<PAGE>
As filed with the Securities and Exchange Commission on January 28, 2000
Registration No. 333-94241
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-3/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
SAKS CREDIT CARD MASTER TRUST
(In which the Certificates represent undivided interests)
SAKS CREDIT CORPORATION
(Originator of the Trust described herein)
<TABLE>
<S> <C> <C>
Delaware 6189 63-1228533
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
Saks Credit Corporation
140 Industrial Drive
Elmhurst, Illinois 60126
(630) 516-8080
(Name, address, including zip code, and telephone number,
including area code, of Registrant's principal executive office)
Charles J. Hansen, Esq.
Saks Credit Corporation
140 Industrial Drive
Elmhurst, Illinois 60126
(630) 516-8080
(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 $1,000,000,000(2) 100% $1,000,000,000(2) $206,389.00(3)
===============================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the filing fee pursuant
to Rule 457(a) under the Securities Act of 1933.
(2) Includes $218,225,000 of unsold securities previously registered under
Registration Statement No. 333-48739.
(3) Pursuant to Rule 429 under the Securities Act, the registration fee
consists of $206,389 paid previously in connection with this
Registration Statement and $221,250 which has been previously paid in
connection with Registration Statement No. 333-48739 to register an
aggregate of $750,000,000 of securities, $218,225,000 of which remain
unsold.
_________________________
Pursuant to Securities and Exchange Commission Rule 429 under the
Securities Act of 1933, as amended (the "Securities Act"), the Prospectus
included in this Registration Statement also relates to unsold securities
in the aggregate amount of $218,225,000 that were previously registered by
the Saks Credit Card Master Trust (formerly named "Proffitt's Credit Card
Master Trust") under Registration Statement No. 333-48739 on Form S-3 filed
on March 26, 1998.
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>
SUBJECT TO COMPLETION DATED ____________________, 20__
Prospectus Supplement to Prospectus dated _______________, 2000
Saks Credit Card Master Trust
Issuer
Saks Credit Corporation
Transferor
Saks Incorporated
Servicer
$_____ Class A [Fixed] [Floating] Rate Asset Backed Certificates, Series 20__-_
$_____ Class B [Fixed] [Floating] Rate Asset Backed Certificates, Series 20__-_
<TABLE>
<CAPTION>
Class A Certificates Class B Certificates
-------------------- --------------------
<S> <C> <C> <C>
Consider carefully the risk Principal amount.................. $__________ $__________
factors beginning on page
S-16 in this prospectus Certificate rate.................. _____% _____%
supplement and page 5
of the prospectus. Interest paid..................... Monthly, beginning Monthly, beginning
_______________, 20__ _______________, 20__
A certificate is not a deposit,
and neither the certificates Expected final distribution date.. _______________, 20__ _______________, 20__
nor the underlying accounts
or receivables are insured or Series termination date........... _______________, 20__ _______________, 20__
guaranteed by the Federal
Deposit Insurance Corporation Price to public, per certificate.. 100.00% 100.00%
or any other governmental
agency. Underwriting discount, per
certificate....................... _____% _____%
The certificates will represent Proceeds to transferor, per
interests in the Trust only and certificate....................... _____% _____%
will not represent interests in
or obligations of Saks or any
Saks affiliate.
The total price to public is $__________, and the total amount of the underwriting
discount is $__________. The total amount of proceeds before deduction of estimated
expenses of $__________ is $__________.
Credit Enhancement --
. The Class B certificates are subordinated to the Class A certificates. This
subordination provides credit enhancement for the Class A certificates.
. [The Trust is also issuing a collateral interest of $__________. The collateral
interest will be subordinated to both the Class A certificates and the Class B
certificates and will provide credit enhancement for the Class A and the Class B
certificates.]
. Only the Class A and Class B certificates are offered by this prospectus supplement
and the accompanying prospectus. This prospectus supplement may be used to offer
and sell certificates only if accompanied by the prospectus.
