. The Transferor must provide 30 days' prior written notice to the
Servicer, the Trustee, each Rating Agency and, in limited circumstances, holders
of Certificates that are not rated, of any such increase, reduction or
elimination, and such increase, reduction or elimination will become effective
on the date specified therein unless the Transferor reasonably believes that
such increase, reduction or elimination will at the time of its occurrence cause
a Pay Out Event, or an event which with notice or the lapse of time would
constitute a Pay Out Event, to occur with respect to any Series; provided that
if such designation would cause the Discount Percentage to be less than 1% or
more than 3%, the Rating Agency Condition must be satisfied and in limited
circumstances, holders of outstanding Certificates that are not rated must
consent to such action.
Discount Option Receivables shall be equal to, on any date of
processing, the sum of (a) the aggregate Discount Option Receivables at the end
of the prior date of processing plus (b) any new Discount Option Receivables
created on such date of processing minus (c) any Discount Option Receivable
Collections received on such date of processing. The Discount Option Receivables
created on any date of processing shall be the product of (i) the amount of
Principal Receivables created on such date of processing (without giving effect
to the deduction of the Discount Option Receivables) and (ii) the Discount
Percentage.
"Discount Option Receivable Collections" means, on any date of
processing on and after the date on which the Transferor's exercise of its
Discount Option is in effect, the product of (a) a fraction the numerator of
which is the amount of Discount Option Receivables and the denominator of which
is the sum of the Principal Receivables and the Discount Option Receivables, in
each case at the end of the prior Monthly Period, and (b) Collections of
Principal Receivables (without giving effect to Discount Option Receivables) on
such date of processing.
Collection and Other Servicing Procedures
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
responsible for servicing and administering the Receivables in accordance with
the Servicer's policies and procedures in effect for servicing
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credit card account receivables comparable to the Receivables, as such policies
and procedures may be modified from time to time by the Servicer. As of the date
of this Prospectus, the Servicer has designated its affiliates, McRae's and CPS
as Subservicers.
Collection and Principal Accounts
The Servicer will establish and maintain, or cause to be established
and maintained, the Collection Account, which will be a segregated corporate
trust account, with the Trustee or another Qualified Institution, in the
Trustee's name and for the benefit of the Certificateholders of all Series then
outstanding. The Servicer will also establish a Principal Account as a
segregated trust account established with a Qualified Institution. A "Qualified
Institution" is defined generally as a (i) depository institution or trust
company, organized under the laws of the United States or any state thereof (or
any domestic branch or agency of any foreign bank), the deposits of which are
insured by the Federal Deposit Insurance Corporation, which at all times has a
rating of at least P-1 by Moody's Investors Service, Inc. ("Moody's") and of A-1
by Standard & Poor's Ratings Services ("Standard & Poor's)," in the case of the
certificates of deposit or short-term unsecured debt, or a rating from the
applicable Rating Agency of at least Aaa or AAA or the equivalent, as
applicable, in the case of its long term unsecured debt obligations, or (ii) a
depository institution, otherwise acceptable to each Rating Agency rating any
Series. Notwithstanding the foregoing, any institution which shall have
corporate trust powers (whether or not such institution takes deposits) and
which maintains the Collection Account, the Excess Funding Account, the
Principal Account or any other account maintained for the benefit of
Certificateholders of any Series as a fully segregated trust account with the
trust department of such institution shall not be required to meet the foregoing
rating requirements, and need only at all times have a long term unsecured debt
rating of at least Baa3 from Moody's so long as Moody's is a Rating Agency
rating any Series.
All payments to Certificateholders will be paid solely out of the
amounts in the Collection Account and Principal Account. Funds in the
Collection Account and Principal Account will be invested, at the direction of
the Servicer, in "Permitted Investments," which include (i) direct obligations
of, and obligations fully guaranteed by the United States of America, (ii)
demand deposits, time deposits or certificates of deposit of depository
institutions or trust companies, incorporated under the laws of the United
States of America or any state thereof (including the District of Columbia, and
any domestic branch or agency of any foreign bank), and which is subject to
supervision and examination by federal or state banking or depository
institution authorities; provided, however, that the commercial paper, if any,
and short-term unsecured debt obligations of such depository institution or
trust company shall have, at the time of the Trust's investment or contractual
commitment to invest therein, a credit rating from the Rating Agency in the
highest investment category granted by such Rating Agency, (iii) commercial
paper having, at the time of the Trustee's investment or contracted commitment
to invest therein, a rating in the highest investment category granted by such
Rating Agency, (iv) bankers' acceptances issued by any depository institution or
trust company described in clause (ii) above, (v) money market funds which have
the highest rating from, or have otherwise been approved in writing by the
Rating Agencies, (vi) time deposits (having maturities of not more than 30 days)
or notes which are payable on demand by an entity the commercial paper of which
has a rating of the highest investment category granted by the Rating Agencies,
(vii) certain repurchase obligations involving Permitted Investment instruments
so long as the counterparty thereto has at the time of the Trust's investment
therein, a short-term debt rating of at least A-1 or P-1, or the equivalent from
the applicable Rating Agencies and (viii) any other investments approved in
writing by the applicable Rating Agencies prior to the Trust's investment
therein. For purposes of determining the availability of funds or balances in
the Collection Account, all investment earnings on such funds shall be deemed
not to be available or on deposit until actually credited to such account. The
Servicer, or a Subservicer on behalf of the Servicer, will have the revocable
power to withdraw funds from the Collection Account and to instruct the Trustee
to make withdrawals and payments from the Collection Account and the Principal
Account for the purpose of carrying out the Servicer's duties under the Pooling
and Servicing Agreement. The Paying Agent, which unless otherwise described in
a Prospectus Supplement, will be the Trustee, will have the revocable power to
withdraw funds from the Principal Account for the purpose of making
distributions to the Certificateholders.
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Funding Period
For any Series of Certificates, the related Prospectus Supplement may
specify that for a Funding Period beginning on the Closing Date and ending on a
specified date before the commencement of an Amortization Period with respect to
such Series the Pre-Funded Amount, which may be up to 100% of the aggregate
principal amount of such Series, will be held in a Pre-Funding Account
established with the Trustee for the benefit of the Certificateholders of such
Series pending the transfer of additional Receivables to the Trust or the
reduction of the Investor Amounts of other Series. The related Prospectus
Supplement will specify the Initial Investor Amount with respect to such Series,
the Full Investor Amount of such Series and the date by which the Investor
Amount is expected to equal the Full Investor Amount. The Investor Amount will
increase as Receivables are delivered to the Trust or as the Investor Amounts of
other Series are reduced. The Investor Amount may also decrease due to Investor
Charge Offs as provided in the related Prospectus Supplement.
During the Funding Period, funds held in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the Transferor to the
extent of any increases in the Investor Amount. In the event that the Investor
Amount does not for any reason equal the Full Investor Amount by the end of the
Funding Period, any amount remaining in the Pre-Funding Account and any
additional amounts specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the related Prospectus Supplement See "Risk Factors -- Effect
on Certain Pre-Funded Series of Ability to Generate Additional Receivables."
If so specified in the related Prospectus Supplement, monies in the
Pre-Funding Account will be invested by the Trustee in Permitted Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, on each Distribution Date during the Funding Period,
investment earnings on funds in the Pre-Funding Account during the related
Monthly Period will be withdrawn from the Pre-Funding Account and deposited,
together with any applicable payment under a guaranteed rate or investment
agreement or other similar arrangement, into the Collection Account for
distribution in respect of interest on the Certificates of the related Series in
the manner specified in the related Prospectus Supplement.
Investor Percentage and Transferor Percentage
The Servicer will allocate between the Investor Amount of each Series
(and between each Class of or other interest in the Trust in respect of each
Series) and the Transferor Amount and, in certain circumstances, the Enhancement
Investor Amount, all Collections of Finance Charge Receivables, all Collections
of Principal Receivables and all Receivables in Defaulted Accounts. The
Servicer will make each allocation by reference to the applicable Investor
Percentage of each Series and the Transferor Percentage in each case. The
Pooling and Servicing Agreement provides that the Servicer may estimate the
amounts of Collections that are allocable to Collections of Principal
Receivables and to Collections of Finance Charge Receivables. If the Servicer
is able to determine the actual amount of Collections proceeds which are
Collections of Finance Charge Receivables and Collections of Principal
Receivables, the Servicer may at its option allocate Collections in accordance
with such actual amounts. All estimates of Collections of Finance Charge
Receivables will be binding for all purposes on the Certificateholders, the
Trustee and the Transferor.
The Prospectus Supplement relating to a Series will specify the
Investor Percentage with respect to the allocations of Collections of Principal
Receivables, Collections of Finance Charge Receivables and Receivables in
Defaulted Accounts during the Revolving Period, any Amortization Period and the
Accumulation Period, as applicable. The Investor Percentage for a Series may be
based on an amount other than the Investor Amount. In addition, for each Series
of Certificates having more than one Class, the related Prospectus Supplement
will specify the method of allocation between Classes.
The Transferor Percentage will, in all cases, be equal to 100% minus
the sum of the applicable Investor Percentages for all Series then outstanding
(the "Aggregate Investor Percentage").
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Application of Collections
Unless otherwise specified in a Series Supplement and the related
Prospectus Supplement, and except as otherwise provided below, the Servicer will
deposit Collections into the Collection Account, no later than the second
business day (or such other day specified in the related Prospectus Supplement)
following the date of processing. As long as the Company or an affiliate of the
Company is the Servicer and no Pay Out Event relating to a Servicer Default
shall have occurred and be continuing, and either, (i) the Company or such
affiliate has and maintains a minimum short-term debt or certificate of deposit
rating of P-1 by Moody's and A-1+ by Standard & Poor's unless otherwise
specified in the related Prospectus Supplement or (ii) the Company shall have
obtained a written notice from each Rating Agency to the effect that such Rating
Agency does not intend to downgrade or withdraw its then current rating of any
outstanding Certificates of any Series, then the Servicer may make such deposits
and payments on the business day prior to each Distribution Date. As long as
Proffitt's or any affiliate is the Servicer and a Servicer Default shall not
have occurred and be continuing, the Servicer may make deposits into the
Collection Account and the Excess Funding Account net of amounts payable as of
such date to the Transferor or the Servicer from amounts held in such accounts.
Unless specified in any Series Supplement, the Servicer is not required to
deposit into the Collection Account, any Collections of Finance Charge
Receivables and Principal Receivables or any other amounts allocable to the
Exchangeable Transferor Certificate.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will apply or cause the Trustee to apply funds deposited in the
Collection Account with respect to each Distribution Date as follows:
(a) an amount equal to the applicable Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge Receivables will
be allocated and distributed as described in the related Prospectus Supplement;
(b) during the Revolving Period, an amount equal to the applicable
Investor Percentage of the aggregate amount of such deposits in respect of
Principal Receivables will be paid to the holder of the Exchangeable Transferor
Certificate, unless the Transferor Amount would be reduced below the Minimum
Transferor Amount, in which case the excess will be deposited in the Principal
Account or other specified account, or to other amortizing Series, all as
described in the related Prospectus Supplement;
(c) during the Controlled Amortization Period or Accumulation
Period, as applicable, an amount equal to the applicable Investor Percentage of
the aggregate amount of such deposits in respect of Principal Receivables up to
the amount, if any, as specified in the related Prospectus Supplement will be
allocated and distributed to Certificateholders or deposited in the Principal
Account as described in the related Prospectus Supplement, provided that if
Collections of Principal Receivables exceed the principal payments which are to
be distributed to Certificateholders or deposited in the Principal Account, the
amount of such excess will be paid to the holder of the Exchangeable Transferor
Certificate, unless the Transferor Amount would be reduced below the Minimum
Transferor Amount, or to other amortizing Series, as described in the related
Prospectus Supplement; and
(d) during the Principal Amortization Period, if applicable, and
the Rapid Amortization Period, an amount equal to the applicable Investor
Percentage of the aggregate amount of such deposits in respect of Principal
Receivables will be deposited into the Principal Account or other specified
account and allocated and distributed to Certificateholders as described in the
related Prospectus Supplement.
In the case of a Series of Certificates having more than one Class,
the amounts in the Collection Account will be allocated and applied to each
Class in the manner and order of priority described in the related Prospectus
Supplement.
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Shared Principal Collections
Collections of Principal Receivables and certain other amounts for any
Monthly Period allocated to any Series in a Group will first be used to cover
certain amounts described in the related Series Supplements (including any
required deposits into a Principal Account or required distributions to
Certificateholders of such Series). The Servicer will determine the amount of
Collections of Principal Receivables for any Monthly Period (plus certain other
amounts required by the related Series Supplement) allocated to such Series
remaining after covering such required deposits and distributions and any
similar amount remaining for any other Series in such Group (collectively,
"Shared Principal Collections"), and will allocate the Shared Principal
Collections to cover any principal distributions to Certificateholders and
deposits to Principal Accounts for any Series in such Group which are either
scheduled or permitted and which have not been covered out of Collections of
Principal Receivables and certain other amounts for such Series, provided that
the Series Supplement for such Series so provides ("Principal Shortfalls"). If
Principal Shortfalls exceed Shared Principal Collections for any Monthly Period,
Shared Principal Collections will be allocated pro rata among the Series in a
Group entitled to the benefits thereof based on the respective Principal
Shortfalls of such Series. To the extent that Shared Principal Collections
exceed Principal Shortfalls, the balance will be distributed to the holder of
the Exchangeable Transferor Certificate; provided, however, that (a) such Shared
Principal Collections will be distributed to the holder of the Exchangeable
Transferor Certificate only to the extent the Transferor Amount is greater than
the Minimum Transferor Amount and (b) in certain circumstances described below
under "-- Excess Funding Account," such Shared Principal Collections will be
deposited in the Excess Funding Account. Any such reallocation of Collections
of Principal Receivables and other amounts will not result in a reduction in the
Investor Amount of the Series to which such Collections were initially
allocated.
Excess Funding Account
On any business day the Transferor Amount is less than the Minimum
Transferor Amount (after giving effect to any addition of Principal Receivables
to the Trust) (the "Shortfall Amount"), the Servicer shall not distribute to the
holder of the Exchangeable Transferor Certificate any Collections of Principal
Receivables that otherwise would be distributed to the holder of the
Exchangeable Transferor Certificate, but shall deposit such funds in a
segregated trust account (which may be a sub-account of the Collection Account)
established and maintained by the Servicer in the name of the Trustee for the
benefit of the Certificateholders of all outstanding Series entitled to the
benefits of such Excess Funding Account with a Qualified Institution and
designating clearly that the funds deposited therein are held for the benefit of
such Certificateholders (the "Excess Funding Account"). Funds held in the
Excess Funding Account will be withdrawn and paid to the holder of the
Exchangeable Transferor Certificate on any date to the extent the Transferor
Amount exceeds the Minimum Transferor Amount on such date; provided, however,
that if an Accumulation Period or Rapid Amortization Period commences with
respect to any Series in a Group entitled to the benefits of Shared Principal
Collections, the Servicer shall determine the aggregate amount of Principal
Shortfalls, if any, with respect to each such Series that is entitled to receive
Shared Principal Collections, and the Servicer shall instruct the Trustee to
withdraw such amount up to the amount of any funds held in the Excess Funding
Account and allocate such amount among each Series as Shared Principal
Collections to the extent needed to cover principal payments due to or for the
benefit of such Series.
Funds held in the Excess Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Permitted Investments. Any
earnings (net of losses and investment expenses), if any, earned on amounts held
in the Excess Funding Account during any Monthly Period will be withdrawn from
the Excess Funding Account and treated as Collections of Finance Charge
Receivables with respect to such Monthly Period.
Shared Excess Finance Charge Collections
Any Series may be included in a Group of Series. Each Series in a
Group will be entitled to share Shared Excess Finance Charge Collections in the
manner, and to the extent, described below with each other Series, if any, in
such Group. Collections of Finance Charge Receivables and certain other amounts
allocable to any Series
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which are included in such Group in excess of the amounts necessary to make
required payments with respect to such Series (including payments to the
provider of any related Enhancement) that are payable out of Collections of
Finance Charge Receivables ("Shared Excess Finance Charge Collections") will be
applied to cover any shortfalls with respect to amounts payable from Collections
of Finance Charge Receivables allocable to any other Series included in such
Group, pro rata based upon the amount of the shortfall, if any, with respect to
each other Series in such Group; provided, however, that the sharing of Shared
Excess Finance Charge Collections among Series in a Group will continue only
until such time, if any, at which the Transferor shall deliver to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Transferor or its counsel, the continued sharing of Shared Excess
Finance Charge Collections among Series in any Group would have adverse
regulatory implications with respect to the Transferor. Following the delivery
by the Transferor of any such certificate to the Trustee there will not be any
further sharing of Shared Excess Finance Charge Collections among the Series in
a Group. In all cases, any Shared Excess Finance Charge Collections remaining
after covering shortfalls with respect to all outstanding Series in a Group will
be paid to the holder of the Exchangeable Transferor Certificate. While the
Transferor believes that, based upon applicable rules and regulations as
currently in effect, the sharing of Shared Excess Finance Charge Collections
among Series in a Group will not have adverse regulatory implications that may
be applicable if the Transferor is a bank, there can be no assurance that this
will continue to be true in the future.
Paired Series
If so provided in the Prospectus Supplement relating to a Series, such
Series is subject to being paired with another Series. The Prospectus Supplement
for such Series and the Prospectus Supplement for the Paired Series will each
specify the relationship between the Series. The issuance of any Paired Series
will be subject to among other conditions, satisfaction of the Rating Agency
Condition. There can be no assurance, however, that the terms of any Paired
Series might not affect the timing or amount of payments received by the
Certificateholders of the other Series. In particular, the numerator of the
Investor Percentage with respect to allocations of Collections 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).
Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge Offs
"Defaulted Receivables" for any Monthly Period are Principal
Receivables in Defaulted Accounts which were charged off as uncollectible in
such Monthly Period. Receivables in an Account will be considered charged off
for the purposes of the Pooling and Servicing Agreement on the date on which
such Account is charged off in accordance with the customary and usual servicing
procedures of the Servicer, but in any event no later than 30 days after receipt
of notice by the Servicer that the related Obligor has died or has become the
subject of a bankruptcy petition. The default amount (the "Default Amount") for
any Monthly Period will be an amount (not less than zero) equal to (a) the
amount of the Principal Receivables (other than Ineligible Receivables) that
were charged off in such Monthly Period less (b) the amount received by the
Servicer with respect to Defaulted Accounts during such Monthly Period
("Recoveries").
Prior to each Distribution Date, the Servicer will calculate the
Investor Default Amount for the preceding Monthly Period. The "Investor Default
Amount" will be allocated to the Investor Amount for each Distribution Date in
an amount equal to the product of (a) the Investor Percentage applicable during
the immediately preceding Monthly Period and (b) the Default Amount for such
Monthly Period. In the case of a Series of Certificates having more than one
Class, the Investor Default Amount will be allocated among the Classes in the
manner described in the related Prospectus Supplement. If so described in the
related Prospectus Supplement, an amount equal to the Investor Default Amount
for any Monthly Period may be paid from other amounts, including Enhancement, if
any, and may be applied to pay principal to Certificateholders, or if provided
in the related Prospectus Supplement, the holder of the Exchangeable Transferor
Certificate, as appropriate. In the case of a Series of Certificates having one
or more Classes of Subordinated Certificates, the related Prospectus Supplement
may provide that all or a portion
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of amounts otherwise allocable to such Subordinated Certificates may be paid to
the Senior Certificateholders to make up any Investor Default Amount allocable
to such Senior Certificateholders.
With respect to each Series of Certificates, if the amount payable on
a Distribution Date or other specified date in respect of interest on the
Certificates, the Investor Servicing Fee (unless otherwise specified in the
related Prospectus Supplement), the Investor Default Amount and other required
fees exceeds the amount held in the Collection Account available therefor
(including Shared Excess Finance Charge Collections, if applicable), available
Enhancement, if any, available reallocated Collections of Principal Receivables,
if any, and amounts available from other specified sources, then the Investor
Amount with respect to such Series will be reduced by the amount of such excess,
but not by more than the Investor Default Amount (an "Investor Charge Off").
Investor Charge Offs will be reimbursed on any Distribution Date to the extent
amounts held in the Collection Account and otherwise available therefor exceed
such interest, fees and any aggregate Investor Default Amount payable on such
date. Such reimbursement of Investor Charge Offs will result in an increase in
the Investor Amount with respect to such Series. In the case of a Series of
Certificates having more than one Class, the related Prospectus Supplement will
describe the manner and priority of allocating Investor Charge Offs and
reimbursements thereof among the Classes thereof.
If the Servicer makes a downward adjustment of the amount of any
Principal Receivable because of a rebate, refund, unauthorized charge, billing
error or certain other noncash items, or if the Servicer otherwise adjusts
downward the amount of any Principal Receivable without receiving Collections
therefor or without charging off such amount as uncollectible, or any Receivable
is discovered as having been created through a fraudulent or counterfeit charge
(each, an "Adjustment"), the Aggregate Principal Receivables and the Transferor
Amount will be reduced by the amount of such Adjustments. If, as a result of an
Adjustment, the Transferor Amount would be less than the Minimum Transferor
Amount, the Transferor shall immediately pay to the Servicer for deposit into
the Excess Funding Account, in immediately available funds, an amount equal to
the amount by which the Transferor Amount would be reduced below the Minimum
Transferor Amount (the "Adjustment Payment Obligation"). In the event the
Servicer adjusts upward the principal amount of any Receivable, the Aggregate
Principal Receivables and the Transferor Amount shall be increased by the amount
of such upward adjustment, and any unpaid Adjustment Payment Obligation shall be
reduced by the applicable amount. To the extent that such Adjustment would
cause the Transferor Amount to be less than the Minimum Transferor Amount (after
giving effect to any required transfer of Receivables in Additional Accounts to
the Trust and any amounts in the Excess Funding Account), and the Transferor
fails to make any payment required by the Pooling and Servicing Agreement in
respect thereof, then the amount of such deficiency will be allocated among all
Series based upon their respective Investor Percentages (a "Series Adjustment
Amount") and a reduction in the Investor Amount of such Series may occur.
Allocation of Adjustment Amounts
The "Minimum Transferor Interest Percentage" shall be equal to the
highest Minimum Transferor Interest Percentage designated for any Series
outstanding. The "Minimum Transferor Amount" is equal to the product of the
aggregate Adjusted Investor Amount (as defined in the Series Supplements for all
Series) for all Series outstanding and the applicable Minimum Transferor
Interest Percentage.