</TABLE>
Neither the SEC nor any state securities commission has approved the
certificates or determined that this prospectus supplement or the accompanying
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
Underwriters of the Class A Certificates
Underwriter of the Class B Certificates
____________________, 20__
- --------------------------------------------------------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
- --------------------------------------------------------------------------------
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates in two documents: (a)
this prospectus supplement, which describes the specific terms of your series
and class of certificates, and (b) the accompanying prospectus, which provides
general information, some of which may not apply to your series and class of
certificates.
If the terms of your certificates or any information varies between this
prospectus supplement and the accompanying prospectus, you should rely on the
information in this prospectus supplement.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus set forth the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement and the accompanying prospectus are defined under the
caption "Index of Terms for Prospectus Supplement" beginning on page S-66 of
this prospectus supplement and under the caption "Index of Terms for
Prospectus" beginning on page 59 of the accompanying prospectus.
You need to read carefully this prospectus supplement and the accompanying
prospectus to understand the structure of the securities offered.
S-2
<PAGE>
PROSPECTUS SUPPLEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
SERIES 20 - TERMS....................................................... S-4
SERIES 20 - SUMMARY..................................................... S-5
RISK FACTORS.............................................................. S-16
CREDIT CARD PROGRAM....................................................... S-19
Retail Businesses........................................................ S-19
Bank Regulation.......................................................... S-21
Portfolio Information.................................................... S-21
Account Origination And Underwriting..................................... S-23
Account Monitoring....................................................... S-23
Billing And Payments..................................................... S-25
Delinquency, Collections and Losses...................................... S-25
COMPOSITION OF THE TRUST PORTFOLIO........................................ S-28
General.................................................................. S-28
Geographic Distribution.................................................. S-30
THE ACCOUNTS.............................................................. S-31
USE OF PROCEEDS........................................................... S-31
MATURITY ASSUMPTIONS...................................................... S-31
RECEIVABLES YIELD CONSIDERATIONS.......................................... S-34
POOL FACTORS.............................................................. S-35
SERIES PROVISIONS......................................................... S-35
General.................................................................. S-35
Interest Payments........................................................ S-36
Principal Payments....................................................... S-38
Discount Option Receivables.............................................. S-38
Postponement of Accumulation Period...................................... S-38
Reserve Account.......................................................... S-39
Subordination of the Class B Certificates and the Collateral Interest.... S-39
Investor Percentages and Transferor Percentage........................... S-40
Reallocation of Cash Flows............................................... S-42
Applications of Collections.............................................. S-43
Example of Distributions................................................. S-50
Allocation of Investor Default Amount;Adjustment Amounts; Investor Charge
Offs.................................................................... S-50
Allocation of Adjustment Amounts......................................... S-53
Pay Out Events........................................................... S-54
Servicing Compensation and Payment of Expenses........................... S-55
LISTING AND CLEARING OF CERTIFICATES...................................... S-55
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFERED CERTIFICATES....... S-57
General.................................................................. S-57
Characterization of the Offered Certificates as Indebtedness............. S-57
Treatment of the Trust................................................... S-58
Possible Classification of the Transaction as a Partnership or as an
Association Taxable as a Corporation.................................... S-58
Taxation of Interest Income of U.S. Certificate Owners................... S-59
Sale or Other Disposition of a Certificate............................... S-60
Non-U.S. Certificate Owners.............................................. S-61
Backup Withholding....................................................... S-62
STATE AND LOCAL TAX CONSEQUENCES.......................................... S-62
UNDERWRITING.............................................................. S-63
LEGAL MATTERS............................................................. S-65
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT.................................. S-66
ANNEX I OTHER SERIES...................................................... I-1
</TABLE>
S-3
<PAGE>
SERIES 20__-__TERMS
<TABLE>
<C> <S>
Transferor.......................... Saks Credit Corporation (or SCC)
Servicer............................ Saks Incorporated
Norwest Bank Minnesota, National
Trustee............................. Association
Pricing Date........................ ______________ , 20__
Closing Date........................ ______________ , 20__
Clearance and Settlement............ DTC/Cedel/Euroclear
Trust Assets........................ Receivables in credit card accounts now
owned or later acquired by National Bank
of the Great Lakes that are designated to
the Trust, including recoveries on
charged-off receivables in these accounts
</TABLE>
<TABLE>
<CAPTION>
Series Structure: Amount % of Total Series
----------------- --------------------- ---------------------
<S> <C> <C>
Class A............................ $_______ ______%
Class B............................ $_______ ______%
Collateral Interest................ $_______ ______%
Annual Servicing Fee............... _______%
<CAPTION>
Class A Class B
--------------------- ---------------------
<S> <C> <C>
Anticipated Ratings:* (Moody's /
S&P / Duff).......................
Credit Enhancement.................
Certificate Rate................... ______% _____%
Interest Accrual Method............ Actual / 360 Actual / 360
Interest Payment Dates............. Monthly (15th) Monthly (15th)
[Interest Rate Index Re-set Date..]
First Interest Payment Date........ ________, 20__ _________, 20__
Expected Payment Date.............. ________, 20__ _________, 20__
Commencement of Accumulation Period
(subject to adjustment)........... ________, 20__ _________, 20__
Stated Series Termination Date..... ________, 20__ _________, 20__
CUSIP Number.......................
ISIN...............................
Common Code........................
</TABLE>
- --------
* It is a condition of issuance that one of these ratings is obtained.
S-4
<PAGE>
SERIES 20__-__ SUMMARY
. This summary:
- highlights selected information from this document,
- does not contain all of the information that you need to consider in
making your investment decision,
- provides general, simplified descriptions of matters which, in some cases,
are highly technical and complex. More detail is provided in other sections
of this prospectus supplement and in the prospectus.
. To understand all the terms of the offering of the certificates, read
carefully all of this prospectus supplement and the accompanying
prospectus.
The Trust
The Saks Credit Card Master Trust is offering the Class A certificates and the
Class B certificates as part of Series 20__-__ . The Class B certificates are
subordinated to the Class A certificates. In this prospectus supplement, when we
use "your certificates," we mean the Series 20__-__ Class A and Class B
certificates.
The Trust has issued ___________ other series of certificates, and expects to
issue additional series in the future. The certificates of each series will
represent an ownership interest in the assets of the Trust. Series 20__-__ is
part of Group One, which includes all of the previously issued series.
National Bank of the Great Lakes
The bank is a limited purpose credit card bank. The bank originates and acquires
credit card accounts for the customers of Saks' retail stores and its catalog
businesses. Except for receivables in designated accounts acquired in Fall 1998,
the bank has sold all the receivables generated in its credit card accounts to
Saks Credit Corporation, as transferor. The bank's principal offices are located
in Elmhurst, Illinois and its telephone number is (630) 516-8200.
The Transferor
As transferor, Saks Credit Corporation sells eligible receivables to the Trust.
Saks Credit Corporation is the successor to Proffitt's Credit Corporation. Saks
Credit Corporation's principal offices are located at 140 Industrial Drive,
Elmhurst, Illinois 60126 and its telephone number is (630) 515-8200.
The Servicer
Saks is the servicer. Through its subservicer, Saks collects payments on the
receivables and allocates the collections among the interests in the Trust.
McRae's, Inc. currently is the sole subservicer.
The Receivables
The primary assets of the Trust are receivables generated by the bank's
portfolio of revolving consumer credit card accounts. The receivables consist of
principal receivables and finance charge receivables.
The following information is as of ______________, 20__.
. Principal receivables in the Trust: $__________ million.
. Finance charge receivables in the Trust: $_________ million.
. Accounts designated to the Trust: ___________ million.
See "The Accounts" in this prospectus supplement.