The Series Adjustment Amount, as applicable to any Series, will be
allocated as described in the related Prospectus Supplement for such Series. A
Series Adjustment Amount will be reduced and the Investor Amount increased to
the extent that allocations of Excess Spread (as defined in each Series
Supplement) and Shared Excess Finance Charge Collections cover the Series
Adjustment Amount, the amount of Principal Receivables in the Trust increases,
Certificates are repaid, amounts are deposited in the Excess Funding Account or
the Transferor subsequently makes a payment allocable to the Series in respect
of an Adjustment. Reductions in a Series Adjustment Amount will be allocated as
described in the related Prospectus Supplement.
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Defeasance
The Pooling and Servicing Agreement permits the Transferor to
terminate its substantive obligations with respect to any Series or all
outstanding Series by depositing with the Trustee, under the terms of an
irrevocable trust agreement satisfactory to the Trustee, monies Permitted
Investments, or both, sufficient to discharge and pay all remaining scheduled
interest and principal payments on such Defeased Series on the dates scheduled
for such payments and to pay all amounts owing to any Enhancement Provider with
respect to the Defeased Series. To achieve that end, the Transferor has the
right to use Collections to purchase Permitted Investments rather than
additional Receivables. Prior to its exercise of its right to substitute monies
or Permitted Investments for Receivables, the Transferor shall deliver to the
Trustee an opinion of counsel that such deposit and termination of obligations
will not have any material adverse effect on the Federal income tax
characterization of any outstanding Series of Certificates that have been the
subject of a previous opinion of tax counsel, or result in the Trust being
taxable as an association under Federal and applicable state law as a sale or
exchange by the holders of the Defeased Series and to the Servicer and the
Trustee written notice from each Rating Agency that such transaction will not
result in a withdrawal or downgrading of the rating of any outstanding Series.
In addition, the Transferor must comply with certain other requirements set
forth in the Pooling and Servicing Agreement, including requirements that the
Transferor deliver to the Trustee an opinion of counsel to the effect that the
deposit and termination of obligations will not require the Trust to register as
an "investment company" within the meaning of the Investment Company Act of
1940, as amended. The Transferor also must deliver to the Trustee and any
Enhancement Provider a certificate of an authorized officer stating that, based
on the facts known to such officer at the time, in the reasonable opinion of the
Transferor, such deposit and termination of obligations will not at the time of
its occurrence 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 any Series. If the Transferor discharges its substantive obligations
in respect of the Defeased Series, any Enhancement for the affected Series might
no longer be available to make payments with respect thereto.
Optional Repurchase; Final Payment of Principal; Termination
Any Series Supplement may permit Certificates of that Series to be
repurchased at the option of the Transferor on any Distribution Date by the
Transferor depositing into the Collection Account, an amount equal to the
Investor Amount plus accrued and unpaid interest on the Certificates and any
other amounts specified in the related Series Supplement. Such repurchase may
or may not be conditioned by the Series Supplement to instances where the
Adjusted Investor Amount held other than by the Transferor or its affiliates
(and any other amount specified in the related Series Supplement) is reduced to
an amount less than or equal to 10% (or such other amount specified in the
related Prospectus Supplement) of the initial outstanding principal amount of
the Certificates, if certain conditions set forth in the related Series
Supplement are met.
The Certificates of each Series will be retired on the day following
the Distribution Date on which the final payment of principal is scheduled to be
made to the Certificateholders, whether as a result of optional reassignment to
the Transferor or otherwise. Each Prospectus Supplement will specify the final
date on which principal and interest with respect to the related Series of
Certificates will be scheduled to be distributed (the "Stated Series Termination
Date"); provided, however, that the Certificates may be subject to prior
termination as provided above. If the Investor Amount is greater than zero on
the Stated Series Termination Date, the Trustee is required to sell or cause to
be sold Receivables (in an amount up to 110% of the Adjusted Investor Amount,
any Enhancement Investor Amount of such Series, and any other amount specified
in the related Series Supplement) in the manner provided in the Pooling and
Servicing Agreement and Series Supplement and pay the net proceeds of such sale
and any Collections, in final payment of all principal of, and all accrued and
unpaid interest on, the Certificates of such Series and any other amounts
specified in the related Series Supplement, to the Certificateholders of such
Series on such Stated Series Termination Date.
Unless the Transferor instructs the Trustee otherwise, the Trust will
only terminate on the earlier to occur of: (i) the day designated by the
Transferor after the Distribution Date following the date on which funds shall
have been deposited in the Collection Account or applicable Principal Account
sufficient to pay the aggregate
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Investor Amount and any Enhancement Investor Amount plus applicable interest
accrued through such Distribution Date in full on all Series of Certificates,
and (ii) the day on which the final payment of principal is made to
Certificateholders of all Series, and (iii) the expiration of 21 years from the
death of the last survivor of the descendants of George Herbert Walker Bush,
former President of the United States, living on August 21, 1997 (the "Final
Termination Date"). Upon termination of the Trust and the surrender of the
Exchangeable Transferor Certificate, the Trustee shall convey to the Transferor
all right, title and interest of the Trust in and to the Receivables and other
funds of the Trust (other than amounts held in the Principal Account maintained
by the Trust for the final payment of principal and interest to the
Certificateholders).
Pay Out Events
Unless otherwise specified in the related Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the related Prospectus Supplement, unless a Pay Out Event occurs prior to
such date. A "Pay Out Event" occurs, unless modified by any Series Supplement,
upon the occurrence of either of the following events:
(a) The Transferor or the Company shall (i) become insolvent or
admit in writing its inability to pay its debts as they become due or
voluntarily and generally suspend payment of its obligations, (ii) voluntarily
seek, consent to, or acquiesce in the benefit or benefits of any Debtor Relief
Law, (iii) become a party to (or be made the subject of) any proceeding provided
for by any Debtor Relief Law, other than as a creditor or claimant, and, in the
event such proceeding is involuntary, (A) within 10 business days after the
Transferor or the Company has knowledge of such proceeding or the filing thereof
either (I) the petition instituting same has not been dismissed or (II) an order
has not been entered by the court having jurisdiction which allows continued
transfer to the Trust of Principal Receivables with no adverse effect to the
Trust or the Certificateholders or (B) an order as contemplated in (A)(II) above
having previously been entered, is no longer in effect other than by reason of
the termination of such proceeding, or (iv) become unable for any reason to
transfer Receivables to the Trust in accordance with the provisions of the
Pooling and Servicing Agreement; or
(b) the Trust or the Transferor becomes an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
In addition, a Pay Out Event may occur with respect to a Series upon
the occurrence of any other event specified in the related Prospectus
Supplement. On the date on which a Pay Out Event is deemed to have occurred,
the Rapid Amortization Period will commence. If, because of the occurrence of a
Pay Out Event, the Rapid Amortization Period begins earlier than the scheduled
commencement of an Amortization Period or prior to a Scheduled Payment Date,
Certificateholders will begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the average life of the
Certificates.
If the Rapid Amortization Event to occur is either the insolvency of
the Transferor or the appointment of a receiver or conservator for the
Transferor, the receiver or conservator for the Transferor may have the power to
delay or prevent commencement of the Rapid Amortization Period.
In addition to the consequences of a Pay Out Event discussed above, if
the Transferor voluntarily enters liquidation or a receiver, conservator or
liquidator is appointed for the Transferor, or all or substantially all its
property or another similar event (each a "Dissolution Event") occurs, on the
day of such Dissolution Event, the Transferor will immediately cease to transfer
Receivables to the Trust and the Transferor will promptly give notice to the
Trustee of such appointment. Within 15 days of receipt of such notice, the
Trustee will publish a notice of the liquidation or the appointment stating that
the Trustee intends to sell, dispose of or otherwise liquidate the Receivables
in a commercially reasonable manner and shall so notify the Certificateholders
and any Enhancement Provider (if provided in the Series Supplement) requesting
instruction as to the disposition of the Receivables. Unless otherwise
instructed within a specified period by the holders of Certificates representing
undivided interests aggregating more than 50% of the related Investor Amounts of
each Series, the Trustee will sell, dispose of or otherwise liquidate the
Receivables in accordance with the Pooling and Servicing Agreement in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds from the sale, disposition or liquidation
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of the Receivables will be treated as Collections allocable to the
Certificateholders of the applicable Series. If the Trustee is instructed not to
sell a portion of the Receivables allocable to a Series, as described above,
then the Trust shall continue with respect to such Series pursuant to the terms
of the Pooling and Servicing Agreement and the applicable Series Supplement. See
"Certain Legal Aspects of the Receivables -- Certain Matters Relating to
Receivership" and " -- Certain Matters Relating to Bankruptcy or Insolvency."
Servicing Compensation and Payment of Expenses
The Servicer's compensation for its servicing activities and
reimbursement for its expenses, will be the monthly servicing fee (the "Monthly
Servicing Fee"), as specified in the related Prospectus Supplement. The Monthly
Servicing Fee will be allocated among the Transferor Amount and the Investor
Amount. The Investor Servicing Fee will be equal to one-twelfth (1/12th) of the
product of the percentage designated in the applicable Series Supplement (the
"Servicing Fee Percentage") and the sum of the allocable portion of the
Transferor Amount and the Investor Amount as of the last day of the preceding
Monthly Period. The Investor Servicing Fee will be funded from Collections on
Finance Charge Receivables allocable to the Investor Amount, and will be paid
each month from the funds held in the Collection Account for the account of the
Investor Amount. See "-- Application of Collections."
The Servicer will pay from its servicing compensation the expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of independent accountants and
the Subservicers, if any.
Certain Matters Regarding the Servicer
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement except upon determination that (i) performance
of its duties is or will become impermissible under applicable law, regulation
or order and (ii) there is no reasonable action which the Servicer could take to
make the performance of its duties permissible under such applicable law,
regulation or order. No such resignation will become effective until the
Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Pooling and Servicing Agreement. The
Servicer may delegate any of its servicing duties to any person or entity that
agrees to conduct such duties in accordance with the Credit Card Guidelines and
the Pooling and Servicing Agreement; however, such delegation will not relieve
the Servicer of its liability and responsibility to perform such duties in
accordance with the Pooling and Servicing Agreement.
Any entity into which, in accordance with the Pooling and Servicing
Agreement, the Servicer may be merged or consolidated, or any entity resulting
from any merger or consolidation to which the Servicer is a party, or any entity
succeeding to the business of or acquiring all or substantially all the
properties or assets of, the Servicer, upon execution of a supplement to the
Pooling and Servicing Agreement, delivery of an opinion of counsel with respect
to the compliance of the transaction with the applicable provisions of the
Pooling and Servicing Agreement and delivery of notice thereof to each Rating
Agency and the satisfaction of the Rating Agency Condition, will be the
successor to the Servicer under the Pooling and Servicing Agreement.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have notified the Transferor in writing that such action
will not result in a reduction or withdrawal of its rating of any outstanding
Series with respect to which it is a Rating Agency. The Transferor shall
furnish any such notice from the Rating Agencies to the Trustee.
Servicer Default
In the event of any Servicer Default (as defined below) that has not
been remedied, either the Trustee or the holders of Certificates of any Series
then outstanding evidencing undivided interests aggregating more than 50% of the
aggregate Investor Amount, by written notice to the Servicer (and to the
Trustee, if given by the holders of Certificates of any Series then
outstanding), may terminate all of the rights and obligations of the Servicer,
in its
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capacity as Servicer under the Pooling and Servicing Agreement, with respect to
all of the Receivables held by the Trust with respect to all Series, and the
proceeds thereof, and the Trustee shall thereafter appoint a new Servicer (a
"Service Transfer"). The rights and interests of the Transferor under the
Pooling and Servicing Agreement in the Transferor Interest will not be affected
by any Service Transfer. The Transferor shall have the right to nominate to the
Trustee a potential successor Servicer. The Trustee shall as promptly as
possible appoint the entity nominated by the Transferor if such entity meets
certain eligibility criteria set forth in the Pooling and Servicing Agreement.
If the Transferor does not nominate an entity to be successor Servicer, the
Trustee shall as promptly as possible appoint a successor Servicer, and if no
successor Servicer has been appointed by the Trustee and has accepted such
appointment by the time the Servicer ceases to act as Servicer, all authority,
power and obligations of the Servicer under the Pooling and Servicing Agreement
will pass to, and be vested in, the Trustee. Prior to any Service Transfer, the
Trustee will seek to obtain bids from potential servicers meeting certain
eligibility requirements set forth in the Pooling and Servicing Agreement to
serve as a successor Servicer for servicing compensation not in excess of the
Investor Servicing Fee plus the servicing fee allocable to the Transferor
Interest. If the Trustee is unable to obtain any bids from eligible servicers
and the Servicer delivers an officer's certificate to the effect that it cannot
in good faith cure the related Servicer Default, then the Trustee will under
certain circumstances offer the Transferor the right to accept the reassignment
of all of the Receivables. The deposit amount of such a reassignment shall be
equal to the sum of the aggregate Investor Amount (less the aggregate principal
amount held in the Excess Funding Account and any principal funding account with
respect to any Series) plus accrued and unpaid interest on the Certificates of
all Series plus certain amounts payable to specified Enhancement Providers, if
applicable.
A "Servicer Default" means any of the following events:
(i) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions or notice to the Trustee to make such
payment, transfer or deposit, on the date the Servicer is required to do so
under the Pooling and Servicing Agreement or any Series Supplement (upon
expiration of a five business day grace period), provided, however, that
any such failure caused by circumstances beyond the Servicer's control
shall not constitute a Servicer Default if the Servicer promptly remedies
such failure within five business days after receiving notice thereof or
otherwise becoming aware of such failure;
(ii) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Pooling and
Servicing Agreement or any Series Supplement which has a material adverse
effect on the Certificateholders of any Series then outstanding (without
regard to the amount of any Enhancement then available), which continues
unremedied for a period of 60 days after written notice and which continues
to material adversely affect the rights of the Certificateholders of any
Series then outstanding for such period, or the Servicer delegates its
duties under the Pooling and Servicing Agreement, except as specifically
permitted thereunder;
(iii) any representation, warranty or certification made by the
Servicer in the Pooling and Servicing Agreement or any Series Supplement or
in any certificate delivered pursuant to the Pooling and Servicing
Agreement or any Series Supplement proves to have been incorrect when made,
which has a material adverse effect on the rights of the Certificateholders
of any Series outstanding (without regard to the amount of any Enhancement
then available), and which continues to be incorrect in any material
respect for a period of 60 days after written notice and which continues to
materially adversely affect the rights of the Certificateholders of any
Series (without regard to the amount of Enhancement, if any then
outstanding for such period); or
(iv) the occurrence of certain events of bankruptcy or insolvency
relating to the Servicer (such events include the appointment (voluntary or
involuntary) of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings related to the Servicer of all or substantially all of its
property and the Servicer
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admitting in writing its inability to pay its debts as they become due,
filing a petition to take advantage of an insolvency or reorganization
statute, making an assignment for the benefit of its creditors or
voluntarily suspending payment of its obligations).
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of 10 business days after the
applicable grace period or a delay in or failure of performance referred to
under clauses (ii) or (iii) for a period of 60 business days after the
applicable grace period shall not constitute a Servicer Default, if such delay
or failure could not have been prevented by the exercise of reasonable diligence
by the Servicer and such delay or failure was caused by an act of God or other
similar occurrence. Upon the occurrence of any such event, the Servicer shall
not be relieved from using its best reasonable efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement or any Series Supplement, and the Servicer shall provide the
Trustee, the Transferor, the Certificateholders and the Enhancement Providers,
if any, applicable to any Series, with prompt notice of such failure or delay by
it, together with a description of its efforts to so perform its obligations.
The Servicer will immediately notify the Trustee in writing of any Servicer
Default.
Reports to Certificateholders
By each Distribution Date, the Paying Agent will forward to the Trustee and
each Rating Agency a statement prepared by the Servicer (the "Monthly Servicer
Report") setting forth certain information with respect to the Trust and
Certificates of each Series, including: (a) the aggregate amount of Collections
of Finance Charge Receivables and the aggregate amount of Collections of
Principal Receivables processed during the immediately preceding Monthly Period;
(b) the Investor Percentage for such Monthly Period; (c) for each Series and for
each Class within any such Series, the total amount of such distribution
allocable to principal and interest, if any, (d) the aggregate outstanding
balance of the Accounts which were delinquent by 31 days, 61 days and 91 days or
more as of the close of business on the last day of the Monthly Period
immediately preceding such Distribution Date; (e) the Investor Default Amount
for the immediately preceding Monthly Period; (f) the amount of Investor Charge
Offs and the amount of reimbursements thereof for the next succeeding
Distribution Date; (g) the amount of the Investor Servicing Fee for the next
succeeding Distribution Date; (h) the aggregate amount of Receivables in the
Trust at the close of business on the last day of the Monthly Period immediately
preceding such Distribution Date; (i) the Investor Amount and the Adjusted
Investor Amount at the close of business on the last day of the Monthly Period
immediately preceding such Distribution Date; and (j) whether a Pay Out Event
has occurred.
On each Distribution Date with respect to each Series the Paying Agent, on
behalf of the Trustee, will forward to each Certificateholder of record a
statement (the "Payment Date Statement"), which may be the Monthly Servicer
Report, prepared by the Servicer setting forth the information with respect to
the Certificates of such Series set forth in the Monthly Servicer Report
supplied to the Trustee as described in the preceding paragraph and the
following additional information (which, in the case of (a), (b) and (c) below,
will be stated on the basis of an original principal amount of $1,000 per
Certificate): (a) the total amount distributed; (b) the amount of such
distribution allocable to principal; (c) the amount of such distribution
allocable to interest; and (d) the amount, if any, by which the principal
balance of the Certificates exceeds the Investor Amount as of the Record Date
with respect to such Distribution Date.
On or before January 31 of each calendar year beginning with 1998, the
Paying Agent, on behalf of the Trustee, will furnish to each person who at any
time during the preceding calendar year was a Certificateholder of record a
statement prepared by the Servicer containing the information required to be
contained in the regular Payment Date Statement, as set forth in clauses (a),
(b) and (c) above aggregated for such calendar year or the applicable portion
thereof during which such person was a Certificateholder, together with such
other customary information (consistent with the treatment of the Offered
Certificates as debt) as the Trustee or the Servicer deems necessary or
desirable to enable Certificateholders to prepare their tax returns.
The Pooling and Servicing Agreement further provides that on or before June
30 of each calendar year, beginning with 1998, the Servicer will cause a firm of
independent public accountants to furnish a report covering
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the preceding annual period to the effect that such firm has applied certain
procedures to certain documents and records relating to the servicing of the
Accounts, compared the information contained in the Servicer's certificates
delivered during the period covered by such report with such documents and
records and that, based upon such procedures, no matters came to the attention
of such accountants that caused them to believe that such servicing was not
conducted in all material respect in compliance with specified sections of the
Pooling and Servicing Agreement, except for such exceptions as such accountants
believe to be immaterial and such other exceptions as shall be set forth in such
report.
In addition, for each calendar year, such accountants will include as
part of their annual report, a comparison of the mathematical calculations of
the amounts contained in the monthly certificates forwarded by the Servicer
during the period covered by such report, with the Servicer's computer reports
that were the source of such amounts, and deliver a report to the Trustee
confirming that such amounts are consistent, except for such exceptions as such
accountants believe to be immaterial and such other exceptions as shall be set
forth in such report. The Trustee will make such reports available for
inspection by Certificateholders.
The Pooling and Servicing Agreement provides for delivery to the
Trustee on or before June 30 of each calendar year, beginning with 1998, of an
annual statement signed by an officer of the Servicer to the effect that to such
officer's knowledge the Servicer has fully performed its obligations under the
Pooling and Servicing Agreement throughout the preceding year, or if there has
been a default in the performance of such obligation, specifying the nature and
status of the default.
Unless Definitive Certificates are issued, all reports and statements
to Certificateholders shall be provided to DTC or its nominee, Cede, as the
registered holder of the Offered Certificates. All reports and statements
discussed above will be delivered to the Certificate Owners by DTC and the DTC
Participants in accordance with the DTC Rules and the rules and policies of the
DTC Participants. In addition, the Trustee will deliver all such reports and
statements to the Certificate Owners upon request. The Monthly Servicer Report
will also be filed with the Commission on a Current Report on Form 8-K and will
be available to Certificate Owners as provided under "Reports to
Certificateholders" and "Available Information."
Amendments
The Pooling and Servicing Agreement and any Supplement may be amended
by the Transferor, the Servicer and the Trustee, without the consent of any of
the Certificateholders, to cure any ambiguity, to revise certain exhibits and
schedules, to correct or supplement any provision therein which may be
inconsistent with any other provision therein, to add other identifying code
numbers or other identifying characteristics to the definition of Account, or to
add any other provisions with respect to matters or questions arising under the
Pooling and Servicing Agreement which are not inconsistent with the provisions
of the Pooling and Servicing Agreement. No such amendment, however, may
adversely affect in any material respect the interests of the
Certificateholders.
The Pooling and Servicing Agreement and any Series Supplement also may
be amended by the Transferor, the Servicer and the Trustee without the consent
of any of the Certificateholders for the purpose of adding, changing or
eliminating any provision thereof or any right of the Certificateholders
thereunder, provided that (i) the Servicer shall have furnished the Trustee with
an officer's certificate to the effect that the amendment will not materially
and adversely affect the interest of any Certificateholder, (ii) such amendment
will not cause the Trust to be characterized as a corporation for Federal income
tax purposes or otherwise have a material adverse effect on the Federal income
taxation of any Series and (iii) the Servicer shall have given each Rating
Agency 10 business days' prior written notice of such amendment and shall have
received written confirmation from each Rating Agency that the Rating Agency
Condition shall be met as a result of such amendment. No such amendment,
however, may effect any of the amendments that require unanimous
Certificateholder consent as set forth in the next paragraph, or (i) reduce in
any manner the amount of, or delay the timing of, distributions which are
required to be made on any Certificate of any Series, (ii) change the definition
of or the manner of calculating the interest of any Certificateholder, (iii)
alter the requirements for changing the percentage by which the Minimum
Transferor Amount for any outstanding Series is determined, (iv) change the
manner in which the
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Transferor Amount is determined, or (v) reduce the percentage required in the
following paragraph to consent to such amendment. Notwithstanding the foregoing,
the transfer of Receivables to, and the generation of new Receivables by the
Bank, the appointment of the Bank as Servicer, and certain other actions related
to the Bank will be deemed not to materially and adversely affect the interests
of the Certificateholders.