The Offered Certificates
Certificates
The Trust is offering:
S-5
<PAGE>
. $________ of Class A certificates; and
. $________ of Class B certificates.
You may purchase beneficial interests in these certificates in minimum
denominations of $1,000 and integral multiples of $1,000.
We expect that the Trust will issue the offered certificates on
____________________, 20__.
Distribution Dates
Distributions for the Series 20__-__ certificates will be made on the 15th
day of each month, or if that day is not a business day, the next business day.
The first distribution date will be __________________, 20__.
Interest Payments
The Class A certificates will accrue interest for each interest period at an
annual rate equal to ____ %.
The Class B certificates will accrue interest for each interest period at an
annual rate equal to ____%.
Interest accrued during an interest period will be due on the following
distribution date. Any interest due but not paid on a distribution date will be
payable on the next distribution date together with additional interest at the
applicable certificate rate plus 2% per annum.
. Each "interest period" begins on and includes a distribution date and
ends on but excludes the next distribution date. However, the first
interest period will begin on and include ____________, 20__ and end on
and exclude ______________, 20__, the first distribution date.
. [LIBOR is the rate for deposits in U.S. dollars for a one-month period
which appears on the Telerate Page 3750 (or similar replacement page) as of
11:00 A.M., London time, on the related LIBOR determination date. See
"Series Provisions -- Interest Payments" in this prospectus supplement for
a discussion of the determination of LIBOR if that rate does not appear on
Telerate Page 3750 (or similar replacement page).]
. [LIBOR determination dates are:
. ______________, 20__, for the period beginning on and including
_______________, 20__ and ending on but excluding _______________, 20__;
. ________________, 20__ for the period beginning on and including
________________, 20__ and ending on but excluding _____________, 20__;
and
. the second London business day prior to the first day of each interest
period, for each interest period thereafter.
The following time line shows the relevant dates for the first two interest
periods.
First Two Interest Periods
Closing Interest Interest
Date Payment Payment
( / / ) ( / / ) ( / / )
| | |
---------------------------------------------------------------------------
| | |
LIBOR LIBOR LIBOR
Set Re-set Re-Set
( / / ) ( / / ) ( / / )
Other interest periods will follow sequentially after the second interest period
in the same manner as is shown in the time line.
See "Series Provisions -- Interest Payments" in this prospectus supplement
for a discussion of the determination of amounts available to pay interest and
for the definition of business day and London business day.
You may obtain certificate rates for the current and immediately preceding
interest periods by telephoning Norwest Bank Minnesota, National Association,
the trustee, at (612) 667-3536.]
S-6
<PAGE>
Principal Payments
We expect that the Trust will distribute principal on the certificates on the
dates noted below; however, principal may be distributed earlier or later. You
will not be entitled to any premium for principal that is distributed earlier or
later.
If adverse events known as pay out events occur, the Trust may distribute
principal earlier than expected.
If collections on the credit card receivables are less than expected or are
collected more slowly than expected, then principal distributions may be
delayed.
. We expect that the Trust will distribute principal on the Class A and the
Class B certificates on the _____________________, 20__ distribution
date.
. If the Trust does not distribute principal on the certificates on the
expected payment date, the Trust will continue to use collections of
receivables to pay principal on the certificates until they are paid in
full, or _____________, 20__ whichever occurs first.
See "Maturity Assumptions" in this prospectus supplement and in the
accompanying prospectus and "Series Provisions -- Investor Percentages and
Transferor Percentage " and "-- Principal Payments" in this prospectus
supplement for a discussion of the determination of amounts available to pay
principal.
[The Collateral Interest
At the same time as the Trust issues the Class A and the Class B
certificates, the Trust will issue $_________ of a collateral interest as
part of Series 20__-__ .
As a subordinated interest, the collateral interest is a form of credit
enhancement for the Class A and Class B certificates.
The collateral interest may be subdivided into separate interests, and on
the closing date, all or some of the collateral interest may be sold to third
parties or to Saks or its affiliates, or retained by the transferor, and if
retained, all or some of the collateral interest may be sold to third parties
or to Saks or its affiliates at any time.
The collateral interest is not offered by this prospectus supplement and
the accompanying prospectus.]
Credit Enhancement
. The credit enhancement described in this prospectus supplement benefits
Series 20__-__ only. You are not entitled to the benefits of any credit
enhancement available to other series.
. Subordination of the Class B certificates provides credit enhancement for the
Class A certificates. Subordination of the collateral interest provides
credit enhancement for both the Class A certificates and the Class B
certificates.
. The spread account is established only for the benefit of the collateral
interest and should not be considered enhancement for the Class A and Class
B certificates.
The principal amount outstanding at any time on a class of certificates and
the collateral interest is called the "investor amount." The collateral
interest amount and the Class B investor amount must be reduced to zero before
the Class A investor amount will suffer any loss of principal. The collateral
interest amount must be reduced to zero before the Class B investor amount
will suffer any loss of principal.
See "Series Provisions -- Reallocation of Cash Flows," "-- Applications of
Collections" and "-- Allocation of Investor Default Amount; Adjustment
Amounts; Investor Charge Offs" in this prospectus supplement for events which
may lead to a reduction of the Class A investor amount, the Class B investor
amount, and the collateral interest amount.
S-7
<PAGE>
Other Interests in the Trust
Other Series of Certificates
Each series previously issued and currently outstanding is summarized in "Annex
I: Other Series" at the end of this prospectus supplement. The Trust may issue
additional series or classes with terms that may be different from Series 20__-
__ without the prior review or consent of the certificateholders of any series,
if the rating agency condition is met.
The Transferor Interest
SCC will own the transferor interest. The transferor interest represents the
remaining interests in the Trust's assets that are not represented by the
certificates of the various series and any collateral or other interests issued
by the Trust.
The transferor interest does not provide credit enhancement for your series
or any other series.
Allocations and Payments to You and Your Series
Each month, the servicer will allocate collections of receivables, and the
amount of receivables that are written off as uncollectible, among:
. Series 20__-__;
. other outstanding series; and
. the transferor interest.
From the amounts allocated to your series, the servicer will further
allocate among the Class A certificates, the Class B certificates and the
collateral interest based on the investor amount of each class.
Initially, the investor amount of each class will be equal to the original
principal amount of that class. The investor amount of a series or a class will
decline as a result of the accumulation of principal collections in the
principal account or principal payments. The investor amount may also decline
if collections of finance charge receivables are not sufficient to cover
receivables defaults allocated to a series or class of certificates. If the
investor amount for your series or class declines, there may be a reduction in
the amounts allocated and available for payment to you.
See the following chart and "Series Provisions -- Investor Percentages and
Transferor Percentage" and "-- Reallocation of Cash Flows" in this prospectus
supplement.
The following chart illustrates the Trust's general allocation structure
only and does not reflect the relative percentages of collections or other
amounts allocated to the transferor interest, to holders of the Series 20__-__
Class A certificates, Class B certificates or the collateral interest, or any
other series.
Allocation of Trust Assets
[CHART APPEARS HERE]
Allocations of Collections of Finance Charge Receivables
The following chart demonstrates the manner in which collections of finance
charge receivables will be allocated and applied to your series. The chart is a
simplified demonstration of allocation and payment provisions and is qualified
by the full descriptions of these provisions in this prospectus supplement and
the accompanying prospectus.
Step 1:
- ------
. Collections of finance charge receivables and other amounts for Series
20__-__ will be allocated, in order of priority, to the Class A investor
amount, the Class B investor amount, and the collateral interest amount.
S-8
<PAGE>
Step 2:
. Collections of finance charge receivables and other amounts allocated to
the Class A certificates will be used in the following priority: first, to
make the interest payment due on the Class A certificates, then, to pay
Class A's portion of the servicing fee if Saks is no longer the servicer,
and then to cover Class A's portion of the receivables that are written off
as uncollectible (known as the default amount). Any remaining amount will
become excess spread and be applied as described in Step 3 below.