The Pooling and Servicing Agreement may also be amended by the
Transferor, the Servicer and the Trustee with the consent of the holders of
certificates of all Series then outstanding evidencing undivided interests
aggregating not less than 50% of the Investor Amount of all outstanding Series
adversely affected, for the purpose of adding any provisions to, changing in any
manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or of modifying in any manner the rights of holders of Certificates of
any Series then outstanding. No such amendment, however, may (i) reduce in any
manner the amount of, or delay the timing of, distributions required to be made
on any Certificate of such outstanding Series without the consent of all holders
of the related Certificate, (ii) change the definition of or the manner of
calculating the Investor Amount, the Investor Percentage, the required amount of
any Enhancement or the Investor Default Amount of such Series without the
consent of each holder of Certificates adversely affected thereby or (iii)
reduce the aforesaid percentage of undivided interests the holders of which are
required to consent to any such amendment, without the consent of all
Certificateholders of all Series then outstanding. Furthermore, any such
amendment shall require prior written confirmation from the applicable Rating
Agency that the Rating Agency Condition will be met.
Promptly following the execution of any amendment to the Pooling and
Servicing Agreement or any Series Supplement, the Trustee will furnish written
notice of the substance of such amendment to each Certificateholder of all
Series (or with respect to an amendment of a Series Supplement, to the
applicable Series).
Indemnification
The Pooling and Servicing Agreement provides that the Servicer will
indemnify the Trust, for the benefit of Certificateholders, and the Trustee,
including its officers, directors and employees, from and against any loss,
liability, expense, damage or injury arising out of or relating to any claims,
actions or proceedings brought or asserted by third parties regarding the
activities of the Trust or the Trustee for which the Servicer is responsible
under the Pooling and Servicing Agreement or any Series Supplement; provided,
however, the Servicer shall not indemnify (a) the Transferor, the Trust, the
Trustee or their respective officers, directors, agents or employees for
liabilities opposed by reason of fraud, negligence or breach of fiduciary duty
by (i) the Trustee in the performance of its duties under the Pooling and
Servicing Agreement or (ii) the Transferor or any Certificateholders, (b) the
Transferor, the Trust, the Trustee, the Certificate Owners or Certificateholders
for liabilities arising from actions taken by the Trustee at the request of the
Certificateholders, (c) the Transferor, the Trust, the Trustee, the Certificate
Owners or the Certificateholders as to any losses, claims or damages incurred in
their capacity as an investor, including, without limitation, losses incurred as
a result of Defaulted Receivables or Receivables which are charged off as
uncollectable, or (d) the Trust, the Trustee, the Certificate Owners or the
Certificateholders for any liabilities costs or expenses the Trust, the Trustee,
or the Certificate Owners or Certificateholders arising under any tax law,
including, without limitation, any Federal, state or local income or franchise
tax or other tax imposed measured by income required to be paid by the Trust,
the Certificate Owners or the Certificateholders in connection with the Trust or
the Pooling and Servicing Agreement to any taxing authority, except as may be
required to the extent that the State of Illinois (or its taxing authority)
determines that the Trust is a partnership and that the Illinois Personal
Property Replacement Income Tax is applicable to the Trust under the Illinois
Income Tax Act.
The Transferor, the Servicer or any of their respective directors,
officers, employees or agents will be liable under the Pooling and Servicing
Agreement only to the extent of the obligation specifically undertaken by it in
such capacity under the Pooling and Servicing Agreement. However, none of the
Transferor, the Servicer or any of their respective directors, officers,
employees or agents will be protected against any liability which would
otherwise be imposed by reason of bad faith or gross negligence by or on behalf
of the Transferor or the Servicer in the performance of their respective duties
under the Pooling and Servicing Agreement.
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In addition, the Pooling and Servicing Agreement provides that the
Servicer is not under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its servicing responsibilities under the
Pooling and Servicing Agreement and which, in the Servicer's opinion, may expose
it to any expense or liability. The Servicer may, in its sole discretion,
undertake any such legal action which it may deem necessary or desirable for the
benefit of Certificateholders with respect to the Pooling and Servicing
Agreement and the rights and duties of the parties thereto and the interest of
the Certificateholders thereunder.
Amendments to the Pooling and Servicing Agreement Relating to FASIT Election
Each Certificateholder, by acquiring an interest in a Certificate, is
deemed to consent to any amendment to the Pooling and Servicing Agreement or any
Series Supplement necessary for the Transferor to elect financial asset
securitization trust ("FASIT") status for the Trust or any portion thereof,
provided that, such election may not be made unless the Transferor delivers to
the Trustee an opinion of counsel to the effect that (i) the issuance of FASIT
regular interests will not adversely affect the tax characterization as debt of
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 Certificates
would be characterized as debt, (ii) 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 (iii) such issuance will not
cause or constitute an event in which gain or loss would be recognized by any
Certificateholder.
List of Certificateholders
Upon written request of any Certificateholders of record representing
undivided interests in the Trust aggregating not less than 10% of the Investor
Amount of any Series, the Trustee, after having been adequately indemnified by
such Certificateholders for its costs and expenses, will afford such
Certificateholders access during normal business hours to the current list of
Certificateholders of such Series for purposes of communicating with such other
Certificateholders with respect to their rights under the Pooling and Servicing
Agreement.
The Pooling and Servicing Agreement generally does not provide for any
annual or other meetings of Certificateholders.
The Trustee
Norwest Bank Minnesota, National Association is the Trustee and
initial Paying Agent under the Pooling and Servicing Agreement. The Transferor,
the Servicer, each Seller and their respective affiliates have had deposit, lock
box, borrowing and similar transactions with the Trustee in the ordinary course
of business, and from time to time may hereafter have further relationships and
transactions with the Trustee and its affiliates. The Trustee, the Transferor,
the Servicer and any of their respective affiliates may hold Certificates of any
Series in their own names however, any Certificates so held shall not be
entitled to participate in any decisions made or instructions given to the
Trustee by the Certificateholders as a group. The Trustee's address is Sixth
and Marquette, Minneapolis, Minnesota 55479-0070, Attention: Asset Backed
Securities Corporate Trust Department, telephone number (612) 667-9528.
For purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint a co-trustee or
separate trustee of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee will be conferred or imposed upon, and exercised or performed
by, the Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee will be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee, who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will
be obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee, if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
circumstances, the Transferor
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will be obligated to appoint a successor Trustee as provided in the Pooling and
Servicing Agreement. Any resignation or removal of the Trustee and appointment
of a successor Trustee does not become effective until acceptance of the
appointment by the successor Trustee.
ENHANCEMENT
General
For any Series, Enhancement may be provided with respect to one or
more Classes thereof. Enhancement may be in the form of the subordination of
one or more Classes of the Certificates of such Series, the establishment of a
cash collateral guaranty or account, a letter of credit, a surety bond,
insurance, a spread account, a reserve account, the use of cross-support
features or another method of Enhancement described in the related Prospectus
Supplement, or any combination of the foregoing. If so specified in the related
Prospectus Supplement, any form of Enhancement may be structured so as to be
drawn upon by more than one Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Enhancement will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur which exceed the amount
covered by the Enhancement or which are not covered by the Enhancement,
Certificateholders will bear their allocable share of such deficiencies.
If Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable under
such Enhancement, (b) any conditions to payment thereunder not otherwise
described herein, (c) the conditions, if any, under which the amount payable
under such Enhancement may be reduced and under which such Enhancement may be
terminated or replaced and (d) any material provisions of any agreement relating
to such Enhancement. Additionally, the related Prospectus Supplement may set
forth certain information with respect to any third party Enhancement Provider,
including (i) a brief description of its principal business activities, (ii) its
principal place of business, place of incorporation and the jurisdiction under
which it is chartered or licensed to do business, (iii) if applicable, the
identity of regulatory agencies which exercise primary jurisdiction over the
conduct of its business and (iv) its total assets, its shareholders' or
policyholders' surplus, if applicable, and other appropriate financial
information as of the date specified in the Prospectus Supplement. If so
specified in the related Prospectus Supplement, Enhancement with respect to a
Series may be available to pay principal of the Certificates of such Series
following the occurrence of certain Pay Out Events with respect to such Series.
In such event, the Enhancement Provider may have an interest in certain cash
flows in respect of the Receivables to the extent described in such Prospectus
Supplement (the "Enhancement Investor Amount").
Subordination
If so specified in the related Prospectus Supplement, one or more
Classes of any Series will be subordinated as described in the related
Prospectus Supplement to the extent necessary to fund payments with respect to
the Senior Certificates or specified Certificates of another Series. The rights
of the holders of any such Subordinated Certificates to receive distributions of
principal and/or interest on any Distribution Date for such Series will be
subordinate in right and priority to the rights of the holders of Senior
Certificates, but only to the extent set forth in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, subordination
may apply only in the event of certain types of losses not covered by another
Enhancement. The related Prospectus Supplement will also set forth information
concerning the amount of subordination of a Class or Classes of Subordinated
Certificates of a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, and the conditions under which amounts available from
payments that would otherwise be made to holders of such Subordinated
Certificates will be distributed to holders of Senior Certificates. If
Collections otherwise distributable to holders of a Subordinated Class of a
Series will be used as support for a Class of another Series, the related
Prospectus Supplement will specify the manner and conditions for applying such a
cross-support feature.
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Cash Collateral Guaranty or Account
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain permitted
investments in an account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash Collateral Guaranty or by a Cash Collateral Account
alone. The amount available pursuant to the Cash Collateral Guaranty or the
Cash Collateral Account will be the lesser of amounts held in the Cash
Collateral Account and an amount specified in the related Prospectus Supplement.
The related Prospectus Supplement will set forth the circumstances under which
payments are made to beneficiaries of the Cash Collateral Guaranty from the Cash
Collateral Account or from the Cash Collateral Account directly.
Letter of Credit
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain
losses in addition to or in lieu of other Enhancement. The issuer of the letter
of credit (the "L/C Bank") will be obligated to honor demands with respect to
such letter of credit, to the extent of the amount available thereunder, to
provide funds under the circumstances, and subject to such conditions, as are
specified in the related Prospectus Supplement.
The maximum liability of an L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the related Prospectus
Supplement of the Initial Investor Amount of a Series or a Class of such Series.
The maximum amount available at any time to be paid under a letter of credit
will be determined in the manner specified therein and described in the related
Prospectus Supplement.
Surety Bond or Insurance Policy
If so specified in the related Prospectus Supplement, insurance with
respect to a Series or one or more Classes thereof will be provided by one or
more insurance companies. Such insurance will guarantee distributions of
interest or principal with respect to such Series or Class in the manner and
amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond
will be purchased for the benefit of the holders of a Series or one or more
Classes thereof to assure distributions of interest or principal with respect to
such Series or Class in the manner and amount specified in the related
Prospectus Supplement.
Spread Account
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by the periodic deposit
of certain available excess cash flow from the Trust's assets into an account
(the "Spread Account") intended to assure the subsequent distribution of
interest or principal with respect to such Series or Class in the manner and
amount specified in the related Prospectus Supplement.
Reserve Account
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by the establishment of a
reserve account (the "Reserve Account"). The Reserve Account may be funded, to
the extent provided in the related Prospectus Supplement, by an initial cash
deposit, the retention of certain periodic distributions of principal or
interest otherwise payable to one or more Classes of Certificates, including the
Subordinated Certificates, and/or the provision of a letter of credit,
guarantee, insurance policy or other form of credit or any combination thereof.
The Reserve Account will be established to assure the subsequent distribution of
interest or principal with respect to such Series or Class in the manner and
amount specified in the related Prospectus Supplement.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Initial Sellers sold all their Receivables to the Transferor
pursuant to Receivables Purchase Agreements dated as of August 21, 1997. On
February 2, 1998, the Company contributed all of the Initial Sellers' Accounts
and the accounts of the Younkers division of Proffitt's to the Bank, and the
Bank assumed all obligations of the Initial Sellers under their respective
Receivables Purchase Agreements and entered into a new Receivables Purchase
Agreement with the Transferor substantially similar to the Receivables Purchase
Agreements with the Initial Sellers. For purposes of this Prospectus, the Bank
includes its predecessors in their capacity as Initial Sellers of Receivables in
Accounts.
The Bank sells, on a daily basis, all its Receivables to the
Transferor. The Transferor transfers the Receivables to the Trust. The Bank
represents and warrants to the Transferor that the sale of Receivables by it
constitutes a valid sale to the Transferor of all right, title and interest of
the Bank in and to the Receivables, and the Transferor warrants to the Trustee
that its transfer constitutes a valid transfer to the Trust of all right, title
and interest of the Transferor in and to the Receivables, except for the
interest of the Transferor as holder of the Exchangeable Transferor Certificate.
The Transferor further warrants to the Trust that if the transfer of the
Receivables to the Trust does not constitute a valid transfer of the
Receivables, it constitutes a grant of a security interest to the Trust in and
to the Receivables. The Transferor also warrants to the Trust that, if the
transfer of Receivables to the Trust is deemed to create a security interest
under the UCC, there exists a valid and enforceable first priority perfected
security interest in the Receivables at the time of their transfer to the Trust
in favor of the Trust, and a valid and enforceable first priority perfected
security interest in the Receivables created thereafter in favor of the Trust on
and after their creation (except for certain liens permitted under the Pooling
and Servicing Agreement), in each case until termination of the Trust. For a
discussion of the Trust's rights arising from a breach of these warranties. See
"Description of the Certificates and the Pooling and Servicing Agreement --
Representations and Warranties."
The Bank represents and warrants to the Transferor, and the Transferor
warrants to the Trust, that the Receivables are "accounts," "general
intangibles" or "chattel paper" for the purposes of the UCC. Both the sale or
transfer of accounts or chattel paper and the transfer of accounts or chattel
paper as security for an obligation are treated under the UCC as creating a
security interest therein and are subject to its provisions, and in either case
the filing of appropriate financing statements is required to perfect the
interests of the Transferor and the Trust in the Receivables. If a transfer of
general intangibles is deemed to create a security interest, the UCC applies and
the filing of appropriate financing statements is required to perfect the
interests of the Transferor and the Trust in the Receivables. Financing
statements covering the Receivables were therefore filed under the UCC to
perfect the interests of the Transferor and the Trust in the Receivables. If a
transfer of general intangibles is deemed to be a sale, then the UCC is not
applicable and no action under the UCC is required to perfect the ownership
interest of the Transferor or the Trust in the Receivables.
There are certain limited circumstances under the UCC in which a prior
or subsequent transferee of Receivables coming into existence after the date of
a transfer of Receivables to the Trust could have an interest in such
Receivables with priority over the Trust's interest. A tax or other government
lien on property of the Bank or the Transferor arising prior to the time a
Receivable comes into existence may also have priority over the interest of the
Trust in such Receivable. Under each Receivables Purchase Agreement, however,
the Bank warrants, and under the Pooling and Servicing Agreement the Transferor
warrants, that the Bank, as Seller, or the Transferor, as the case may be, has
sold or transferred the Receivables to the Transferor or the Trust, as the case
may be, free and clear of the lien of any third party except for liens permitted
under the Pooling and Servicing Agreement. In addition, each of the Bank and
the Transferor covenants that the Bank or the Transferor, as the case may be,
will not sell, pledge, assign, transfer or grant any lien on any Receivable (or
any interest therein) other than to the Transferor or the Trust, as the case may
be.
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If any seller of Receivables (other than the Bank) or the Transferor
were to become a debtor in a bankruptcy case, a receiver or conservator was
appointed for the Bank, or certain other events relating to the insolvency of
the Bank, any other seller of Receivables, the Bank, or the Transferor were to
occur, causing a Pay Out Event pursuant to the Pooling and Servicing Agreement,
new Principal Receivables would not be transferred to the Trust. If any such
events occur with respect to the Transferor, the Trustee would sell the
Receivables (unless holders of more than 50% of the principal amount of
outstanding Certificates under all Classes of all Series instruct otherwise),
thereby causing a termination of the Trust and a loss to the Certificateholders
if the net proceeds from such sale is insufficient to pay the Certificateholders
in full. However, in a bankruptcy proceeding affecting the Transferor, the
Transferor may not be permitted to suspend transfers of Receivables to the
Trust, and the Trustee's instructions to sell the Receivables may not be
enforceable. If no Servicer Default other than such insolvency event exists,
the debtor-in-possession may have the power to prevent either the Trustee or the
Certificateholder from appointing a successor Servicer.
Certain Matters Relating to Bankruptcy or Insolvency
Certain restrictions have been imposed on the Transferor and certain
parties to the transactions described herein which are intended to reduce the
risk of a bankruptcy proceeding involving the Transferor. The Transferor's
certificate of incorporation provides that it will not file a voluntary petition
for relief under the Bankruptcy Code or any applicable state insolvency laws
without the affirmative vote of its independent directors. Pursuant to the
Pooling and Servicing Agreement, each of the Servicer and the Trustee on behalf
of itself and each Certificateholder will covenant that it will not institute
against the Transferor any bankruptcy proceeding under any insolvency law prior
to the date which is one year and one day after the payment of the Certificates
in full. The Transferor has no intent to file, and the Company has no intent to
cause the filing of, a voluntary application of relief under any insolvency laws
with respect to the Transferor as long as the Transferor is solvent and does not
reasonably foresee becoming insolvent, continues to pay its debts as they become
due and does not become under capitalized. Pursuant to the Receivables Purchase
Agreement, the Bank has agreed that it will not institute against the Transferor
any bankruptcy proceeding under any insolvency law prior to the date which is
one year and one day after the date of the termination of the Trust.
The Transferor has taken steps in structuring the transactions
contemplated hereby that are intended to reduce the risk that a bankruptcy case
with respect to Proffitt's or any of its affiliates will result in consolidation
of the assets and liabilities of the Transferor with those of any of such
entities under the Bankruptcy Code. The Transferor will not engage in any
activities except purchasing Receivables and related property from the Bank,
managing and servicing such Receivables, selling and assigning Receivables and
issuing evidences of ownership or assignment in respect thereof and engaging in
activities incident to, or necessary or convenient to accomplish, the foregoing.
In addition, the Transferor's certificate of incorporation contains restrictions
requiring, among other things, that the Transferor adhere to specified operating
procedures including, without limitation (i) that at all times no less than two
members of the Board of Directors of the Transferor will be composed of
individuals who are not affiliated with the Company or any of its affiliates,
except as members of the Board of Directors of the Transferor, (ii) the
Transferor will not incur any indebtedness or assume or guaranty any
indebtedness of any other entity, (iii) the Transferor will maintain its own
payroll and separate books of account and corporate documents, (iv) that to the
extent that the Transferor's office is located in the offices of any affiliate,
it will pay fair market rent and a fair share of the overheads associated with
such office space, (v) the Transferor will act solely in its corporate name and
through its own authorized officers and agents, (vi) the Transferor will manage
its liabilities separately from those of any of its affiliates and will pay its
own liabilities, and (vii) the Transferor will not impermissibly commingle any
of its assets with those of any of its affiliates or any other entity and will
not hold itself out as being liable for the debts of another. Such separate
business restrictions may be waived with the unanimous consent of the Board of
Directors of the Transferor.
Counsel has advised the Transferor that (i) a voluntary application
for relief under the Bankruptcy Code or any similar applicable state law with
respect to the Transferor may not lawfully be filed without the prior consent of
all directors of the Transferor, including its independent directors, (ii)
subject to certain assumptions (including the assumption that separateness and
corporate formalities are observed by the Company and the
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Transferor), the assets and liabilities of the Transferor would not be
substantively consolidated with the assets and liabilities of the Company in the
event of an application for relief under the Bankruptcy Code with respect to the
Company, and (iii) the sale and transfer of Receivables by the sellers of
Receivables (other than the Bank) to the Transferor constitutes a valid sale and
transfer and, therefore, such Receivables and the proceeds thereof should not be
a part of the Company's bankruptcy estate under Section 541 of the Bankruptcy
Code, as currently enacted, if any of the other sellers of Receivables should
become a debtor thereunder. Such opinion is based on the law as it exists at the
date hereof and is not binding on any court. Accordingly, there can be no
assurance that a court will not reach a different conclusion.
If the Company or any of the Initial Sellers were to become a debtor
in a bankruptcy case and a creditor or a trustee-in-bankruptcy of such debtor or
such debtor itself, as debtor-in-possession, were to take the position that the
sale of Receivables to the Transferor should be recharacterized as a pledge of
such Receivables to secure a borrowing by such debtor or if the court were to
rule in favor of such recharacterization, then delays and reductions in payment
of Collections to the Transferor and consequently to the Trust and delays and
reductions in payments on the Offered Certificates could occur and
Certificateholders could experience losses in their investment in the Offered
Certificates.
If, notwithstanding the structure described above, (i) the Transferor
became a debtor in a bankruptcy proceeding, or (ii) a court concluded that the
assets and liabilities of the Transferor should be consolidated with the assets
and liabilities of the Company, or (iii) a creditor or a trustee-in-bankruptcy
of such debtor or such debtor itself, as debtor-in-possession, were to litigate
the consolidation issue, then delays in distributions on the Offered
Certificates and possible reductions in the amounts of such distributions could
occur.
Payments made by the Initial Sellers (other than the Bank) pursuant to
the Receivables Purchase Agreements in respect of purchases of Receivables or
reductions in the amount thereof as described in the preceding paragraph may be
recoverable by the Initial Sellers as debtor-in-possession or by a trustee-in-
bankruptcy of any of the Initial Sellers from the Transferor or the
Certificateholders as an avoidable transfer, if such payments were made within
one year or other applicable period under state law prior to the commencement of
a bankruptcy case in respect of any of the Initial Sellers.
Certain Matters Relating to Receivership
The FDIA, as amended by FIRREA, which became effective August 9, 1989,
sets forth certain powers that the FDIC could exercise if it were appointed as
receiver or conservator for the Bank.
To the extent that (i) the Bank has granted a security interest in the
Receivables to the Trust, (ii) that interest is validly perfected before the
Transferor's insolvency and is not taken in contemplation of insolvency or with
the intent to hinder, delay or defraud the Bank or its creditors, (iii) the
Receivables Purchase Agreement is continuously maintained as a record of the
Transferor and (iv) the Receivables Purchase Agreement represents a bona fide
and arm's length transaction undertaken for adequate consideration in the
ordinary course of business and the Trustee is not an insider or affiliate of
the Bank, such valid perfected security interest of the Trustee would be
enforceable (to the extent of the Trust's "actual direct compensatory damages")
notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, the Bank and payments to the Trust with respect to the
Receivables (up to the amount of such damages) should not be subject to recovery
by the FDIC as conservator or receiver of the Bank. If, however, the FDIC were
to assert a contrary position, or were to require the Trustee to establish its
right to those payments by submitting to and completing the administrative
claims procedure established under FIRREA, delays in payments on the
Certificates and possible reductions in the amount of those payments could
occur. The FDIA does not define the term "actual direct compensatory damages."