. Collections of finance charge receivables allocated to the Class B
certificates will be used in the following priority: first, to make the
interest payment due on the Class B certificates, and then to pay Class B's
portion of the servicing fee if Saks is no longer the servicer. Any
remaining amount will become excess spread and be applied as described in
Step 3 below.
. Collections of finance charge receivables allocated to the collateral
interest will be used to pay the collateral interest's portion of the
servicing fee if Saks is no longer the servicer. Any remaining amount will
become excess spread and be applied as described in Step 3 below.
. Remaining collections of finance charge receivables allocated to the
Class B investor amount and the collateral interest amount are applied in
Step 3 because of their subordinated status.
Step 3:
Collections of finance charge receivables allocated to your series and not
used in Step 2 are treated as excess spread and applied, together with shared
excess finance charge collections from other series in Group One, as necessary
and available, in the following priority:
. to make up deficiencies with respect to Class A, in their order of
priority, to the extent not covered in Step 2;
. to reimburse reductions of the Class A investor amount;
. to make up deficiencies with respect to Class B, in their order of
priority, to the extent not covered in Step 2;
. to cover Class B's portion of the default amount;
. to fund, if necessary, a reserve account, to cover interest payment
shortfalls;
. to reimburse reductions of the Class B investor amount;
. to pay the interest due on the collateral interest;
. to pay the servicing fee, or if Saks is no longer the servicer, to pay
the portion not covered in Step 2;
. to cover the collateral interest's portion of the default amount;
. to reimburse reductions of the collateral interest amount;
. to fund, as required, the spread account for the benefit of the
collateral interest;
. to fund, as required, other amounts due to the collateral interest; and
finally, to other series in Group One, as part of shared excess finance
charge collections.
See "Series Provisions -- Applications of Collections" in this prospectus
supplement.
S-9
<PAGE>
Allocations of Collections of Finance Charge Receivables
[CHART APPEARS HERE]
Allocations of Collections of Principal Receivables for Series 20__-_
As long as no pay out event has occurred, your series' share of principal
collections, including shared principal collections from other series in Group
One will be applied each month as follows:
Step 1:
Collections of principal receivables for your series will be allocated,
based on the respective percentages, among the Class A investor amount, the
Class B investor amount and the collateral interest amount.
Step 2:
. Collections of principal receivables allocated to the collateral
interest and the Class B certificates may be reallocated, if necessary, to
make required payments on the Class A certificates that were not made from
finance charge collections, excess spread or shared excess finance charge
collections.
. Collections of principal receivables allocated to the collateral
interest may be reallocated, if necessary, to make required payments on the
Class B certificates that were not made from
S-10
<PAGE>
finance charge collections, excess spread or shared excess finance charge
collections.
. During the revolving period, no principal will be paid to you or holders
of the collateral interest, or accumulated in a trust account.
. During each month in the accumulation period, principal collections will
be deposited in a trust account, up to a specified amount (known as the
controlled deposit amount) for payment first to the Class A
certificateholders, and then to the Class B certificateholders on the
expected final distribution date, and then to pay the holders of the
collateral interest.
The amount, priority and timing of your principal payments, if any, depend
on whether your series is in the revolving period, the accumulation period or a
rapid amortization period, as described below.
The Class A certificates will be paid in full before the Class B certificates
and the collateral interest receive any payments of principal. The Class B
certificates will be paid in full before the collateral interest receives any
payments of principal.
Step 3:
Any remaining principal collections will be made available to other series in
Group One as shared principal collections, to the extent necessary, or paid to
the transferor.
See "Maturity Assumptions" and "Series Provisions -- Applications of
Collections" in this prospectus supplement.