On April 10, 1990, the Resolution Trust Corporation (the "RTC"), which
administered the resolution of failed savings associations under the FDIA and
which is no longer in existence, adopted a statement of policy with respect to
the payment of interest on collateralized borrowings. The RTC policy statement
states that interest on such borrowings will be payable at the contract rate up
to the date of the redemption or payment by the conservator, receiver, or
trustee of an amount equal to the principal owed plus the contract rate of
interest up to the date of such
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payment or redemption, plus any expenses of liquidation if provided for in the
contract, to the extent secured by the collateral. In a 1993 case involving zero
coupon bonds, however, a federal district court held that the RTC was instead
obligated to pay bondholders the fair market value of repudiated bonds as of the
date of repudiation. The FDIC itself has not adopted a policy statement on
payment of interest on collateralized borrowings.
The Pooling and Servicing Agreement provides that, upon the insolvency
of the Bank or the appointment of a receiver of conservator for the Bank, the
Bank will promptly give notice thereof to the Trustee and a Pay Out Event with
respect to all Series will occur. Under the Pooling and Servicing Agreement no
new Receivables will be transferred to the Trust and, unless otherwise
instructed within a specified period by the holders of an interest in the Trust
as described under "Description of the Certificates and the Pooling and
Servicing Agreement -- Pay Out Events," or unless otherwise required by the
receiver or conservator for the Bank, the Trustee will proceed to sell, dispose
of or otherwise liquidate the Receivables in a commercially reasonable manner
and on commercially reasonable terms. The proceeds from the sale of the
Receivables would then be treated by the Trustee as Collections and would be
distributed to the Certificateholders as described in the Pooling and Servicing
Agreement. If the only Pay Out Event to occur is either the insolvency of the
Bank or the appointment of a receiver or conservator for the Bank, such receiver
or conservator may have the power to require the Transferor to continue to
purchase new Receivables and transfer such Receivables to the Trust and to
prevent the early sale, liquidation or disposition of the Receivables and the
commencement of the Rapid Amortization Period.
Consumer and Debtor Protection Laws, Recent and Proposed Legislation
The relationship between a cardholder and a credit card issuer is
extensively regulated by Federal and state consumer protection laws. With
respect to the Bank's credit cards, the most significant Federal laws are those
included in the Federal Truth-in-Lending, Equal Credit Opportunity and Fair
Credit Reporting Act, as amended. These laws require, among other things,
extension of credit without unlawful discrimination, disclosure of credit costs
both before credit is extended and thereafter in each monthly account statement,
timely response to claimed billing errors, and prompt application of payments.
The Trustee may be liable for certain violations of consumer protection laws
that apply to the Receivables, either as assignee from the Bank and the
Transferor with respect to obligations arising before transfer of the
Receivables to the Trust or as the party directly responsible for obligations
arising after the transfer. In addition, a cardholder may be entitled to assert
such violations by way of set-off against the obligations to pay the amount of
Receivables owing. The Transferor agrees to accept from the Trust, and the Bank
agrees to accept from the Transferor, the retransfer of all Receivables that
have been charged off and that were not created in compliance in all material
respects with the requirements of such laws. The Transferor makes to the Trust,
and the Initial Sellers have made, and the Bank makes to the Transferor, certain
other representations and warranties relating to the validity and enforceability
of the Receivables. However, it is not anticipated that the Trustee will make
any examination of the Receivables or the records relating thereto for the
purpose of establishing the presence or absence of defects or compliance with
such representations and warranties, or for any other purpose. The sole remedy
if any such representation or warranty is breached, and such breach continues
beyond the applicable cure period, is that the Transferor will be obligated to
accept the retransfer of such Receivables and each of the Bank (as successor to
the obligations of the Initial Sellers under the Receivables Purchase
Agreements) and any other seller of Receivables, if any, will be obligated to
repurchase such Receivables from the Transferor. See "Description of the
Certificates and the Pooling and Servicing Agreement -- Representations and
Warranties."
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals
on active duty in the military to cap the interest rate on debts incurred before
the call to active duty to 6% per annum. In addition, subject to judicial
discretion, any action or court proceeding in which an individual in military
service is involved may be stayed if the individual's rights would be prejudiced
by denial of such stay.
Application of Federal and state bankruptcy and Debtor Relief Laws
would affect the interests of the Certificateholders if such laws result in
Receivables being charged off as uncollectible when there is insufficient credit
enhancement to cover such charged off amounts. See "Description of the
Certificates and the Pooling and Servicing Agreement -- Allocation of Investor
Default Amount; Adjustment Amounts; Investor Charge Offs."
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During recent years, there has been increased consumer awareness with
respect to the level of finance charges and fees and other practices of credit
card issuers and other consumer revolving credit loan providers which could
result in public pressure on Federal and state legislators to impose limitations
on finance charges or other fees. For example, legislation has been introduced
in the United States Congress which would limit the finance charges that may be
charged on credit card balances. In particular, on June 19, 1997, a proposal to
amend the Federal Truth-in-Lending Act was introduced in the House of
Representatives and referred to the Committee on Banking and Financial Services,
which would, among other things, prohibit the imposition of certain minimum
finance charges and other fees, prohibit certain methods of calculating finance
charges, require prior notice of any increase in the interest rate assessed with
respect to a credit card account and limit the amount of certain fees. If a
federal or state law imposing a ceiling on finance charge rates were enacted,
the Bank could be required to lower the finance charges that it assesses on the
Receivables to a level which might result in a Pay Out Event, thus causing
commencement of the Rapid Amortization Period and other adverse consequences to
Certificateholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion, summarizing the material anticipated Federal
income tax aspects of the purchase, ownership and disposition of the
Certificates of a Series, is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the Treasury regulations promulgated
thereunder, and published rulings and court decisions in effect as of the date
hereof, all of which are subject to change, possibly retroactively, and such
changes could modify or adversely affect the tax consequences summarized below.
This discussion does not address every aspect of the Federal income tax laws
that may be relevant to Certificate Owners of a Series in light of their
personal investment circumstances or to certain types of Certificate Owners of a
Series subject to special treatment under the Federal income tax laws (for
example and without limitation, banks and insurance companies). PROSPECTIVE
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS
IN CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCALITY, FOREIGN COUNTRY, OR OTHER TAXING JURISDICTION.
Unless otherwise indicated, this summary deals only with U.S.
Certificate Owners who hold such Certificates as capital assets. The discussion
assumes that the Certificates will be issued in registered form, will have all
payments denominated in U.S. Dollars and will have a term that exceeds one year.
Moreover, the discussion assumes that the interest formula for the Certificates
meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID Regulations") relating to original issue discount ("OID"),
and that any OID on the Certificates (i.e., any excess of the principal amount
of the Certificates over their issue price) does not exceed a de minimis amount
(i.e., 1/4% of the principal amount multiplied by the number or full years until
maturity), all within the meaning of the OID Regulations. If any of those
assumptions are not met with regard to a particular Series of Certificates,
additional tax considerations will be disclosed in the applicable Prospectus
Supplement.
For purposes of this discussion, a "U.S. Certificate Owner" means a
Certificate Owner that is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate, the income
of which is subject to Federal income taxation regardless of its source or (iv)
a trust which is subject to the supervision of a court within the United States
and the control of a United States person as described in section 7701(a)(30) of
the Code. For purposes of this discussion, the term "non-U.S. Certificate
Owner" means a Certificate Owner other than a U.S. Certificate Owner.
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Characterization of the Certificates as Indebtedness
Unless otherwise specified in the related Prospectus Supplement,
Alston & Bird LLP, Atlanta, Georgia, special tax counsel to the Transferor
("Special Tax Counsel") will, upon issuance of a Series of Certificates, render
an opinion that the Offered Certificates of such Series will be treated as
indebtedness for Federal income tax purposes. However, opinions of counsel are
not binding on the Internal Revenue Service (the "IRS") and there can be no
assurance that the IRS could not successfully challenge this conclusion.
The Transferor expresses in the Pooling and Servicing Agreement its
intent that for Federal, state and local income and franchise tax purposes, the
Certificates of each Series will be indebtedness secured by the Receivables.
The Transferor agrees and each Certificateholder and Certificate Owner, by
acquiring an interest in a Certificate of a Series, will be deemed to agree to
treat the Certificates of such Series as indebtedness of PCC for Federal, state
and local income and franchise tax purposes (except to the extent that different
treatment is explicitly required under state or local tax statutes). However,
because different criteria are used to determine the non-tax accounting
characterization of the transactions contemplated by the Pooling and Servicing
Agreement, the Transferor expects to treat such transaction, for regulatory and
financial accounting purposes, as a sale of an ownership interest in the
Receivables and not as a debt obligation of the Transferor.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the IRS and the courts have set forth several
factors to be taken into account in determining whether the substance of a
transaction is a sale of property or a secured indebtedness for Federal income
tax purposes, the primary factors in making this determination are whether the
Transferor has assumed the risk of loss or other economic burdens relating to
the property and has obtained the benefits of ownership thereof. Unless
otherwise set forth in a Prospectus Supplement, it is expected that Special Tax
Counsel will express the opinion that although no transaction closely comparable
to that contemplated herein has been the subject of any Treasury regulation,
revenue ruling or judicial decision, the Certificates will be properly
characterized as indebtedness for Federal income tax purposes. Except as
otherwise expressly indicated, the following discussion assumes that the Offered
Certificates are properly treated as debt obligations of the Transferor for
Federal income tax purposes. See "-- Possible Classification of the Transaction
as a Partnership or as an Association Taxable as a Corporation".
Treatment of the Trust
Unless otherwise specified in the related Prospectus Supplement,
Special Tax Counsel will render an opinion that the Trust will not be subject to
Federal income tax, and that (i) if the Trust is viewed as a collateral
arrangement for debt issued directly by the Transferor and any other holders of
equity interests in the Trust, then the Trust will be disregarded for Federal
income tax purposes, and (ii) if the Trust is viewed as a separate entity
issuing its own debt and owned by the Transferor and any other holders of equity
interests in the Trust, then the Trust would be a partnership for Federal income
tax purposes rather than an association (or publicly traded partnership) taxable
as a corporation.
Possible Classification of the Transaction as a Partnership or as an Association
Taxable as a Corporation
It is possible that the IRS could assert that, for purposes of the
Code, some or all of the Certificates of a Series are not debt obligations for
Federal income tax purposes and that the proper classification of the legal
relationship between the Transferor, any other holders of equity interests in
the Trust, and the Certificate Owners of such Series resulting from the
transaction is that of a partnership, a publicly traded partnership taxable as a
corporation, or an association taxable as a corporation.
If some or all of the Certificates were treated as equity interests in
a partnership (other than a "publicly traded partnership"), the partnership
itself would not be subject to Federal income tax; rather, the partners of such
partnership, including the Certificate Owners of such Series, would be taxed
individually on their respective
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distributive shares of the partnership's income, gain, loss, deductions and
credits. The amount and timing of items of income and deductions of a
Certificate Owner could differ if the Certificates of such Series were held to
constitute partnership interests, rather than indebtedness. Moreover, an
individual's share of expenses of the partnership would be miscellaneous
itemized deductions that, in the aggregate, are allowed as deductions only to
the extent they exceed two percent of the individual's adjusted gross income,
and would be subject to reduction under Section 68 of the Code if the
individual's adjusted gross income exceeded certain limits. As a result, the
individual might be taxed on a greater amount of income than the stated rate on
the Certificates. Furthermore, if any Certificates were treated as equity
interests in a partnership, all or a portion of such income in subsequent years
allocated to a Certificate Owner that is a pension, profit sharing or employee
benefit plan or other tax-exempt entity (including an individual retirement
account) might constitute "unrelated business taxable income" generally taxable
to such investor under the Code. Finally, if any Certificates were treated as
equity interests in a partnership in which other interests were debt, all or
part of a tax-exempt investor's share of income from the Certificates that were
treated as equity would be treated under the Code as unrelated debt-financed
income taxable to the investor.
If the Trust were treated in whole or in part as a partnership in
which some or all Certificate Owners of one or more Series were partners, that
partnership could be classified as a publicly traded partnership taxable as a
corporation. A partnership will be classified as a publicly traded partnership
taxable as a corporation if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent" unless certain exceptions apply. One
such exception would apply if the Trust is not engaged in a "financial business"
and 90% or more of its income consists of interest and certain other types of
passive income. Because Treasury Regulations do not clarify the meaning of a
"financial business" for this purpose, it is unclear whether this exception
applies. The Transferor has taken and intends to take measures designed to
reduce the risk that the Trust could be classified as a publicly traded
partnership taxable as a corporation. However, there can be no assurance that
the Trust could not become a publicly traded partnership, because certain of the
actions necessary to comply with such exceptions are not fully within the
control of the Transferor.
If it were determined that a transaction created an entity classified
as a corporation (including a publicly traded partnership taxable as a
corporation), the Trust would be subject to Federal income tax at corporate
income tax rates on the income it derives from the Receivables and other
investments, which would reduce the amounts available for distribution to the
Certificate Owners, possibly including Certificate Owners of a Series that is
treated as indebtedness. Such classification might also have adverse state and
local tax consequences that would further reduce amounts available for
distribution to Certificate Owners. Cash distributions to the Certificate
Owners (except any Class not recharacterized as an equity interest in an
association) generally would be treated as dividends for tax purposes to the
extent of such deemed corporation's earnings and profits.
Since Special Tax Counsel, unless otherwise specified in the related
Prospectus Supplement, will advise that the Certificates of a Series will be
treated as indebtedness in the hands of the Certificate Owners of a Series for
Federal income tax purposes, the Transferor generally will not attempt to comply
with the Federal income tax reporting requirements that would apply if
Certificates were treated as interests in a partnership or corporation (unless,
as is permitted by the Pooling and Servicing Agreement, an interest in the Trust
is issued or sold that is intended to be classified as an interest in a
partnership).
Taxation of Interest Income of U.S. Certificate Owners
As set forth above, it is expected that, unless otherwise specified in
a Prospectus Supplement, Special Tax Counsel will render an opinion, upon
issuance, that the Certificates of a Series will be treated as indebtedness for
Federal income tax purposes. Except as discussed below or in a Prospectus
Supplement, the Certificates will not be issued with OID and, accordingly,
interest thereon will be includable in income by U.S. Certificate Owners as
ordinary income when received (in the case of a cash basis taxpayer) or accrued
(in the case of an accrual basis taxpayer) in accordance with their respective
methods of tax accounting. Under the OID Regulations, a holder of a Certificate
issued with a de minimis amount of OID must include any such OID in income, on a
pro rata basis, as principal payments are made on the Certificate. Interest
received on the Certificates of a Series may also constitute
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"investment income" for purposes of certain limitations of the Code concerning
the deductibility of investment interest expense.
A subsequent U.S. Certificate Owner who purchases a Certificate at a
discount may be subject to the "market discount" rules of the Code. These rules
provide, in part, for the treatment of gain attributable to accrued market
discount as ordinary income upon the receipt of partial principal payments or on
the sale or other disposition of the Certificate, and for the deferral of
certain interest deductions with respect to debt incurred to acquire or carry
the market discount Certificate.
A holder who purchases a Certificate at a premium may elect to
amortize and deduct this premium over the remaining term of the Certificate in
accordance with rules set forth in Section 171 of the Code.
Sale of a Certificate by a U.S. Certificate Owner
In general, a U.S. Certificate Owner will recognize gain or loss upon
the sale, exchange, redemption, or other taxable disposition of a Certificate
measured by the difference between (i) the amount of cash and the fair market
value of any property received (other than amounts attributable to, and taxable
as, accrued interest) and (ii) the U.S. Certificate Owner's adjusted tax basis
in the Certificate (as increased by any OID or market discount previously
included in income by the holder and decreased by any deductions previously
allowed for amortizable bond premium and by any payments reflecting principal or
OID received with respect to such Certificate). Subject to the market discount
rules discussed above and provided that the Certificate was held as a capital
asset, any such gain or loss will be capital gain or loss. Capital gains of
individuals derived in respect of capital assets held for more than one year are
eligible for reduced rates of taxation which may vary depending upon the holding
period of such capital assets. In addition, capital losses generally may be
used only to offset capital gains.
FASIT Considerations
Unless otherwise set forth in a Prospectus Supplement, it is expected
that the Series Supplement pursuant to which any Certificates are issued will
provide for an amendment to the Pooling and Servicing Agreement to permit an
election to treat the Trust as a "financial asset securitization investment
trust" (a "FASIT"). Prior to any such amendment, the Transferor will be
required to deliver to the Trustee an opinion of counsel to the effect that, for
Federal income tax purposes, (i) the issuance of FASIT regular interests will
not adversely affect the tax characterization as debt of Certificates of any
outstanding Series or Class that were characterized as debt at the time of their
issuance, (ii) following such issuance the Trust will not be deemed to be an
association (or publicly traded partnership) taxable as a corporation, and (iii)
such issuance will not cause or constitute an event in which gain or loss would
be recognized by any Certificate Owner or the Trust. See "Description of the
Certificates and the Pooling and Servicing Agreement -- Amendments to the
Pooling and Servicing Agreement Relating to FASIT Election."
Non-U.S. Certificate Owners
As set forth above, it is expected that, unless otherwise specified in
a Prospectus Supplement, Special Tax Counsel will render an opinion, upon
issuance, that the Certificates of a Series will be treated as indebtedness for
Federal income tax purposes. The following information describes the Federal
income tax treatment of non-U.S. Certificate Owners if the Certificates are
treated as indebtedness.
Interest, including OID, paid to a non-U.S. Certificate Owner will be
subject to U.S. withholding taxes at a rate of 30% unless (i) the income is
"effectively connected" with the conduct by such non-U.S. Certificate Owner of a
trade or business carried on in the United States and the investor evidences
this fact by delivering an IRS Form 4224 or (ii) the non-U.S. Certificate Owner
and each securities clearing organization, bank, or other financial institution
that holds the Certificates on behalf of such non-U.S. Certificate Owner in the
ordinary course of its trade or business, in the chain between the Certificate
Owner and the U.S. person otherwise required to withhold the U.S. tax, complies
with applicable identification requirements (and the Certificate Owner does not
actually or
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constructively own 10% or more of the voting stock of the Transferor (or, upon
the issuance of an interest in the Trust that is treated as a partnership
interest, any holder of such interest) and is not a controlled foreign
corporation with respect to the Transferor (or the holder of such an interest)
and is not a bank whose receipt of interest on a Certificate is described in
section 881(c)(3)(A) of the Code. Applicable identification requirements
generally will be satisfied if there is delivered to a securities clearing
organization (i) IRS Form W-8 signed under penalties of perjury by the
Certificate Owner, stating that the Certificate Owner is not a U.S. Certificate
Owner and providing such Certificate Owner's name and address or (ii) IRS Form
1001, signed by the Certificate Owner or such Certificate Owner's agent,
claiming exemption from withholding under an applicable tax treaty; provided
that in any such case (x) the applicable form is delivered pursuant to
applicable procedures and is properly transmitted to the United States entity
otherwise required to withhold tax and (y) none of the entities receiving the
form has actual knowledge that the Certificate Owner is a U.S. Certificate
Owner.
Recently finalized Treasury regulations (the "Final Regulations")
could affect the procedures to be followed by a non-U.S. Certificate Owner in
complying with United States Federal withholding, backup withholding and
information reporting rules. The Final Regulations are not effective as of the
date of this Prospectus but generally will be effective for payments made after
December 31, 1998. Prospective investors are urged to consult their tax
advisors regarding the effect, if any, of the Final Regulations on the purchase,
ownership, and disposition of the Certificates.
If a non-U.S. Certificate Owner is engaged in a trade or business in
the United States and interest on the Certificate is effectively connected with
the conduct of such trade or business, the non-U.S. Certificate Owner, although
exempt from the withholding tax discussed above, will be subject to U.S. federal
income tax on such interest on a net income basis in the same manner as if it
were a U.S. Certificate Owner. In addition, if such holder is a foreign
corporation it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, subject to
adjustments. For this purpose, such interest will be included in such foreign
corporation's earnings and profits.
A non-U.S. Certificate Owner will not be subject to U.S. Federal
income tax on gain realized upon the sale, exchange, or redemption of a
Certificate, provided that (i) such gain is not effectively connected with the
conduct of a trade or business in the United States, (ii) in the case of a non-
U.S. Certificate Owner that is an individual, such non-U.S. Certificate Owner is
not present in the United States for 183 days or more during the taxable year in
which such sale, exchange, or redemption occurs, and (iii) in the case of gain
representing accrued interest, the conditions described with respect to interest
and OID above.
If the interests of the non-U.S. Certificate Owners of a Series were
reclassified as interests in a partnership (not taxable as a corporation), such
recharacterization could cause a non-U.S. Certificate Owner to be treated as
engaged in a trade or business in the United States. In such event the non-U.S.
Certificate Owner of such Series would be required to file a Federal income tax
return and, in general, would be subject to Federal income tax, including branch
profits tax in the case of a non-U.S. Certificate Owner that is a corporation
(unless eliminated under an applicable tax treaty), on its net income from the
partnership. Further, the partnership would be required, on a quarterly basis,
to pay withholding tax equal to the sum, for each foreign partner, of such
foreign partner's distributive share of "effectively connected" income of the
partnership multiplied by the highest rate of tax applicable to that foreign
partner. The tax withheld from each foreign partner would be credited against
such foreign partner's U.S. income tax liability.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an applicable
tax treaty.
Backup Withholding
Certain Certificate Owners may be subject to backup withholding at the
rate of 31% with respect to interest paid on the Certificates of a Series if the
Certificate Owner, upon issuance, fails to supply the Trustee or
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his broker with his taxpayer identification number, furnishes an incorrect
taxpayer identification number, fails to report interest, dividends, or other
"reportable payments" (as defined in the Code) properly, or, under certain
circumstances, fails to provide the Trustee or his broker with a certified
statement, under penalty of perjury, that he is not subject to backup
withholding. Information returns will be sent annually to the IRS and to each
Certificate Owner of a Series setting forth the amount of interest paid on the
Certificates of such Series and the amount of tax withheld thereon.
STATE AND LOCAL TAX CONSEQUENCES
An investment in the Certificates will have state and local tax
consequences. The state and local tax consequences will depend in part upon the
tax laws of jurisdictions where the Certificateholders reside or are doing
business. Certain state tax implications of an investment in the Certificates
are described in the Prospectus Supplement. The tax consequences arising to the
Certificateholders under the laws of other jurisdictions are not discussed
herein or in the Prospectus Supplement. Potential investors should consult
their own tax advisers as to the state and local tax consequences of an
investment in the Certificates with respect to their particular circumstances.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on (i) employee benefit
plans (as defined in Section 3(3) of ERISA), (ii) plans described in section
4975(e)(1) of the Code, including individual retirement accounts or Keogh plans,
(iii) any entities whose underlying assets include plan assets by reason of a
plan's investment in such entities and (iv) person who have certain specified
relationships to such plans. Section 406 of ERISA prohibits plans described in
Section 401 of ERISA from engaging in certain transactions with person who are
"parties in interest" unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code prohibits plans described in Section
4975(e)(1) of the Code from engaging in certain transactions with persons who
are "disqualified persons" unless a statutory or administrative exemption
applies. Moreover, based on the reasoning of the United States Supreme Court in
John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86 (1993), an
insurance company's general account may be deemed to include assets of the
employee benefit plans investing in the general account (e.g., through the
purchase of an annuity contract), and the insurance company might be treated as
a party in interest with respect to a plan by virtue of such investment.
ERISA also imposes certain duties on persons who are fiduciaries of
plans subject to ERISA. Under ERISA, a person who exercises discretionary
authority or control respecting the management or disposition of the assets of a
plan, renders investment advice or has the authority to render investment advice
to a plan for a fee or other compensation, or has any discretionary authority or
responsibility with respect to the administration of a plan is generally
considered to be a fiduciary of such plan. Fiduciaries, parties in interest and
disqualified persons with respect to employee benefit plans described in Section
401 of ERISA and Section 4975(e)(1) of the Code (collectively, "Benefit Plans"),
may be subject to excise taxes, civil fines and other liabilities for violating
the fiduciary responsibility and prohibited transaction rules of Section 406 of
ERISA and Section 4975 of the Code.
Benefit Plan fiduciaries should determine whether the acquisition and
holding of the Certificates and the operations of the Trust would result in
direct or indirect prohibited transactions under ERISA and the Code. The
operations of the Trust could result in prohibited transactions if Benefit Plans
that purchase the Certificates are deemed to own an interest in the underlying
assets of the Trust. There may also be an improper delegation of the fiduciary
responsibility to manage Benefit Plan assets if Benefit Plans that purchase the
Certificates are deemed to own an interest in the underlying assets of the
Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of a Benefit Plan, the assets and properties of certain entities
in which a Benefit Plan makes an equity investment could be deemed to be assets
of the Benefit Plan in certain circumstances. Accordingly, if Benefit Plans
purchase Certificates, the Trust could be deemed to hold plan assets unless one
of the exceptions under the Final Regulation is applicable to the Certificates
of a Series and the Trust.
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The Final Regulation applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that interests in Certificates are
equity interests for purposes of the Final Regulation, the final Regulation
contains an exception that may apply to the purchase of Certificates by a
Benefit Plan. Under this exception, the issuer of a security is not deemed to
hold plan assets of a Benefit Plan that purchases the security so long as the
security qualifies as a "publicly offered security" for purposes of the Final
Regulation. A publicly offered security is a security that is (i) freely
transferable, (ii) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another and (iii) either is (A)
part of a class of securities registered with the Commission under Section 12(b)
or 12(g) of the Exchange Act or (B) sold to the Benefit Plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Securities Act and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days (or such
later time as may be allowed by the Commission) after the end of the fiscal year
of the issuer during which the offering of such securities to the public
occurred.
In addition, the Final Regulation generally provides that if equity
participation by "benefit plan investors" in the Certificates is not
significant, the assets of a Benefit Plan holding Certificates of a Series will
not include any of the underlying assets of the Trust. Equity participation by
benefit plan investors is considered significant if immediately after the most
recent acquisition of any equity interest in the Trust, 25% or more of the value
of any class of equity interests in the Trust is held by benefit plan investors.
In performing the percentage calculation, the value of equity interests held by
a person (other than a benefit plan investor) that has discretionary authority
or control with respect to the assets of the Trust or any person that provides
investment advice for a fee (direct or indirect) with respect to such assets or
any affiliate of such persons (as defined in the Final Regulations) is
disregarded. Thus, if such persons purchase Certificates, the 25% threshold
will decrease. For purposes of the Final Regulation, a "benefit plan investor"
includes any employee benefit plan within the meaning of Section 3(3) of ERISA
(whether or not it is subject to ERISA), a plan described in Section 4975(e)(1)
of the Code, and any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity.
If interests in the Offered Certificates fail to meet the criteria of
publicly offered securities and the equity participation by benefit plan
investors is significant, the Trust's assets will be deemed to include assets of
Benefit Plans that are Certificateholders. Consequently, transactions involving
the Trust and parties in interest or disqualified persons with respect to such
Benefit Plans might be prohibited under Section 406 of ERISA and Section 4975 of
the Code unless an exemption is applicable. In addition, the Transferor or any
underwriter of the Certificates may be considered to be a party in interest,
disqualified person or fiduciary with respect to an investing Benefit Plan.
Accordingly, an investment by a Benefit Plan in Certificates may be a prohibited
transaction under ERISA and the Code unless such investment is subject to a
statutory or administrative exemption. Thus, for example, if a participant in
any Benefit Plan is a cardholder of one of the Accounts, under DOL
interpretations the purchase of interest in Certificates by such Benefit Plan
could constitute a prohibited transaction.
There are five class exemptions issued by the DOL that could apply in
such event: (i) DOL Prohibited Transaction Exemption 84-14 (Class Exemption for
Plan Asset Transactions Determined by Independent Qualified Professional Asset
Managers), (ii) 91-38 (Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds), (iii) 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts), (iv) 95-60
(Class Exemption for Certain Transactions Involving Insurance Company General
Accounts) and, (v) 96-23 (Class Exemption for Certain Transactions Determined by
In-House Asset Managers). There is no assurance that these exemptions, even if
all of the conditions specified therein are satisfied, or any other exemption
will apply to all transactions involving the Trust's assets.
If any Certificates are treated as equity interests in a partnership,
a Benefit Plan could have its share of income from the partnership treated as
"unrelated business taxable income" under the Code and thus taxable to the
Benefit Plan. Furthermore, if any Certificates were treated as equity interests
in a partnership in which other interests were debt, all or part of a tax-exempt
investor's share of income from the Certificates that were treated as equity
probably would be treated under the Code as unrelated debt-financed income
taxable to the investor as unrelated business taxable income.
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In light of the foregoing, fiduciaries of a Benefit Plan considering
the purchase of interests in Certificates should consult their own counsel as to
whether the acquisition of such Certificates would be a prohibited transaction,
whether the assets of the Trust which are represented by such interests would be
considered plan assets, and whether, under the general fiduciary standards of
investment prudence and diversification, an investment in Certificates is
appropriate for the Benefit Plan taking into account the overall investment
policy of the Benefit Plan and the composition of the Benefit Plan's investment
portfolio. In addition, fiduciaries should consider the consequences that would
apply if the Trust's assets were considered plan assets, the applicability of
exemptive relief from the prohibited transaction rules, and, whether all
conditions for such exemptive relief would be satisfied.
In addition, insurance companies considering the purchase of
Certificates using assets of a general account should consult their own employee
benefits counsel or other appropriate counsel with respect to the effect of the
Small Business Job Protection Act of 1996 which added a new Section 401(c) of
ERISA relating to the status of the assets of insurance company general accounts
under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the DOL
was required to issue final regulations not later than December 31, 1997 with
respect to insurance policies issued on or before December 31, 1998 that are
supported by an insurer's general account. On December 22, 1997, the DOL issued
proposed regulations, which have not been finalized at the date of this
Prospectus but are intended to provide guidance on which assets held by the
insurer constitute "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code. The plan asset status of
insurance company separate accounts is unaffected by new Section 401(c) of
ERISA, and separate account assets continue to be treated as the plan assets of
any such plan invested in a separate account.
PLAN OF DISTRIBUTION
The Transferor may sell Certificates (a) through underwriters or
dealers, (b) directly to one or more purchasers, or (c) through agents. The
related Prospectus Supplement will set forth the terms of the offering of any
Certificates offered hereby, including, without limitation, the names of any
underwriters, the purchase price of such Certificates and the proceeds to the
Transferor from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series
offered hereby, such Certificates will be acquired by the underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of commitment
therefor. Such Certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the related Prospectus
Supplement, the obligation of the underwriters to purchase such Certificates
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all of such Certificates if any of such Certificates are
purchased. After the initial public offering, the public offering price and
other selling terms, including discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
Certificates may also be sold directly by the Transferor or through
agents designated by the Transferor from time to time. Any agent involved in
the offer or sale of Certificates will be named, and any commissions payable by
the Transferor to such agent will be set forth, in the related Prospectus
Supplement. Unless otherwise indicated in the related Prospectus Supplement,
any such agent will act on a "best efforts" basis for the period of its
appointment.
Any underwriters, agents or dealers participating in the distribution
of Certificates may be deemed to be underwriters, and any discounts or
commission received by them on the sale or resale of Certificates may be deemed
to be underwriting discounts and commissions, under the Securities Act. Agents
and underwriters may be entitled under agreements entered into with the
Transferor to indemnification by the Transferor and the Company
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against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments that the agents or underwriters
may be required to make in respect thereof. Agents and underwriters may be
affiliates or customers of, engage in transactions with, or perform services
for, the Transferor or its affiliates in the ordinary course of business.
LEGAL MATTERS
It is anticipated that certain legal matters relating to the issuance
of the Certificates of any Series and the federal income tax consequences of
such issuance will be passed upon for the Company and the Transferor by Alston &
Bird LLP, Atlanta, Georgia. Certain legal matters relating to the issuance of
the Certificates of a Series will be passed upon for the underwriters by the
counsel named in the Prospectus Supplement.
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INDEX OF TERMS FOR PROSPECTUS
Term Page
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Accounts......................................................... cover
Accumulation Period.............................................. 12
Additional Account Closing Date.................................. 41
Additional Accounts.............................................. 2
Adjusted Investor Amount......................................... 50
Adjustment....................................................... 49
Adjustment Payment Obligation.................................... 50
Aggregate Automatic Addition Limit............................... 43
Aggregate Investor Amount........................................ 40
Aggregate Investor Percentage.................................... 46
Amortization Period.............................................. 3
Automatic Additional Accounts.................................... 2
Bank............................................................. 1
Bankruptcy Code.................................................. 19
Base Rate........................................................ 26
Benefit Plans.................................................... 70
Cash Collateral Account.......................................... 60
Cash Collateral Guaranty......................................... 59
Cede............................................................. cover
Cedel............................................................ 7
Cedel Participants............................................... 34
Certificate Owners............................................... cover
Certificate Rate................................................. 3
Certificateholders............................................... cover
Certificates..................................................... cover
Class............................................................ cover
Closing Date..................................................... 10
Code............................................................. 65
Collection Account............................................... 8
Collections...................................................... 1
Commission....................................................... cover
Company.......................................................... ii
Controlled Accumulation Amount................................... 12
Controlled Amortization Amount................................... 11
Controlled Amortization Period................................... 11
Controlled Deposit Amount........................................ 12
Controlled Distribution Amount................................... 11
Cooperative...................................................... 35
CPS.............................................................. cover
Creation Date.................................................... 40
Credit Card Guidelines........................................... 22
Default Amount................................................... 49
Defaulted Accounts............................................... 4
Defaulted Receivables............................................ 49
Defeased Series.................................................. 15
Definitive Certificates.......................................... 36
Department Stores................................................ 2
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Depositaries..................................................... 33
Depositary....................................................... 33
Depository....................................................... 33
Disclosure Document.............................................. 6
Discount Option.................................................. 26
Discount Option Receivable Collections........................... 44
Discount Option Receivables...................................... 43
Discount Percentage.............................................. 43
Dissolution Event................................................ 52
Distribution Date................................................ 9
DOL.............................................................. 70
DTC.............................................................. cover
DTC Rules........................................................ 33
Eligible Account................................................. 29
Eligible Originator.............................................. 29
Eligible Receivable.............................................. 28
Enhancement...................................................... 2
Enhancement Investor Amount...................................... 59
Enhancement Provider............................................. 43
ERISA............................................................ 16
Euroclear........................................................ 35
Euroclear Operator............................................... 35
Euroclear Participants........................................... 35
Euroclear System................................................. 35
Excess Funding Account........................................... 48
Excess Spread.................................................... 50
Exchange......................................................... 6
Exchange Act..................................................... cover
Exchange Date.................................................... 39
Exchange Notice.................................................. 39
Exchangeable Transferor Certificate.............................. 6
FASIT............................................................ 58
FDIA............................................................. 20
FDIC............................................................. 4
Final Regulation................................................. 70
Final Regulations................................................ 69
Final Termination Date........................................... 51
Finance Charge Receivables....................................... 4
Finance Charges.................................................. 4
FIRREA........................................................... 20
Full Investor Amount............................................. 14
Funding Period................................................... 14
Global Securities................................................ 1
Group............................................................ 13
Indirect Participants............................................ 33
Ineligible Receivable............................................ 40
Initial Cut-Off Date............................................. 2
Initial Investor Amount.......................................... 15
Initial Seller, Initial Sellers.................................. 18
Interchange...................................................... 5
Interest Funding Account......................................... 37
Interest Period.................................................. 9
Investor Amount.................................................. 3
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Investor Charge Off.............................................. 49
Investor Default Amount.......................................... 49
Investor Percentage.............................................. 4
Investor Servicing Fee........................................... 8
IRS.............................................................. 66
L/C Bank......................................................... 60
McRae's.......................................................... cover
Minimum Aggregate Principal Receivables.......................... 41
Minimum Transferor Amount........................................ 50
Minimum Transferor Interest Percentage........................... 50
Monthly Period................................................... 9
Monthly Servicer Report.......................................... 54
Monthly Servicing Fee............................................ 52
Moody's.......................................................... 44
non-U.S. Certificate Owner....................................... 65
Obligor.......................................................... 21
OCC.............................................................. 20
Offered Certificate.............................................. 9
OID.............................................................. 65
OID Regulations.................................................. 65
Paired Series.................................................... 15
Participants..................................................... 27
Participation Agreement.......................................... 42
Participations................................................... 42
Pay Out Event.................................................... 51
Payment Date Statement........................................... 55
PCC.............................................................. cover
Permitted Investments............................................ 45
Pooling and Servicing Agreement.................................. 1
Portfolio Yield.................................................. 22
Pre-Funded Amount................................................ 14
Pre-Funding Account.............................................. 14
Principal Account................................................ 12
Principal Amortization Period.................................... 11
Principal Commencement Date...................................... 10
Principal Receivables............................................ 4
Principal Shortfalls............................................. 47
Principal Terms.................................................. 7
Proffitt's....................................................... 8
Prospectus Supplement............................................ cover
Qualified Institution............................................ 44
Rapid Amortization Period........................................ 13
Rating Agency.................................................... 16
Rating Agency Condition.......................................... 39
Receivables...................................................... cover
Receivables Purchase Agreement, Receivables Purchase Agreements.. 18
Record Date...................................................... 6
Recoveries....................................................... 49
Removed Accounts................................................. 5
Reserve Account.................................................. 60
Revolving Period................................................. 10
Scheduled Payment Date........................................... 10
Securities Act................................................... cover
Senior Certificates.............................................. 3
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Series........................................................... cover
Series Adjustment Amount......................................... 50
Series Supplement................................................ 1
Service Transfer................................................. 53
Servicer......................................................... cover
Servicer Default................................................. 54
Servicing Fee Percentage......................................... 52
Shared Excess Finance Charge Collections......................... 48
Shared Principal Collections..................................... 47
Shortfall Amount................................................. 47
Special Tax Counsel.............................................. 66
Spread Account................................................... 60
Standard & Poor's................................................ 44
Stated Series Termination Date................................... 51
Subordinated Certificates........................................ 3
Subservicers..................................................... cover
Terms and Conditions............................................. 35
Transfer Agent and Registrar..................................... 36
Transferor....................................................... cover
Transferor Amount................................................ 3
Transferor Percentage............................................ 32
Trust............................................................ cover
Trust Portfolio.................................................. cover
Trustee.......................................................... cover
U.S. Certificate Owner........................................... 65
U.S. Person...................................................... 3
UCC.............................................................. 18
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Proffitt's Credit Card Master Trust Asset Backed Certificates (the "Global
Securities to be issued in Series from time to time (each, a "Series") will be
available only in book-entry form. Investors in the Global Securities may hold
such Global Securities through any of The Depository Trust Company ("DTC"),
Cedel or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of Cede, as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
Participants and Indirect Participants in DTC. As a result, Cedel and Euroclear
will hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to U.S. corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in same-
day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between
DTC Participants will be settled using the procedures applicable to U.S.
corporate debt obligations in same-day funds.
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Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a Cedel Participant or a Euroclear Participant, the purchaser
will send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit
to them, Cedel Participants or Euroclear Participants can elect not to pre-
position funds and allow the credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the
value date. Therefore, in many cases the investment income on the Global
Securities earned during that one-day period may substantially reduce or offset
the amount of such overdraft charges, although this result will depend on each
Cedel Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedel Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will send
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
Cedel or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the Global Securities to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date.
The payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debit in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade fails),
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would instead be valued as of the actual settlement date.
Finally, day traders that
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use Cedel or Euroclear and that purchase Global Securities from DTC Participants
for delivery to Cedel Participants or Euroclear Participants should note that
these trades would automatically fail on the sale side unless affirmative action
were taken. At least three techniques should be readily available to eliminate
this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give the
Global Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Cedel or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between such beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (ii) such beneficial owner takes one of the following steps to
obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income
(Form 4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of Tax
on Income Effectively Connected with the Conduct of a Trade or Business in the
United States).
Exemption or reduced rate of non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing in
a country that has a tax treaty with the United States can obtain an exemption
or reduced tax rate (depending on the treaty terms) by filing Form 1001
(Ownership, Exemption or Reduced Rate Certificate). If the treaty provides only
for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the Certificate
Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's Request
for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of
a Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the books
of the clearing agency). Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year.
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The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includable in gross income for United States tax
purposes, regardless of its source.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses in connection with the distribution of the Offered
Certificates, other than underwriting discounts, are set forth in the following
table. All amounts except the Securities and Exchange Commission Registration
Fee are estimated.
Securities and Exchange Commission Registration Fee............ $221,250
Legal Fees and Expenses........................................ *
Accounting Fees and Expenses................................... *
Rating Agency Fees............................................. *
Printing and Engraving......................................... *
Blue Sky Fees and Expenses..................................... *
Miscellaneous.................................................. *
Total................................................... *
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* To be filed by amendment
Item 15. Indemnification of Directors and Officers
The Articles of Incorporation of Proffitt's Credit Corporation include
the following provisions regarding indemnification:
(a) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation, or
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation, or is or was serving at the
request of the Corporation as a director (including an Independent Director),
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall be indemnified and held harmless by the
Corporation to the fullest extent legally permissible under the General
Corporation Law of the State of Delaware, as amended from time to time, against
all expenses, liabilities and losses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding.
(b) To the extent that a director, officer, employee or agent of
the Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraph (a) of this Article XV, or
in defense of any claim, issue or matter therein, he shall be indemnified by the
Corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith without the necessity of any action
being taken by the Corporation other than the determination, in good faith, that
such defense has been successful. In all other cases wherein indemnification is
provided by this Article XV, unless ordered by a court indemnification shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct specified in this Article XV. Such determination shall be made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion or (iii)
by the holders of a majority of the shares of capital stock of the Corporation
entitled to vote thereon.
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(c) The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful. Entry of a judgment by consent as part
of a settlement shall not be deemed a final adjudication of liability for
negligence or misconduct in the performance of duty, nor of any other issue or
matter.
(d) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
finial disposition of such action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount unless is shall ultimately be
determined that he is entitled to be indemnified by the Corporation. Expenses
(including attorneys' fees) incurred by other employees or agents of the
Corporation in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
(e) No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Nevada Revised Statutes Section 78
300 or (iv) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this Section (e) shall apply to
or have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
(f) The indemnification and advancement of expenses provided by
this Article XV shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Proffitt's, Inc. and various of its affiliates maintain directors and
officers liability insurance policies presently outstanding which may insure
directors and officers of the Transferor. These policies cover losses for which
the Transferor or its parent corporations shall be required or permitted by law
to indemnify directors and officers and which result from claims made against
such directors or officers based upon the commission of wrongful acts in the
performance of their duties. The policies also cover losses which the directors
or officers must pay as the result of claims brought against them based upon the
commission of wrongful acts in the performance of their duties and for which
they are not indemnified by the Transferor or the Transferor's parents or any of
their affiliates. The losses covered by the policies are subject to various
deductibles, exclusions and limitations and do not include fines or penalties
imposed by law or other matters deemed uninsurable under the law. The
Transferor has also agreed by contract to provide directors and officers'
insurance to its two independent directors.
Item 16. Exhibits and Financial Statements
(a) Exhibits
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of Proffitt's Credit Corporation
(incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-3 (File No. 333-28811).
3.2 -- By-laws of Proffitt's Credit Corporation (incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement on Form S-3
(File No. 333-28811).
II-2
<PAGE>
4.1 -- Master Pooling and Servicing Agreement dated as of August 21, 1997, by
and among Proffitt's Credit Corporation, as Transferor, Proffitt's
Inc., as Servicer, and Norwest Bank Minnesota, National Association,
as Trustee, as amended by Amendment No. 1 to the Master Pooling and
Servicing Agreement dated as of February 2, 1998, by and among
Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National Association, as Trustee
(incorporated by reference to Exhibit 99.2 to the Registrant's Current
Report on Form 8-K filed on September 23, 1997 and Exhibit 99.2 to the
Registrant's Current Report on Form 8-K filed on February 18, 1998).
4.3 -- Receivables Purchase Agreement by and among National Bank of the Great
Lakes, as Seller, Proffitt's Credit Corporation, as Purchaser, and
Proffitt's, Inc., as Servicer
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).*
23.2 -- Consent of Alston & Bird LLP (included in its opinion filed as Exhibit
8.1).*
24.1 -- Powers of Attorney.
- -------
* To be filed by amendment or on Form 8-K and incorporated herein by reference
(b) Financial Statements and Schedules
All financial schedules of Proffitt's Credit Corporation, Proffitt's, Inc.
and its subsidiaries have been omitted as they are not required under the
related instructions or are inapplicable.
Item 17. Undertakings.
A. RULE 415 OFFERING.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant
II-3
<PAGE>
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. SUBSEQUENT DOCUMENTS INCORPORATED BY REFERENCE.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. INDEMNIFICATION OF OFFICERS, DIRECTORS AND CONTROLLING PERSONS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
D. RULE 430A.
The undersigned registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Birmingham, State of Alabama, on this 24th day of
March, 1998.
PROFFITT'S CREDIT CORPORATION
By: /s/ DOUGLAS E. COLTHARP
-----------------------
Name: Douglas E. Coltharp
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Douglas E. Coltharp, Donald E. Wright and James
S. Scully and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, including a Registration Statement filed under Rule 462(b) of the
Securities Act of 1993, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the following
capacities on March 24, 1998.