The following chart demonstrates the manner in which collections of principal
receivables are allocated and applied to your series. The chart is a simplified
demonstration of certain allocation and payment provisions and is qualified by
the full descriptions of these provisions in this prospectus supplement and the
accompanying prospectus.
Revolving Period: Series 20__-_ will have a revolving period, when the Trust
will not pay or accumulate principal for certificateholders or the holders of
the collateral interest. In general, during the revolving period, the Trust
will pay available principal to other series or the holder of the Allocations
of Collections of Principal Receivables transferor interest. See "Series
Provisions -- Principal Payments" and "-- Applications of Collections" in this
prospectus supplement.
S-11
<PAGE>
Allocations of Collections of Principal Receivables
[CHART APPEARS HERE]
The revolving period will start on the closing date and end on the earlier
to begin of:
. the accumulation period; or
. a rapid amortization period.
Accumulation Period: During the accumulation period, the servicer will
deposit a specified amount in the principal account each month in order to pay
the certificates and the collateral interest in full on the expected payment
date.
Each month, the Trust will pay principal that is not required to be
deposited in the principal account to other series or the holder of the
transferor interest. Each month, if the amount actually deposited in the
principal account is less than the required deposit, the amount of this
deficiency will be carried forward as a shortfall and included in the next
month's required deposit. See "Series Provisions -- Principal Payments" and
"-- Applications of Collections" in this prospectus supplement.
On the expected payment date, the Trust will use the money on deposit in the
principal account to pay (a) the Class A investor amount, (b) if the Class A
investor amount is paid in full, the Class B investor amount and (c) if the
Class B investor amount is paid in full, the collateral interest amount.
You should be aware that there may not be sufficient amounts available to
pay principal in full for the Class A investor amount or the Class B investor
amount on the expected payment date. In addition, if the money on deposit in
the principal account is insufficient to pay these amounts on the expected
payment date or if a pay out event occurs, the rapid amortization period will
begin and the timing of your principal payments could change. See "Maturity
Assumptions" in this prospectus supplement and in the accompanying prospectus.
S-12
<PAGE>
The accumulation period is scheduled to begin at the close of business on
_________________________, 20__, but in some cases may be delayed to no later
than the close of business on ___________________, 20__. See "Series
Provisions -- Postponement of Accumulation Period" in this prospectus
supplement.
The accumulation period will end upon the earliest of the following:
. the investor amount is paid in full;
. a rapid amortization period begins; or
. the Series 20__-_ termination date.
Pay Out Events: Adverse events called pay out events might lead to the start
of a rapid amortization period, which will end the revolving period or the
accumulation period.
A pay out event for your series will include the following events:
. we do not make a required payment or deposit within the applicable grace
period;
. we fail to observe or perform in any material respect any other
obligation or agreement causing you to be adversely affected, if (a) we do
not remedy the violation within 60 days after written notice is given and
(b) you continue to be materially and adversely affected for the 60-day
period;
. certain of our representations, warranties or other information were
materially incorrect at the time they were provided causing you to be
adversely affected, if (a) they continue to be materially incorrect 60 days
after written notice is given and (b) you continue to be materially and
adversely affected for the 60-day period;
. the three-month average net yield on the receivables is less than the
average base rate for the same three-month period;
. we fail or are unable to designate additional accounts or to transfer
receivables to the Trust, as required under the pooling and servicing
agreement;
. defaults by the servicer that have a material adverse effect on you; or
you are not paid in full on the expected payment date.
See "Series Provisions -- Pay Out Events" in this prospectus supplement.
Rapid Amortization Period: If a rapid amortization period begins, the Trust
will use any available principal collections allocated to your series to pay
(a) the Class A investor amount, (b) if the Class A investor amount is paid in
full, the Class B investor amount and (c) if the Class B investor amount is
paid in full, the collateral interest amount. These payments will begin on the
distribution date in the month after the rapid amortization period begins.
The rapid amortization period will begin if a pay out event occurs and will
end upon the earliest of the following:
. the investor amount is paid in full;
. the Series 20__-_ termination date; or
. the Trust termination date.