Signatures Title
- ---------- -----
/s/ Douglas E. Coltharp President and Director
- ------------------------- (Principal Executive Officer)
Douglas E. Coltharp
/s/ James S. Scully Vice President, Treasurer, Assistant Secretary and
- ------------------------- Director
James S. Scully (Principal Financial Officer)
/s/ Douglas E. Wright Senior Vice President, Assistant Secretary and
- ------------------------- Director
Donald E. Wright (Principal Accounting Officer)
/s/ Monte L. Miller Director
- -------------------------
Monte L. Miller
/s/ Andrew L. Stidd Director
- -------------------------
Andrew L. Stidd
/s/ Kevin P. Burns Director
- -------------------------
Kevin P. Burns
II-5
<PAGE>
EXHIBIT INDEX
S-K
Reference
Number Description
- ------ -----------
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of Proffitt's Credit Corporation
(incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-3 (File No. 333-28811).
3.2 -- By-laws of Proffitt's Credit Corporation (incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement on Form S-3
(File No. 333-28811).
4.1 -- Master Pooling and Servicing Agreement dated as of August 21, 1997, by
and among Proffitt's Credit Corporation, as Transferor, Proffitt's
Inc., as Servicer, and Norwest Bank Minnesota, National Association, as
Trustee, as amended by Amendment No. 1 to the Master Pooling and
Servicing Agreement dated as of February 2, 1998, by and among
Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as
Servicer, and Norwest Bank Minnesota, National Association, as Trustee
(incorporated by reference to Exhibit 99.2 to the Registrant's Current
Report on Form 8-K filed on September 23, 1997 and Exhibit 99.2 to the
Registrant's Current Report on Form 8-K filed on February 18, 1998).
4.3 -- Receivables Purchase Agreement by and among National Bank of the Great
Lakes, as Seller, Proffitt's Credit Corporation, as Purchaser, and
Proffitt's, Inc., as Servicer
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).*
23.2 -- Consent of Alston & Bird LLP (included in its opinion filed as Exhibit
8.1).*
24.1 -- Powers of Attorney.
- ---------
* To be filed by amendment or on Form 8-K and incorporated herein by reference
II-6
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
among
NATIONAL BANK OF THE GREAT LAKES,
as Seller
and
PROFFITT'S CREDIT CORPORATION,
as Purchaser
and
PROFFITT'S, INC.
as Servicer
Dated as of February 2, 1998
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I - DEFINITIONS..................................................... 2
SECTION 1.1. Definitions.............................................. 2
SECTION 1.2. Other Terms.............................................. 6
SECTION 1.3. Computation of Time Periods.............................. 6
ARTICLE II - PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES.............. 6
SECTION 2.1. Sale..................................................... 6
SECTION 2.2. Servicing of Receivables................................. 8
ARTICLE III - CONSIDERATION AND PAYMENT; RECEIVABLES........................ 9
SECTION 3.1. Purchase Price........................................... 9
SECTION 3.2. Payment of Purchase Price................................ 9
SECTION 3.3. Monthly Report........................................... 10
ARTICLE IV - REPRESENTATIONS AND WARRANTIES................................. 10
SECTION 4.1. Seller's Representations and Warranties.................. 10
SECTION 4.2. Reaffirmation of Representations and
Warranties by the Seller; Notice of Breach............... 13
SECTION 4.3. Repurchase of Ineligible Receivables..................... 14
SECTION 4.4. Repurchase After Cure Period............................. 14
SECTION 4.5. Repurchase of All Receivables............................ 15
ARTICLE V - COVENANTS OF THE SELLER......................................... 15
SECTION 5.1. Covenants of the Seller.................................. 15
SECTION 5.2. Negative Covenants of the Seller......................... 17
SECTION 5.3. Indemnification.......................................... 18
ARTICLE VI - REPURCHASE OBLIGATION.......................................... 19
SECTION 6.1. Mandatory Repurchase..................................... 19
SECTION 6.2. Dilutions, etc........................................... 19
ARTICLE VII - CONDITIONS PRECEDENT.......................................... 20
SECTION 7.1. Conditions to the Purchaser's Obligations
Regarding Receivables.................................... 20
ARTICLE VIII - TERM AND TERMINATION......................................... 21
SECTION 8.1. Term..................................................... 21
SECTION 8.2. Effect of Termination.................................... 21
ARTICLE IX - MISCELLANEOUS PROVISIONS....................................... 22
SECTION 9.1. Amendment................................................ 22
SECTION 9.2. Governing Law............................................ 22
SECTION 9.3. Notices.................................................. 22
SECTION 9.4. Severability of Provisions............................... 23
SECTION 9.5. Assignment............................................... 23
SECTION 9.6. Further Assurances....................................... 24
SECTION 9.7. No Waiver; Cumulative Remedies........................... 24
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9.8. No Bankruptcy Petition Against the Purchaser
or Trust............................................. 24
SECTION 9.9. Counterparts......................................... 24
SECTION 9.10. Binding Effect; Third-Party Beneficiaries............ 25
SECTION 9.11. Merger and Integration............................... 25
SECTION 9.12. Headings............................................. 25
SECTION 9.13. Exhibits............................................. 25
</TABLE>
EXHIBITS
Exhibit A: Form of Subordinated Note
Exhibit B: Location of Records, Principal Place of Business, etc.
Exhibit C: Subsidiaries, Divisions, Trade Names, Bankruptcy Proceedings
-ii-
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT, dated as of February 2, 1998 (as
amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), between NATIONAL BANK OF THE GREAT LAKES, a national banking
association, as seller (the "Seller"), PROFFITT'S CREDIT CORPORATION, a Nevada
------
corporation, as purchaser (the "Purchaser"), and PROFFITT'S, INC., a Tennessee
---------
corporation, as servicer (the "Servicer").
--------
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase from time to time certain
accounts receivable existing on the Closing Date and acquired or generated
thereafter in the normal course of the Seller's business pursuant to certain
revolving consumer credit card accounts;
WHEREAS, the Seller desires to sell and assign from time to time such
certain receivables to the Purchaser upon the terms and conditions hereinafter
set forth;
WHEREAS, the Servicer has agreed to service the accounts receivable
sold to the Purchaser by the Seller hereunder;
WHEREAS, the rights and obligations contained in the Amended and
Restated Receivables Purchase Agreements, dated as of August 21, 1997, by and
among each of Proffitt's, Inc. (excluding Receivables originated by or on behalf
of the Younkers Division of Proffitt's, Inc.), Parisian, Inc., McRae's, Inc. and
G.R. Herberger's, Inc. as "Sellers" thereunder, the Seller and the Servicer, are
being assigned and assumed pursuant to an Assumption Agreement by and among such
Sellers, the Bank and the Purchaser, as of the date hereof;
WHEREAS, the Purchaser, as transferor (the "Transferor"), Proffitt's,
----------
Inc., as Servicer, and Norwest Bank Minnesota, National Association, as trustee
(together with its successors, the "Trustee") entered into a Master Pooling and
-------
Servicing Agreement dated as of August 21, 1997 (as amended, supplemented or
otherwise modified and in effect from time to time, the "Pooling and Servicing
---------------------
Agreement"), and thereby created a trust on behalf of the holders of
- ---------
certificates in such trust;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser and the Seller,
intending to be legally bound, agree as follows:
-1-
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. All capitalized terms used herein
-----------
shall have the meanings specified herein or, if not so specified, the meaning
specified in, or incorporated by reference into, the Pooling and Servicing
Agreement:
"Account" shall mean each consumer revolving credit card
-------
account, originated or acquired by the Seller, which account has been
established or exists pursuant to an Account Agreement between an Obligor and
any Person, including all Accounts of the Department Stores contributed to the
Bank. "Account Agreement," "Obligor" and "Person" shall have the respective
meanings specified in the Pooling and Servicing Agreement.
"Additional Accounts" shall have the meaning specified in the Pooling and
-------------------
Servicing Agreement.
"Advance" shall have the meaning specified in Section 3.2(a)
-------
hereof.
"Automatic Additional Accounts" shall have the meaning
-----------------------------
specified in the Pooling and Servicing Agreement.
"Benefit Plan" shall mean any employee benefit plan as defined
------------
in Section 3(3) of ERISA which the Seller maintains.
"Certificateholders" shall have the meaning specified in the
------------------
Pooling and Servicing Agreement.
"Closing Date" shall mean the beginning of business on
------------
February 2, 1998.
"CPS" shall mean Carson Pirie Scott & Co.
---
"Creation Date" shall have the meaning specified in the
-------------
Pooling and Servicing Agreement.
"Cut-Off Date" shall mean the close of business on
------------
January 28, 1998.
"Department Stores" shall mean Proffitt's, Inc. (excluding
-----------------
stores operated by its Younkers Division), Parisian, Inc., McRae's, Inc.,
G.R. Herberger's, Inc., Carson Pirie Scott & Co., and CPS Department Stores,
Inc. and each department store currently or hereafter owned or operated by
Proffitt's, Inc. or a subsidiary of Proffitt's, Inc. or a division of any of
Proffitt's, Inc. owning such subsidiary, where the Bank holds, originates or
acquires Accounts and Receivables for customers of such stores.
-2-
<PAGE>
"Eligible Account" shall have the meaning specified in the
----------------
Pooling and Servicing Agreement.
"Eligible Receivable" shall have the meaning specified in
-------------------
the Pooling and Servicing Agreement.
"ERISA Affiliate" shall mean, with respect to any Person, (i)
---------------
any corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Internal Revenue Code) as such
Person; (ii) a trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Internal Revenue Code) with
such Person; or (iii) for purposes of Code Section 412, a member of the same
affiliated service group (within the meaning of Section 414(m) of the Internal
Revenue Code) as such Person, any corporation described in clause (i) above or
any trade or business described in clause (ii) above.
"Event of Bankruptcy" shall have the meaning specified in the
-------------------
Pooling and Servicing Agreement.
"Finance Charges" shall have the meaning specified in the
---------------
Pooling and Servicing Agreement.
"Insurance Charges" shall have the meaning specified in the
-----------------
Pooling and Servicing Agreement.
"McRae's" shall mean McRae's, Inc., a Mississippi corporation,
-------
and its successors and assigns.
"Multiemployer Plan" shall mean a "multiemployer plan" as
------------------
defined in Section 4001(a)(3) of ERISA which is or was at any time during the
current year or the immediately preceding five years contributed to by the
Seller or Eligible Originator or any ERISA Affiliate of the Seller or Eligible
Originator on behalf of its employees.
"Purchase Date" shall have the meaning assigned in Section
-------------
3.2(b) hereof.
"Purchase Rate" shall mean the percentage equivalent of the
-------------
decimal representation of the following expression:
(1.00 + APY) minus (BDA + SF + PCF + OE + RF) where:
APY = average portfolio yield of the Seller (expressed as
the decimal equivalent of a percentage) as reasonably
determined over the preceding twelve (12) months (or
such other period mutually agreed upon by the Purchaser
and the Seller);
-3-
<PAGE>
BDA = an allowance for bad debts (expressed as the decimal
equivalent of a percentage), based on, among other
relevant factors, historical rates for the previous
twelve (12) months (or such other period mutually
agreed upon by the Purchaser and the Seller);
SF = a Servicer fee equal to 2.00% (expressed as the decimal
equivalent of a percentage) per annum;
PCF = the Purchaser's cost of funds, as calculated from time
to time, equal to the sum (expressed as the decimal
equivalent of a percentage) of (i) the product of a
fraction equal to the adjusted investor amount of all
classes of Certificates issued by the Trust (other than
those held by the Purchaser) divided by the Aggregate
Principal Receivables multiplied by the prime rate (as
published in the Money Rates Section of The Wall
Street Journal) plus (ii) the product of (x) 20% (to
be adjusted from time to time based on changes to the
Purchaser's reasonably estimated marginal cost of
capital) multiplied by (y) a fraction equal to the sum
of the Transferor Amount plus the investor amount of
any class of Certificates held by the Purchaser
divided by the Aggregate Principal Receivables;
OE = the fraction (expressed as the decimal equivalent of
a percentage), the numerator of which is the
Purchaser's annualized estimate of projected operating
expenses for the next twelve (12) months and the
denominator of which is the estimated outstanding
principal balance of Receivables expected to be sold
by the Seller to the Purchaser in the next twelve (12)
months; and
RF = a contingency risk factor (expressed as the decimal
equivalent of a percentage) based on industry and
economic considerations, as determined by the
Purchaser in its reasonable discretion and as agreed
upon between the Purchaser and the Seller.
"Purchase Period" shall mean, with respect to Receivables sold
---------------
by the Seller to the Purchaser after the Closing Date, the Monthly Period
reported upon in the most recent Monthly Servicer Report delivered after the
Closing Date.
"Purchase Price" shall have the meaning set forth in
--------------
Section 3.1.
"Purchaser" shall mean Proffitt's Credit Corporation, a Nevada
---------
corporation, and its successors and assigns.
-4-
<PAGE>
"Receivable" shall mean any amount owing by an Obligor under
----------
an Account with the Seller, including any Additional Account and/or Automatic
Additional Account, from time to time, including, without limitation, amounts
owing for the payment of merchandise and services, Insurance Charges, service
contract charges, Finance Charges and all other fees and charges. In calculating
the aggregate amount of Receivables on any day, the amount of Receivables shall
be reduced by the aggregate amount of adjustments stated in Section 3.8 of the
Pooling and Servicing Agreement, in the Accounts on such day. Any Receivables
which the Seller is unable to transfer under circumstances similar to those
described in Section 2.5(d) of the Pooling and Servicing Agreement shall not be
included for the period in which such Receivables cannot be transferred under
conditions similar to those described in such Section 2.5(d) in calculating the
aggregate amount of Receivables.
"Records" shall mean all Account Agreements and other
-------
documents, books, records and other information (including, without limitation,
computer programs, tapes, discs, punch cards, data processing software and
related property and rights) maintained with respect to Receivables and the
related Obligors.
"Related Security" means, with respect to any Receivable, all
----------------
of the Seller's rights, title and interest in, to and under the following, as
and to the extent applicable:
(i) all of the Seller's interest, if any, in the merchandise
(including returned or repossessed merchandise), if any, the sale of
which gave rise to such Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment
of such Receivable, whether pursuant to the Account related to such
Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable;
(iii) all guarantees, indemnities, warranties, insurance (and
proceeds and premium refunds thereof) or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Account related to
such Receivable or otherwise;
(iv) all records related to such Receivable; and
(v) all Proceeds of any of the foregoing.
"Relevant UCC" shall mean the Uniform Commercial Code as in
------------
effect in the State of Illinois.
"Secured Obligations" shall have the meaning set forth in
-------------------
Section 2.1(d) hereof.
"Subservicers" shall mean initially McRae's and CPS, and any
------------
Person thereafter appointed by the Servicer as a Subservicer of the Receivables.
-5-
<PAGE>
"Subordinated Note" shall have the meaning specified in
-----------------
Section 3.2(b) hereof.
"Termination Date" shall have the meaning specified in
----------------
Section 8.1 hereof.
SECTION 1.2. Other Terms. All accounting terms not
-----------
specifically defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of the Relevant UCC,
and not specifically defined herein, are used herein as defined in such Article
9. To the extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained herein shall control. The definitions of
all terms defined herein shall include the singular as well as the plural form
of such terms and the masculine of such terms as well as the feminine and neuter
genders of such terms. The terms "include", "including" or "includes" shall mean
including without limitation by way of enumeration or otherwise.
SECTION 1.3. Computation of Time Periods. Unless otherwise
---------------------------
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding."
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
SECTION 2.1. Sale. (a) Upon the terms and subject to the
conditions set forth herein, the Seller hereby sells, assigns, transfers,
sets-over and conveys to the Purchaser, without recourse, and the Purchaser
hereby purchases from the Seller, on the terms and subject to the conditions
specifically set forth herein, all of the Seller's right, title and interest,
whether now owned or hereafter acquired, in, to and under the Receivables now
existing or hereafter created, and owned by the Seller, through any Termination
Date (but not thereafter), together with all Related Security, if any, and all
Collections and other monies due or to become due with respect thereto
(including all Finance Charges, Recoveries and Interchange, if any) and all
proceeds of the foregoing, including Insurance Proceeds. The foregoing sale,
assignment, transfer and conveyance does not constitute an assumption by the
Purchaser of any obligations of the Seller or any other Person to Obligors or
to any other Person in connection with the Receivables or under any Related
Security, Account Agreement or other agreement and instrument relating to the
Receivables. With respect to Receivables sold by the Seller on the Closing Date,
such Receivables shall be deemed to be all the Receivables of the Seller that
exist as of the close of business on the Cut-Off Date together with any
Receivables created thereafter prior to the Closing Date. With respect to
Receivables to be sold pursuant to this Agreement by the Seller after the
Closing Date, such Receivables shall be deemed to be all the Receivables created
after the close of business on the Cut-Off Date.
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<PAGE>
(b) In connection with the foregoing sale, the Seller agrees
to record and file on or prior to the Closing Date, at its own expense, a
financing statement or statements with respect to the Receivables and the other
property described in Section 2.1(a) sold by the Seller hereunder meeting the
requirements of applicable state law in such manner and in such jurisdictions as
are necessary to perfect and protect the interests of the Purchaser created
hereby under the Relevant UCC (subject, in the case of Related Security
constituting returned inventory and proceeds, to the applicable provisions of
Section 9-306 of the Relevant UCC) against all creditors of and purchasers from
the Seller, and to deliver either the originals of such financing statements or
a file-stamped copy of such financing statements or other evidence of such
filings to the Purchaser on the Closing Date.
(c) The Seller agrees that from time to time, at its expense,
it will promptly execute and deliver all instruments and documents and take all
actions as may be necessary or as the Purchaser may reasonably request in order
to perfect or protect the interest of the Purchaser in the Receivables purchased
hereunder or to enable the Purchaser to exercise or enforce any of its rights
hereunder. Without limiting the foregoing, the Seller will, in order to
accurately reflect this purchase and sale transaction, execute and file such
financing or continuation statements or amendments thereto or assignments
thereof (as permitted pursuant hereto) as may be requested by the Purchaser, and
shall indicate clearly and unambiguously in the Seller's computer files and
other Records that the Receivables transferred hereby have been sold to the
Purchaser pursuant to this Agreement and subsequently transferred to the Trustee
pursuant to the Pooling and Servicing Agreement. The Seller shall, upon request
of the Purchaser, obtain such additional search reports as the Purchaser shall
request. To the fullest extent permitted by applicable law, the Purchaser shall
be permitted to sign and file continuation statements and amendments thereto and
assignments thereof without the Seller's signature. Carbon, photographic or
other reproduction of this Agreement or any financing statement shall be
sufficient as a financing statement.
(d) It is the express intent of the Seller and the Purchaser
that the conveyance of the Receivables, all Related Security, if any, and all
Collections and proceeds thereof by the Seller to the Purchaser pursuant to this
Agreement be construed as a sale of such Receivables and other property by the
Seller to the Purchaser, which sale is absolute and irrevocable (except as
expressly provided otherwise herein) and provides the Purchaser with the full
benefits of ownership of such Receivables and other property. Further, it is not
the intention of the Seller and the Purchaser that such conveyance be deemed a
grant of a security interest in the Receivables and such other property by the
Seller to the Purchaser to secure a debt or other obligation of the Seller.
However, in the event that, notwithstanding the express intent of the parties,
the Receivables and such other property are construed to constitute property of
the Seller, then (i) this Agreement also shall be deemed to be, and hereby is, a
security agreement within the meaning of the Relevant UCC; and (ii) the
conveyance by the Seller provided for in this Agreement shall be deemed to be,
and the Seller hereby grants to the Purchaser, a security interest in, to and
under all of the Seller's right, title and interest in, to and under the
Receivables and such other property outstanding on the Closing Date and
thereafter owned by the Seller, together with all Related Security, if any, and
all Collections and other monies due or to become due with respect thereto
(including all Finance Charges, Recoveries and Interchange, if any) and all
proceeds of the foregoing, including
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<PAGE>
Insurance Proceeds, to secure the rights of the Purchaser set forth in this
Agreement or as may be determined in connection therewith by applicable law
(collectively, the "Secured Obligations"). The Seller and the Purchaser shall,
-------------------
to the extent consistent with this Agreement, take such actions as may be
necessary to ensure that, if this Agreement were deemed to create a security
interest in the Receivables and such other property, such security interest
would be deemed to be a perfected first priority security interest in favor of
the Purchaser under applicable law and will be maintained as such throughout
the term of this Agreement.
SECTION 2.2. Servicing of Receivables. (a) The servicing,
------------------------
administering and collection of the Receivables shall be conducted by the
Servicer, which hereby agrees to perform, take or cause to be taken all such
action as may be necessary or advisable to collect each Receivable from time to
time, all in accordance with applicable laws, rules and regulations and with the
care and diligence which the Servicer employs in servicing similar receivables
for its own account, in accordance with the Credit Card Guidelines. With the
consent of the Trustee and the Purchaser, the Servicer may delegate certain
functions to the Subservicers; provided, however, no such delegation shall
relieve the Servicer of its obligations hereunder. The Purchaser hereby appoints
the Servicer as its agent to enforce the Purchaser's rights and interests in, to
and under the Receivables, the Related Security, if any, and the Collections
with respect thereto, and the Seller agrees to cooperate with and assist the
Purchaser and the Servicer in connection with any such efforts, including acting
as agent for and on behalf of the Purchaser and the Servicer in connection
therewith. The Servicer shall hold in trust for the Purchaser, in accordance
with its interests, all records which evidence or relate to the Receivables or
Related Security, if any, Collections and proceeds with respect thereto.
Notwithstanding anything to the contrary contained herein, from and after a
Servicer Default (as defined in the Pooling and Servicing Agreement), a
Successor Servicer shall be appointed as provided in Article X of the Pooling
and Servicing Agreement. The Purchaser agrees to pay the Servicer a Servicing
Fee for the Servicer's performance of the duties and obligations described in
this Section 2.2 and in Article III of the Pooling and Servicing Agreement.
(b) The Seller hereby grants to each of the Purchaser and the Servicer
an irrevocable, non-exclusive license to use, without royalty or payment of any
kind, all software used by the Seller to account for the Receivables, to the
extent necessary to administer the Receivables, whether such software is owned
by the Seller or is owned by others and used by the Seller under license
agreements with respect thereto, provided, however, should the consent of any
licensor of the Seller to such grant of the license described herein be
required, the Seller hereby agrees that upon the request of the Purchaser (or
the Trustee as the Purchaser's assignee), the Seller will use its reasonable
efforts to obtain the consent of such third-party licensor. The license granted
hereby shall be irrevocable, and shall terminate on the date this Agreement
terminates in accordance with its terms.
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<PAGE>
ARTICLE III
CONSIDERATION AND PAYMENT; RECEIVABLES
SECTION 3.1. Purchase Price. (a) The purchase price
--------------
("Purchase Price") for the Receivables and related property conveyed on the
Closing Date to the Purchaser by the Seller under this Agreement shall be a
dollar amount equal to the product of (i) the Aggregate Principal Receivables
as of the Cut-Off Date, and (ii) the Purchase Rate then in effect.
The Purchase Price for the Receivables and related property
conveyed on any date after the Closing Date shall be the dollar amount equal to
the product of (i) the aggregate outstanding principal balance of the
Receivables sold during the applicable Purchase Period as reflected in the
applicable Monthly Servicer's Certificate or any other certificate delivered
pursuant thereto or pursuant to this Agreement as in effect prior to the date
hereof and (ii) the Purchase Rate on such date.
SECTION 3.2. Payment of Purchase Price. (a) The Purchase Price
-------------------------
for the Receivables sold on the Closing Date shall be paid or has been paid by
payment of cash in immediately available funds. The Purchaser may obtain the
cash to pay the Purchase Price from the sale of Eligible Receivables to the
Trust, and pursuant to advances pursuant to a Subordinated Note between
Proffitt's, Inc. and the Purchaser (such advance and any advance thereunder as
contemplated by Section 3.2(b), each an "Advance") and contributions to the
-------
capital of the Purchaser by Proffitt's, Inc.
(b) The Purchase Price for the Receivables sold by the Seller
on any date after the initial date of the Receivables Purchase Agreement (each,
a "Purchase Date") shall be paid in cash to the Seller from proceeds from (i)
-------------
the sale by the Purchaser of the Receivables to the Trust or (ii) as the
Purchaser may elect, in its sole discretion, from proceeds of (A) an Advance
under the Subordinated Note or (iii) a capital contribution by Proffitt's, Inc.
to the Purchaser or (iv) any combination of the foregoing. In the event the
Purchaser does not have sufficient cash to pay the Purchase Price due on any
Purchase Date, or Proffitt's determines, in its sole discretion not to make a
capital contribution to the Purchaser, Proffitt's, Inc., subject to the terms
hereof, irrevocably agrees to make an Advance on such Purchase Date in an
original principal amount equal to such cash insufficiency; provided, however,
that no Advance shall be made if immediately thereafter the Net Worth of the
Purchaser would be less than 10% of the highest Aggregate Principal Receivables
outstanding during the immediately preceding twelve (12) calendar month period.
All Advances made by the Seller to the Purchaser shall be evidenced by a single
subordinated note, duly executed on behalf of the Purchaser, in substantially
the form of Exhibit A annexed hereto, delivered and payable to the Seller
(c) The terms and conditions of the Subordinated Note and
all Advances thereunder shall be as follows:
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<PAGE>
(i) Repayment of Advances. All amounts paid by the
---------------------
Purchaser with respect to the Advances shall be allocated first to the
repayment of accrued interest until all such interest is paid, and then to the
outstanding principal amount of the Advances. Subject to the provisions of this
Agreement, the Purchaser may borrow, repay and reborrow Advances on and after
the date hereof and prior to the termination of this Agreement, subject to the
terms, provisions and limitations set forth herein.
(ii) Interest. The Subordinated Note shall bear
--------
interest from its date on the outstanding principal balance thereof at a rate
per annum equal to one month LIBOR as published in the Money Rates Section of
The Wall Street Journal. Interest on each Advance shall be computed based on
the actual number of days elapsed based upon a year of 360 days.
(iii) Sole and Exclusive Remedy; Subordination. The
----------------------------------------
Subordinated Note shall be fully subordinated to any rights of the Trustee,
the Certificateholders and their permitted assigns pursuant to the Pooling and
Servicing Agreement, all on the terms and conditions set forth in the
Subordinated Note, and shall not evidence any rights in the Receivables.
SECTION 3.3. Monthly Report. On each Determination Date, the
--------------
Seller shall deliver or cause to be delivered to the Purchaser a report
covering the preceding Monthly Period, substantially in the form of the Monthly
Servicer's Certificate attached as Exhibit E to the Pooling and Servicing
Agreement, showing (i) the aggregate Purchase Price of Receivables acquired or
generated by the Seller in the preceding Monthly Period and (ii) the aggregate
outstanding principal balance of such Receivables that are Eligible Receivables
as of the last day of such preceding Monthly Period.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Seller's Representations and Warranties. The
---------------------------------------
Seller represents and warrants to the Purchaser as of the Closing Date and
shall be deemed to represent and warrant as of the date of any sale of any
interest in Receivables, including Receivables in Additional Accounts and
Automatic Additional Accounts to the Purchaser pursuant to this Agreement that:
(a) Corporate Existence and Power. The Seller is a national
-----------------------------
banking association, duly incorporated, validly existing and in good standing
under the laws of the United States of America, and has full power, authority
and legal right to own its properties and conduct its business as such
properties are presently owned and such business is presently conducted, and to
execute, deliver and perform its obligations under this Agreement. The Seller 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 with respect
to the Seller, in each jurisdiction in which failure to so qualify or to obtain
such licenses and approvals would render any Account Agreement relating
-10-
<PAGE>
to an Account or any Receivable unenforceable by it, the Purchaser or the Trust
and would have a material adverse effect on the Certificateholders or on the
Purchaser's or the Servicer's ability to perform their respective obligations
under this Agreement, the Pooling and Servicing Agreement or any Supplement
thereto.
(b) Corporate and Governmental Authorization; Contravention.
-------------------------------------------------------
The execution, delivery and performance by the Seller of this Agreement are
within the Seller's corporate powers, have been duly authorized by all necessary
corporate action, and require no action by or in respect of, or filing with, any
Governmental Authority or official thereof (except for the filing of UCC
financing and continuation statements, and amendments thereto, as required by
this Agreement). The execution and delivery of this Agreement by the Seller, the
performance by the Seller of the transactions contemplated by this Agreement and
the fulfillment by the Seller of the terms hereof and thereof will not conflict
with, violate or result in any breach of any of the material terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
default under, any Requirement of Law applicable to the Seller or any indenture,
contract, agreement, mortgage, deed of trust or other instrument to which the
Seller is a party or by which it or any of its properties are bound and which
conflict, violation, breach or default would have a material adverse effect on
the Purchaser or the Certificateholders or on the Purchaser's or the Servicer's
ability to perform their respective obligations under the Pooling and Servicing
Agreement.
(c) Binding Effect. This Agreement will constitute the legal,
--------------
valid and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms, subject to applicable bankruptcy, insolvency,
receivership, conservatorship, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general principles
of equity (whether considered in a proceeding at law or in equity).
(d) Perfection. Immediately preceding the sale, transfer and
----------
assignment of the Receivables and the related property pursuant to this
Agreement, the Seller had good and marketable title to all of the Receivables
and such related property, free and clear of all Liens (except those Liens
permitted by the Pooling and Servicing Agreement). On or prior to the date of
each sale of Receivables and such related property pursuant to this Agreement,
all financing statements and other documents required to be recorded or filed in
order to perfect and protect the ownership interest of the Purchaser in and to
the Receivables and such related property against all creditors of and
purchasers from the Seller will have been duly filed in each filing office
necessary for such purpose and all filing fees and taxes, if any, payable in
connection with such filings shall have been paid in full.
(e) Tax Status. The Seller has filed all material tax returns
----------
(federal, state and local) required to be filed and has paid or made adequate
provision for the payment of all taxes, assessments and other governmental
charges.
(f) Action, Suits. There are no proceedings or investigations
-------------
pending or, to the knowledge of the Seller, threatened against the Seller before
any Governmental Authority (i)
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<PAGE>
asserting the invalidity of this Agreement, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement, (iii)
seeking any determination or ruling that, in the reasonable judgment of the
Seller, would materially and adversely affect the performance by the Seller of
its obligations under this Agreement, (iv) seeking any determination or ruling
that would materially and adversely affect the validity or enforceability of
this Agreement (v) seeking to affect adversely the federal income tax
attributes of the Trust.
(g) Place of Business. The principal place of business and
-----------------
chief executive office of the Seller is located at 140 Industrial Drive,
Elmhurst, Illinois 60126, and the offices where the Seller keeps all its records
with respect to its Accounts and Receivables, are located at the address(es)
described on Exhibit B hereto or such other locations notified to the Purchaser
in accordance with this Agreement in jurisdictions where all action required by
the terms of this Agreement has been taken and completed.
(h) True Sale. This Agreement constitutes a valid sale,
---------
transfer and assignment to the Purchaser of all right, title and interest of the
Seller in and to the Receivables and related property to be transferred hereby,
whether existing on the date of this Agreement or hereafter created in the
Accounts and the proceeds thereof which is effective as to each Receivable upon
the creation thereof, and upon such transfer to the Purchaser hereunder, the
Purchaser shall obtain good and marketable title to such Receivables and related
property, free and clear of all Liens (except those Liens permitted by the
Pooling and Servicing Agreement).
(i) Trade Names, Etc. As of the date hereof: (i) the Seller's
----------------
chief executive office is located at the address for notices set forth in
Section 9.3; (ii) the Seller has only the subsidiaries and divisions listed on
Exhibit C hereto; and (iii) the Seller has, within the last five (5) years,
operated only under the trade names identified in Exhibit C hereto, and, within
the last five (5) years, has not changed its name, merged with or into or
consolidated with any other corporation or been the subject of any proceeding
under Title 11, United States Code (Bankruptcy), except as disclosed in Exhibit
C hereto.
(j) Nature of Receivables. As of the Cut-Off Date or Creation
---------------------
Date, as applicable, and in the case of Receivables in Additional Accounts, as
of the related Additional Account Cut-Off Date, (i) each Receivable then
existing is an Eligible Receivable, and (ii) as of the applicable Additional
Account Cut-Off Date with respect to Additional Accounts, and as of the
applicable Distribution Date on which a computer file, microfiche or written
list is delivered pursuant to Section 2.1(b) of the Pooling and Servicing
Agreement with respect to Automatic Additional Accounts included automatically
pursuant to Section 2.6(d) of the Pooling and Servicing Agreement, Schedule 1 to
the Pooling and Servicing Agreement is in all material respects an accurate and
complete listing of all the Accounts of the Seller the Receivables of which have
been sold, transferred and assigned to the Purchaser as of the Cut-Off Date or
the applicable Additional Account Cut-Off Date, the applicable Creation Date and
the date of such Schedule 1, as the case may be, and the information contained
therein with respect to the identity of such Accounts and the Receivables
existing thereunder is true and correct in all material respects as of the dates
thereof, including the applicable Cut-Off Date, Additional Account Cut-Off Date
or Creation
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<PAGE>
Date. On each day on which any new Receivable is created, the Seller shall be
deemed to represent and warrant to the Purchaser that each Receivable created
on such day is an Eligible Receivable.
(k) Eligibility of Accounts. As of the applicable Cut-Off
-----------------------
Date, Additional Account Cut-Off Date or Creation Date, each Account was an
Eligible Account and no selection procedures adverse to the Purchaser or the
Certificateholders have been employed in selecting the Accounts.
(l) Amount of Receivables. As of the Cut-Off Date, the
---------------------
aggregate outstanding principal balance of the Receivables of the Seller in
existence was approximately $280,000,000.
(m) Not an Investment Company. The Seller is not, and is not
-------------------------
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all provisions of such Act.
(n) ERISA. The Seller and each of its ERISA Affiliates is in
-----
compliance in all material respects with ERISA and no lien exists in favor of
the Pension Benefit Guaranty Corporation on any of the Receivables.
(o) Bulk Sales. No transaction contemplated by this Agreement
----------
requires compliance with any bulk sales act or similar law.
(p) No Insolvency. The Seller is not insolvent immediately
-------------
prior to any transfer of Receivables hereunder, and will not be rendered
insolvent immediately following such transfer.
(q) Reasonably Equivalent Value. The Purchaser has given
---------------------------
reasonably equivalent value to the Seller in consideration for the transfer and
sale to the Purchaser of the applicable Receivables and other property from such
Seller, and each such transfer shall not have been made for or on account of an
antecedent debt owed by such Seller to the Purchaser. The Seller acknowledges
that it will receive reasonably equivalent value in consideration for the
transfer to the Purchaser of all Receivables and other property now or hereafter
to be transferred and sold hereunder.
The Purchaser and the Servicer may rely upon any of these
representations and warranties, and any of the covenants and agreements of the
Seller contained herein in connection with any transactions pursuant to the
Pooling and Servicing Agreement.
SECTION 4.2. Reaffirmation of Representations and Warranties
-----------------------------------------------
by the Seller; Notice of Breach. On each sale date, the Seller, by accepting the
- -------------------------------
proceeds of such sale, shall be deemed to have certified that all
representations and warranties described in Section 4.1 are true and correct on
and as of such day as though made on and as of such day and that all the
covenants to be performed by the Seller have been performed. The representations
and warranties set forth in Section 4.1 shall survive the conveyance of the
Receivables to the
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<PAGE>
Purchaser, and termination of the rights and obligations of the Purchaser and
the Seller under this Agreement. Upon discovery by the Purchaser or the Seller
of a breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the other within
three (3) Business Days of such discovery.
SECTION 4.3. Automatic Repurchase of Ineligible Receivables.
----------------------------------------------
In the event that a Receivable is not an Eligible Receivable as a result of the
failure to satisfy the conditions set forth in clause (iii) of the definition of
Eligible Receivable, and either of the following two conditions is met:
(i) the Lien on the subject Receivable (1) ranks
prior to the Lien created pursuant to this Agreement, (2) arises in
favor of the United States of America or any state or any agency or
instrumentality thereof or involves taxes or liens arising under Title
IV of ERISA, or (3) has been consented to by the Seller; or
(ii) the Lien on the subject Receivable is not of the
types described in clause (i) above, but, as a result of such breach or
event, such Receivable becomes a Receivable in a Defaulted Account or
the Purchaser's rights in, to or under such Receivable or its proceeds
are materially impaired or the proceeds of such Receivable are not
available for any reason to the Purchaser free and clear of any Lien
except Liens permitted hereby;
then, upon the earlier to occur of the discovery of such breach or event by the
Seller or receipt by the Seller of written notice of such breach or event given
by the Purchaser, the Servicer or the Trustee, each such Receivable or, at the
option of the Seller, all such Receivables with respect to the related Account,
automatically shall be repurchased by the Seller on the terms and conditions set
forth in Article VI hereof.
SECTION 4.4. Repurchase After Cure Period. In the event of a
----------------------------
breach of any of the representations and warranties set forth in Section 4.1(j)
or (k) with respect to a Receivable (other than in the event that a Receivable
is not an Eligible Receivable as a result of the failure to satisfy the
conditions set forth in clause (iii) of the definition of Eligible Receivable),
and as a result of such breach or event such Receivable becomes a Receivable in
a Defaulted Account or the Purchaser's rights in, to or under such Receivable or
its proceeds are materially impaired or the proceeds of such Receivable are not
available for any reason to the Purchaser free and clear of any Lien except
Liens permitted hereby, then, upon the expiration of 90 days or any longer
period specified by the Servicer (not to exceed an additional 90 days) from the
earlier to occur of (x) the discovery of any such event by the Transferor or the
Servicer or (y) receipt by the Purchaser or the Servicer of written notice of
any such event given by the Trustee, each such Receivable or, at the option of
the Purchaser, all such Receivables with respect to the related Account, shall
be repurchased by the Seller on the terms and conditions set forth in Article VI
hereof; provided, however, that no such repurchase shall be required to be made
if, on any day within such applicable period, (A) such representation and
warranty with respect to such Receivable shall then be true and correct in all
material respects as if such Receivable had been transferred to the Trust
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<PAGE>
on such day, and (B) the related Account is no longer a Defaulted Account as the
result of the breach of such representation and warranty, and the Trust's rights
in, to or under such Receivable or its proceeds are no longer materially
impaired as a result of a breach of such representation and warranty, and the
proceeds of such Receivable are available to the Trust free and clear of all
Liens resulting in the breach of such representation and warranty, as
applicable.
SECTION 4.5 Repurchase of All Receivables. In the event that
-----------------------------
any of the representations or warranties set forth in Sections 4.1(a), 4.1(b),
4.1(c), 4.1(d) or 4.1(j) are breached and such breach results in a requirement
that the Purchaser repurchase such Receivable under the Pooling and Servicing
Agreement or a material amount of Receivables are deemed not to be Eligible
Receivables, and such event has a materially adverse effect on the Purchaser or
the Certificateholders, and the Transferor is required to accept reassignment of
all Receivables at the order of the Trustee or the Certificateholders, then the
Seller shall repurchase all Receivables on the terms and conditions set forth in
Article VI hereof.
ARTICLE V
COVENANTS OF THE SELLER
SECTION 5.1. Covenants of the Seller. The Seller hereby
-----------------------
covenants and agrees with the Purchaser that, for so long as this Agreement and
the Pooling and Servicing Agreement are in effect, and until all Receivables,
an interest in which has been sold to the Purchaser pursuant hereto, shall have
been paid in full or charged off, and all amounts owed by the Seller pursuant
to this Agreement have been paid in full, unless the Purchaser otherwise
consents in writing, the Seller covenants and agrees as follows:
(a) Conduct of Business. The Seller will carry on and conduct
-------------------
its credit card business in substantially the same manner as is presently
conducted and do all things necessary to remain duly organized, validly existing
and in good standing as a national banking association. The Seller will maintain
all authority required to conduct its business in each jurisdiction in which its
business is conducted, the failure of which would render any Account Agreement
relating to an Account or any Receivable unenforceable by it, the Purchaser or
the Trustee and would have a material adverse effect on the Certificateholders
or on the Purchaser's or the Servicer's ability to perform their respective
obligations under this Agreement, the Pooling and Servicing Agreement or any
Supplement thereto.
(b) Compliance with Laws. The Seller will comply in all
--------------------
material respects with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it or its properties may be subject.
(c) Furnishing of Information and Inspection of Records. The
---------------------------------------------------
Seller will furnish or cause to be furnished to the Purchaser from time to time
such information with respect to the Receivables as the Purchaser may reasonably
request, including, without limitation, a computer
-15-
<PAGE>
file, microfiche or written list showing each Account, identified by account
number, and Receivable balance and any information which the Purchaser may be
required to deliver pursuant to the Pooling and Servicing Agreement, any
Supplement thereto and any related Certificate Purchase Agreement. The Seller
will at any time and from time to time during regular business hours and upon
reasonable prior notice permit the Purchaser, or its agents or representatives
(which may include any purchasers of certificates not sold to the public), (i)
to examine and make copies of and abstracts from all records and (ii) to visit
the offices and properties of the Seller for the purpose of examining such
records, and to discuss matters relating to Receivables or the Seller's
performance hereunder with any of the officers, directors, employees or
independent public accountants of the Seller having knowledge of such matters.
(d) Keeping of Records and Books of Account. The Seller will
---------------------------------------
maintain a system of accounting established and administered in accordance with
generally accepted accounting principles except to the extent required otherwise
by applicable regulatory authorities and then consistent with regulatory
accounting principles, consistently applied, and will maintain and implement
administrative and operating procedures (including, without limitation, an
ability to produce or recreate records evidencing Receivables in the event of
the destruction of the originals thereof), and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of each new Receivable and all Collections of
and adjustments to each existing Receivable). The Seller will give the Purchaser
and the Trustee notice of any material change in the administrative and
operating procedures of the Seller referred to in the previous sentence.
(e) Account Agreements and Credit Card Guidelines. The Seller
---------------------------------------------
shall comply with and perform, its obligations under the applicable Account
Agreements relating to the Accounts and the Credit Card Guidelines, except
insofar as any failure so to comply or perform would not materially and
adversely affect the rights of the Purchaser, the Trust or the
Certificateholders, the ability of the Servicer to collect the Receivables, the
validity or enforceability of this Agreement, the Pooling and Servicing
Agreement, or any documents or agreements related thereto, or the performance by
any party of its obligations hereunder or thereunder.
(f) Reduction of Charges. Except as required by law or as the
--------------------
Seller shall deem advisable for its credit card program based on a good faith
assessment by the Seller, in its sole discretion, of the various factors
affecting the use of its credit card accounts, the Seller will not reduce the
finance charges or other fees on the Accounts if, as a result of such reduction,
its reasonable expectation of Portfolio Yield as of the time of such reduction
would be less than the weighted average base rates of all outstanding Series. In
addition, the Seller covenants that, unless required by law, it will not reduce
the annual percentage rate, if its reasonable expectation of Portfolio Yield
would be less than the highest Certificate Rate for any outstanding Series.
(g) Collections Received. The Seller shall direct or cause all
--------------------
Collections of Receivables to be remitted as directed by the Purchaser. In the
event that the Seller receives any
-16-
<PAGE>
such Collection, the Seller shall hold in trust for and on behalf of the
Purchaser and the Trust, as their interests may appear, and remit, immediately,
but in any event not later than the close of business on the second Business Day
following its receipt thereof, to the Servicer, all Collections received from
time to time by the Seller.
(h) Sale Treatment. The Seller agrees to treat this conveyance
--------------
for all purposes (including, without limitation, tax and financial accounting
purposes) as a sale and, to the extent any such reporting is required, shall
report the transactions contemplated by this Agreement on all relevant books,
records, tax returns, financial statements and other applicable documents as a
sale of the Receivables to the Purchaser.
(i) ERISA. The Seller shall promptly give the Purchaser
-----
written notice upon becoming aware that (i) the Seller or any of its ERISA
Affiliates is not in compliance in all material respects with ERISA and to the
extent required of the Purchaser and its ERISA Affiliates in the Certificate
Purchase Agreement or that (ii) any ERISA Lien on any of the Receivables exists.
SECTION 5.2. Negative Covenants of the Seller. During the
--------------------------------
term of this Agreement, unless the Trustee and the Purchaser shall otherwise
consent in writing:
(a) No Sales, Liens, Etc. Except for the conveyances
--------------------
hereunder, the Seller will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on (or the
filing of any financing statement with respect to) any Receivable, whether now
existing or hereafter created, or any interest therein; the Seller will notify
the Purchaser and the Trustee of the existence of any Lien on any Receivable
transferred and sold by the Seller to Purchaser hereby; and immediately upon
discovery thereof, the Seller will defend the right, title and interest of the
Purchaser and the Trust in, to and under the Receivables, whether now existing
or hereafter created, against all claims of third parties claiming through or
under the Seller; provided, however, that nothing in this Section 5.2(a) shall
prevent or be deemed to prohibit the Seller from suffering to exist upon any of
the Receivables any Liens for, municipal or other local taxes and other
governmental charges if such taxes or governmental charges shall not at the time
be due and payable or if the Transferor shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves under generally accepted accounting
principles with respect thereto.
(b) Account Agreements and Credit Card Guidelines. Subject to
---------------------------------------------
compliance with all Requirements of Law, the failure to comply with which would
have a material adverse effect on the Purchaser or the Certificateholders, the
Seller or the Servicer may change the terms and provisions of the Account
Agreements or the Credit Card Guidelines in any respect (including, without
limitation, the calculation of the amount, or the timing, of charge offs of
Receivables) as follows: (i) if the Seller owns a comparable segment of
accounts, then such change shall be made applicable to such comparable segment
of the accounts owned and serviced by the Seller that have characteristics the
same as, or substantially similar to, the Accounts that are the subject of such
change, and (ii) if the Seller does not own such a comparable segment, then the
Seller will not
-17-
<PAGE>
make or cause to be made any such change with the intent to materially benefit
the Seller over the Purchaser or the Certificateholders.
(c) Change of Name, Etc. The Seller shall not change its name,
-------------------
identity or structure or location of its chief executive office, unless at least
ten (10) Business Days prior to the effective date of any such change the Seller
delivers to the Purchaser such documents, instruments or agreements, including,
without limitation, appropriate financing statements under the Relevant UCC,
executed by the Seller necessary to reflect such change and to continue the
perfection of the Purchaser's and any assignee's first priority interest in the
Receivables.
(d) No Change in Business or Credit Card Guidelines. The
-----------------------------------------------
Seller will not make any change in the Credit Card Guidelines or any change in
the character of its business, which change would, in either case, impair the
collectibility of any substantial portion of the Receivables or otherwise
materially and adversely affect the rights of the Purchaser, the Trust or the
Certificateholders, the ability of the Servicer to collect the Receivables, the
validity or enforceability of this Agreement, the Pooling and Servicing
Agreement, or any documents or agreements related thereto, or the performance by
any party of its obligations hereunder or thereunder.
(e) ERISA Matters. The Seller will not (i) engage in any
-------------
prohibited transaction (as defined in Section 4975 of the Code and Section 406
of ERISA) for which an exemption is not available or has not previously been
obtained from the U.S. Department of Labor; (ii) permit to exist any accumulated
funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of
the Code) or funding deficiency with respect to any Defined Benefit Plan other
than a Multiemployer Plan that could reasonably result in the PBGC or IRS filing
a lien; (iii) fail to make any payments to any Multiemployer Plan that the
Seller or any ERISA Affiliate of the Seller is required to make under the
agreement relating to such Multiemployer Plan or any law pertaining thereto;
(iv) terminate any Defined Benefit Plan so as to result in any liability; or (v)
permit to exist any occurrence of any Reportable Event which represents a
material risk of a liability to the Seller or any ERISA Affiliate of the Seller
under ERISA or the Code.
(f) Transfers of Accounts. The Seller will not convey,
---------------------
transfer or assign any Accounts to any Person, except for Removed Accounts,
unless the Rating Agency Condition is satisfied.
SECTION 5.3. Indemnification. The Seller agrees to indemnify,
---------------
defend and hold the Purchaser harmless from and against any and all loss,
liability, damage, judgment, claim, deficiency, or expense (including interest,
penalties, reasonable attorneys' fees and amounts paid in settlement)
(collectively, "Indemnified Amounts") to which the Purchaser or any assignee
thereof may become subject insofar as such loss, liability, damage, judgment,
claim, deficiency, or expense arises out of or is based upon a breach by the
Seller of its representations, warranties and covenants contained herein, or any
information certified in any written schedule or certificate delivered by the
Seller hereunder being untrue in any material respect at the time so certified;
provided, however, neither the Purchaser nor any of its assignees shall be
entitled to
-18-
<PAGE>
indemnification hereunder for any Indemnified Amount to the extent the same
resulted from the gross negligence or willful misconduct of the Purchaser or any
of its assignees. The obligations of the Seller under this Section 5.3 shall be
considered to have been relied upon by the Purchaser and shall survive the
execution, delivery, performance and termination of this Agreement and any sale
or transfer of the Receivables or any interest therein by the Purchaser,
regardless of any investigation made by the Purchaser or on its behalf.
ARTICLE VI
REPURCHASE OBLIGATION
SECTION 6.1. Mandatory Repurchase.
--------------------
(a) Breach of Warranty. If on any day the repurchase of any
------------------
Receivable which has been sold by the Seller hereunder shall be required
pursuant to Sections 4.3 or 4.4 hereof, the Seller shall be deemed to have
received on such day a Collection of such Receivable in full and shall on such
day pay to the Purchaser an amount equal to the aggregate outstanding principal
balance of such Receivable, plus outstanding Finance Charges accrued thereon
through the date of such repurchase; provided that, prior to the Termination
Date, such amount may be paid, at the election of the Purchaser, by a reduction
in or an offset to the Purchase Price paid to the Seller on the next occurring
Purchase Date, unless the Purchaser is required to make a payment in respect of
such breach pursuant to the Pooling and Servicing Agreement; provided, however,
in all events at least the amount of any cash deposit required to be made by the
Purchaser under the Pooling and Servicing Agreement in respect of the retransfer
of such Ineligible Receivable shall be paid in immediately available funds by
the Seller.
(b) Repurchase of All Receivables. If on any day the
-----------------------------
repurchase of all Receivables which have been sold by the Seller hereunder shall
be required pursuant to Section 4.5 hereof, the Seller shall be deemed to have
received on such day a Collection of such Receivables in full and shall on such
day pay to the Purchaser an amount equal to the aggregate outstanding principal
balance of such Receivable, plus Finance Charges accrued thereon through the
date of such repurchase; provided, however, in all events at least the amount of
any cash deposit required to be made by the Purchaser under the Pooling and
Servicing Agreement in respect of the retransfer of such Ineligible Receivable
shall be paid in immediately available funds by the Seller.
SECTION 6.2. Dilutions, etc. If the Servicer or the Seller
--------------
adjusts downward the amount of any Receivable without receiving Collections
therefor or without charging off such amount as uncollectible, because of a
rebate, refund, unauthorized charge or billing error to an Obligor, or because
such Receivable was created in respect of merchandise or services which were
refused, returned or not received by an Obligor, then the Seller shall be deemed
to have received on such day a Collection of such Receivable in the amount of
such reduction, cancellation or payment made by the Obligor and shall on such
day pay to the Purchaser an amount equal to such reduction or cancellation;
provided that, prior to the Termination Date,
-19-
<PAGE>
such amount may be paid by a reduction in the Purchase Price paid to the Seller
on the next occurring Purchase Date, unless the Purchaser is required to make a
payment in respect of such breach sooner pursuant to the Pooling and Servicing
Agreement. Similarly, if the Servicer or the Seller adjusts downward the amount
of any Receivable because such Receivable was discovered as having been created
through a fraudulent or counterfeit charge or with respect to which the covenant
contained in Section 5.2(a) hereof was breached, then the Seller shall be deemed
to have received on such day a Collection of such Receivable in the amount of
such reduction, cancellation or payment made by the Obligor and shall on such
day pay to the Purchaser an amount equal to such reduction or cancellation;
provided that, prior to the Termination Date, such amount may be paid by a
reduction in the Purchase Price paid to the Seller on the next occurring
Purchase Date; provided, however, in all events at least the amount of any cash
deposit required to be made by the Purchaser under the Pooling and Servicing
Agreement in respect of any such adjustment shall be paid in immediately
available funds by the Seller. Any adjustment ("Adjustment Payment Obligation"),
required pursuant to either of the two preceding sentences shall be made within
two (2) Business Days of the making of the Adjustment Payment Obligation, and in
no event later than the end of the Monthly Period in which such adjustment
obligation arises.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. Conditions to the Purchaser's Obligations
-----------------------------------------
Regarding Receivables. The obligations of the Purchaser to purchase the
- ---------------------
Receivables on the Closing Date and any Purchase Date shall be subject to the
satisfaction of the following conditions:
(a) All representations and warranties of the Seller contained
in this Agreement shall be true and correct on the Closing Date and on each
Purchase Date thereafter with the same effect as though such representations and
warranties had been made on such date (except to the extent any such
representation or warranty specifically related to an earlier date, in which
case such representation or warranty shall have been true as of such earlier
date);
(b) All information concerning the Receivables provided to the
Purchaser shall be true and correct in all material respects as of the Closing
Date, in the case of any Receivables existing on the Closing Date, or the
Purchase Date, in the case of any Receivables created after the Closing Date,
and in each Schedule of Accounts delivered to the Purchaser hereunder for
inclusion in Schedule 1 to the Pooling and Servicing Agreement;
(c) The Seller shall have substantially performed all other
obligations required to be performed by the provisions of this Agreement;
(d) The Seller shall have filed or caused to be filed the
financing and continuation statement(s) and all amendments thereto required to
be filed pursuant to Section 2.1(b); and
-20-
<PAGE>
(e) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Purchaser, and the Purchaser shall
have received from the Seller copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as the Purchaser may reasonably have requested.
ARTICLE VIII
TERM AND TERMINATION
SECTION 8.1. Term. This Agreement shall commence as of the
----
date of execution and delivery hereof and shall continue in full force and
effect until the date following the earlier of (i) the date on which the Trustee
declares a Pay Out Event with respect to all outstanding Series of the Trust
pursuant to the Pooling and Servicing Agreement and any Supplements, (ii) the
date on which the Trust terminates, (iii) the date on which an event described
in the first sentence of Section 9.2(a) of the Pooling and Servicing Agreement
occurs with respect to the Seller and the Trust, (iv) the close of business on
the third Business Day following a conveyance of Receivables to the Purchaser
for which the Purchaser does not pay the Purchase Price in accordance with the
provisions hereof, or (vi) the date on which either the Purchaser or the Seller
becomes unable for any reason to purchase or repurchase any Receivable in
accordance with the provisions of this Agreement or defaults on its obligations
hereunder, which default continues unremedied for more than thirty (30) days
after written notice (any such date being a "Termination Date"); provided,
----------------
however, that the termination of this Agreement pursuant to this Section 8.1
hereof shall not discharge any Person from any obligations incurred prior to
such termination, including, without limitation, any obligations to make any
payments with respect to the interest of the Purchaser in any Receivable sold
prior to such termination.
SECTION 8.2. Effect of Termination. Following the termination
---------------------
of this Agreement pursuant to Section 8.1, the Seller shall not sell, and the
Purchaser shall not purchase, any Receivables. No termination or rejection or
failure to assume the executory obligations of this Agreement in any proceeding
regarding an event described in the first sentence of Section 9.2(a) of the
Pooling and Servicing Agreement with respect to the Seller or the Purchaser
shall be deemed to impair or affect the obligations pertaining to any executed
sale or executed obligations, including, without limitation, pre-termination
breaches of representations and warranties by the Seller or the Purchaser.
Without limiting the foregoing, prior to termination, the failure of the Seller
to deliver or cause to be delivered computer records of Receivables or any
reports regarding the Receivables shall not render such transfer or obligation
executory, nor shall the continued duties of the parties pursuant to Article V
or Section 9.1 of this Agreement render an executed sale executory.
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<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. Amendment. This Agreement and the rights and
---------
obligations of the parties hereunder may not be changed orally, but only by an
instrument in writing signed by the Purchaser and the Seller. Any reconveyance
executed in accordance with the provisions hereof shall not be considered an
amendment to this Agreement.
SECTION 9.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
-------------
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA.
SECTION 9.3. Notices. Except as provided below, all
-------
communications and notices provided for hereunder shall be in writing (including
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth below or at
such other address or telecopy number as such party may hereafter specify for
the purposes of notice to such party. Each such notice or other communication
shall be effective (i) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section 9.3 and confirmation is
received, (ii) if given by mail three (3) Business Days following such posting,
postage prepaid, U.S. first class or overnight mail, (iii) if given by overnight
courier, such as FedEx, one Business Day after deposit thereof with a national
overnight courier service, or (iv) if given by any other means, when received at
the address specified in this Section 9.3.
(a) in the case of the Purchaser:
Proffitt's Credit Corporation
Bank of America Center
101 Convention Center Drive, Suite 850
Las Vegas, Nevada 89109
Attn: Douglas E. Coltharp, President
Telephone: (702) 598-3738
Telecopy: (702) 598-3651
-22-
<PAGE>
with a copy to:
Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Telephone: (205) 940-4735
Telecopy: (205) 940-4098
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
(b) in the case of the Seller:
National Bank of the Great Lakes
140 Industrial Drive
Elmhurst, Illinois 60126
Telephone: (630) 516-8080
Telecopy: (630) 516-8031
Attn: Richard Ehrle
Vice President
(c) in the case of the Servicer:
Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Telephone: (205) 940-4735
Telecopy: (205) 940-4098
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
SECTION 9.4. Severability of Provisions. If any one or more of
--------------------------
the covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions,
or terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
-23-
<PAGE>
SECTION 9.5. Assignment and Designation of Selling
-------------------------------------
Subsidiaries.
------------
(a) This Agreement may not be assigned by the parties hereto,
except that the Purchaser may assign its rights hereunder pursuant to the
Pooling and Servicing Agreement to the Trustee, for the benefit of the
Certificateholders. The Purchaser hereby notifies (and the Seller hereby
acknowledges that) the Purchaser, pursuant to the Pooling and Servicing
Agreement, has assigned all its rights hereunder to the Trustee. All rights of
the Purchaser hereunder may be exercised by the Trustee or its assignees, to the
extent of their respective rights pursuant to such assignments.
(b) Proffitt's, Inc. may from time to time designate its
subsidiaries, divisions or department stores as "Selling Subsidiaries." To
--------------------
become a Selling Subsidiary, (i) the Purchaser, the Seller and the proposed
Selling Subsidiary must execute an assumption agreement pursuant to which the
Selling Subsidiary assumes certain of the Seller's obligations under this
Agreement and is granted the right to sell Receivables to the Purchaser upon the
terms and conditions set forth herein, (ii) such proposed Selling Subsidiary
must deliver certain other documents (including UCC-1 financing statements) to
the Transferor, the Trustee and the Rating Agencies, (iii) certain
representations and warranties made by such Selling Subsidiary must be true as
of the date it first sells Receivables to the Purchaser, and (iv) each Rating
Agency must confirm that the Rating Agency Condition has been met. In the event
any Selling Subsidiary is designated and approved hereunder, each reference to
the Seller herein shall be deemed to include each Selling Subsidiary.
SECTION 9.6. Further Assurances. The Purchaser and the Seller
------------------
agree to do and perform, from time to time, any and all acts and to execute any
and all further instruments required or reasonably requested by the other party
more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements or continuation statements
or equivalent documents relating to the Receivables for filing under the
provisions of the Relevant UCC or other laws of any applicable jurisdiction.
SECTION 9.7. No Waiver; Cumulative Remedies. No failure to
------------------------------
exercise and no delay in exercising, on the part of the Purchaser, the Seller or
the Trustee (as assignee of the Purchaser), any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exhaustive of any rights, remedies, powers and privilege
provided by law.
SECTION 9.8. No Bankruptcy Petition Against the Purchaser or
-----------------------------------------------
Trust. Each of the Seller and the Servicer hereby covenants and agrees that,
- -----
prior to the date which is one year and one day after the payment in full of all
Certificates, it will not institute against, or join any other Person in
instituting against, the Purchaser or the Trust any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
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<PAGE>
SECTION 9.9. Counterparts. This Agreement may be executed in
------------
two or more counterparts including telecopy transmission thereof (and by
different parties on separate counterparts), each of which shall be an original,
but all of which together shall constitute one and the same instrument.
SECTION 9.10. Binding Effect; Third-Party Beneficiaries.
-----------------------------------------
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. The Trustee on
behalf of the Certificateholders is intended by the parties hereto to be a third
party beneficiary of this Agreement, but otherwise no Person not a party is
intended to or shall have any rights hereunder, whether as a third party
beneficiary or otherwise.
SECTION 9.11. Merger and Integration. Except as specifically
----------------------
stated otherwise herein or incorporated hereby, this Agreement sets forth the
entire understanding of the parties relating to the subject matter hereof, and
all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived or supplemented except in
writing executed by the parties as provided herein.
SECTION 9.12. Headings. The cover page, table of contents, and
--------
article and section headings hereof are for purposes of convenience of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
SECTION 9.13. Exhibits. The schedules and exhibits referred to
--------
herein shall constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.
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<PAGE>
IN WITNESS WHEREOF, the Seller, the Purchaser and the Servicer
each have caused this Receivables Purchase Agreement to be duly executed by
their respective officers as of the day and year first above written.
NATIONAL BANK OF THE GREAT LAKES,
as Seller
By: /s/ Charles J. Hansen
------------------------------
Name: Charles J. Hansen
Title: Vice President
PROFFITT'S CREDIT CORPORATION,
as Purchaser
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
-26-
<PAGE>
EXHIBIT A
to the
RECEIVABLES PURCHASE AGREEMENT
FORM OF SUBORDINATED NOTE
$500,000,000
February 2, 1998
FOR VALUE RECEIVED, the undersigned, PROFFITT'S CREDIT CORPORATION, a
Nevada corporation (the "Maker"), hereby unconditionally promises to pay to the
-----
order of PROFFITT'S, INC. (the "Payee"), on December 31, 2005 or earlier as
-----
provided for in the Amended and Restated Receivables Purchase Agreement dated as
of the date hereof between the Maker and the Payee (as such agreement may from
time to time be amended, supplemented or otherwise modified and in effect, the
"Receivables Purchase Agreement"), the lesser of the principal sum of up to Five
- -------------------------------
Hundred Million Dollars and No/100 ($500,000,000) or the aggregate unpaid
principal amount of all Advances to the Maker from the Payee pursuant to Section
3.2, and the other terms, of the Receivables Purchase Agreement, in lawful money
of the United States of America in immediately available funds, and to pay
interest from the date thereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at the rate per annum set forth in
Section 3.2(c)(iii) of the Receivables Purchase Agreement and shall be payable
in arrears on the first day of each calendar month (or if any such day is not a
Business Day, on the succeeding Business Day).
The Maker hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the holder hereof of any of
its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Subordinated Note and all payments
and prepayments of the principal hereof and interest hereon and the respective
dates thereof shall be endorsed by the holder hereof on the schedule attached
hereto and made a part hereof, or on a continuation thereof which shall be
attached hereto and made a part hereof, or otherwise recorded by such holder in
its internal records; provided, however, that (a) the failure of the holder
hereof to make such a notation or record or (b) any error in such a notation,
shall not in any manner affect the obligation of the Maker to make payments of
principal and interest in accordance with the terms of this Subordinated Note
and the Receivables Purchase Agreement. Any such notation or record shall be
conclusive and binding as to the date and amount of such Advance, or payment of
principal or interest thereon, absent manifest error.
The Maker shall have the right to borrow, repay and, subject to the
limitations set forth in the Receivables Purchase Agreement, reborrow Advances
made to it without penalty, premium or charge. The Maker shall be obligated to
repay Advances to the Payee only to the extent of funds available to the
Purchaser from Collections on the Receivables and, to the extent that such
payments are insufficient to pay all amounts owing to the Seller under the
Subordinated
A-1
<PAGE>
Note, the Seller shall not have any claim against the Purchaser for such amounts
and no further or additional recourse shall be available against Purchaser.
This Subordinated Note is the Subordinated Note referred to in the
Receivables Purchase Agreement. The indebtedness evidenced by this Subordinated
Note is subordinated to the prior payment in full of all of the Maker's recourse
obligations under the Pooling and Servicing Agreement. The subordination
provisions contained herein are for the direct benefit of, and may be enforced
by, the Trustee, the Certificateholders and/or any of their respective permitted
assignees pursuant to the Pooling and Servicing Agreement (collectively, the
"Senior Claimants") under the Pooling and Servicing Agreement. Until the date
- -----------------
on which all obligations of the Maker and/or the Servicer under the Pooling and
Servicing Agreement (all such obligations, collectively, the "Senior Claims")
-------------
have been indefeasibly paid and satisfied in full, the Payee shall not demand,
accelerate, sue for, take, receive or accept from the Maker, directly or
indirectly, in cash or other property or by set-off or any other manner
(including, without limitation, from or by way of collateral) any payment or
security of all or any of the indebtedness under this Subordinated Note or
exercise any remedies or take any action or proceeding to enforce the same;
provided, however, that nothing in this paragraph shall restrict the Maker from
paying, or the Payee from requesting, any payments under this Subordinated Note
so long as the Maker is not required under the Pooling and Servicing Agreement
to set aside for the benefit of, or otherwise pay over to, the funds used for
such payments to any of the Senior Claimants and further provided that the
making of such payment would not otherwise violate the terms and provisions of
the Pooling and Servicing Agreement. Should any payment, distribution or
security or proceeds thereof be received by the Payee in violation of the
immediately preceding sentence, the Payee agrees that such payment shall be
segregated, received and held in trust for the benefit of, and deemed to be the
property of, and shall be immediately paid over and delivered to the Trustee for
the benefit of the Senior Claimants.
Upon the occurrence of any event described in the first sentence of
Section 9.2(a) of the Pooling and Servicing Agreement with respect to the Maker,
then and in any such event the Senior Claimants shall receive payment in full of
all amounts due or to become due on or in respect of the Senior Claims before
the Payee is entitled to receive payment on account of this Subordinated Note,
and to that end, any payment or distribution of assets of the Maker of any kind
or character, whether in cash, securities or other property, in any applicable
insolvency proceeding, which would otherwise be payable to or deliverable upon
or with respect to any or all indebtedness under this Subordinated Note, is
hereby assigned to and shall be paid or delivered by the Person making such
payment or delivery (whether a trustee in bankruptcy, a receiver, custodian or
liquidating trustee or otherwise) directly to the Trustee for application to, or
as collateral for the payment of, the Senior Claims until such Senior Claims
shall have been paid in full and satisfied.
Capitalized terms not otherwise defined herein are used herein with
the respective meanings given them in the Receivables Purchase Agreement.
A-2
<PAGE>
This Note shall be governed by, and construed in accordance with, the
laws of the State of Alabama.
PROFFITT'S CREDIT CORPORATION
By:
---------------------------------------
Name: Douglas E. Coltharp
Title: President
A-3
<PAGE>
ADVANCES AND PAYMENTS
Date and Payments Unpaid Principal Name of Person
Amount of Advance Principal/Interest Balance of Note Making Notation
- ----------------- ------------------ --------------- ---------------
A-4
<PAGE>
EXHIBIT B
to the
RECEIVABLES PURCHASE AGREEMENT
LOCATION OF RECORDS
1. Purchaser
300 South Fourth Street
Suite 1100
Las Vegas, Nevada 89101
2. Seller
140 Industrial Drive
Elmhurst, Illinois 60126
331 West Wisconsin Avenue
Milwaukee, Wisconsin 53203
3455 Highway 80 West
P.O. Box 20080
Jackson, Mississippi 39289-0080
B-1
<PAGE>
EXHIBIT C
to the
RECEIVABLES PURCHASE AGREEMENT
SUBSIDIARIES, DIVISIONS, TRADE NAMES, BANKRUPTCY PROCEEDINGS
Great Lakes Credit Corporation
140 Industrial Drive
Elmhurst, Illinois 60126
C-1