S-13
<PAGE>
Shared Principal Collections
Series 20__-_ is included in a group of series designated as "Group One."
Each series listed in "Annex I: Other Series" included at the end of this
prospectus supplement is, and future series may be, included in Group One. To
the extent that collections of principal receivables allocated to your series
are not needed to make payments or deposits to the principal account for your
series, these collections, called shared principal collections, will be applied
to cover principal payments for other series within Group One. Any reallocation
for this purpose will not reduce your series' investor amount. In addition, you
may receive the benefits of collections of principal receivables and certain
other amounts allocated to other series in Group One, to the extent those
collections are not needed for those other series. See "Description of the
Certificates and the Pooling and Servicing Agreement -- Shared Principal
Collections" in the accompanying prospectus.
Registration, Clearance and Settlement
Your certificates will be registered in the name of Cede & Co., as the
nominee of The Depository Trust Company. You will not receive a definitive
certificate representing your interest, except in limited circumstances
described in the accompanying prospectus, when certificates in fully
registered, certificated form are issued. See "Description of the Certificates
and the Pooling and Servicing Agreement -- Definitive Certificates" in the
accompanying prospectus.
You may elect to hold your Certificates through DTC, in the United States,
or Cedelbank, societe anonyme or the Euroclear System, in Europe. Transfers
within DTC, Cedelbank or Euroclear, as the case may be, will be made in
accordance with the usual rules and operating procedures of those systems.
We expect that the Certificates will be delivered in book-entry form through
the facilities of DTC, Cedelbank and Euroclear on or about __________________,
20__. See "Listing and Clearing of Certificates" in this prospectus supplement
and "Description of the Certificates and the Pooling and Servicing Agreement --
Book-Entry Registration" and Annex I in the accompanying prospectus.
Tax Status
Alston & Bird LLP, as our special counsel, is of the opinion that under
existing law, your certificates will be characterized as debt for federal
income tax purposes. By your acceptance of a Series 20__-_ certificate, you
will agree to treat your certificates as debt for federal, state and local
income tax purposes and franchise tax purposes. See "Certain Federal Income Tax
Consequences of the Offered Certificates" in this prospectus supplement and
"Certain Federal Income Tax Consequences" in the accompanying prospectus for
additional information concerning the application of federal income tax laws.
ERISA Considerations
The Class A certificates may be eligible for purchase by persons investing
assets of employee benefit plans or individual retirement accounts, if 100 or
more investors purchase the Class A certificates.
The Class B certificates are not eligible for purchase by persons investing
assets of employee benefit plans or individual retirement accounts other than
an insurance company's investments for its general account.
You should read "ERISA Considerations" in the accompanying prospectus for
more information regarding investments by persons subject to ERISA.
Certificate Ratings
The Class A certificates will be rated in the highest rating category by at
least one nationally recognized rating organization.
The Class B Certificates will be rated in one of the three highest rating
categories by at least one nationally recognized rating organization. See "Risk
Factors -- Certificate Ratings Are Limited and Do Not Guarantee Payments" in
the accompanying prospectus.
S-14
<PAGE>
Exchange Listing
We expect to list the certificates on the Luxembourg Stock Exchange. We cannot
guaranty that the application for the listing will be accepted or, if accepted,
when the listing will be accepted. You should consult with Banque Generale du
Luxembourg S.A. listing agent for the certificates, 50 Avenue J.F. Kennedy,
L-2951, Luxembourg, phone number (011) 352-4242-2686, to determine whether or
not the certificates are listed on the Luxembourg Stock Exchange. See "Listing
and Clearing of Certificates" in this prospectus supplement and "Description of
the Certificates and the Pooling and Servicing Agreement -- Book-Entry
Registration" and Annex I in the accompanying prospectus.
Additional Information
For more information, you can call (205) 940-4000 and direct your inquiries to
Charles J. Hansen.
S-15
<PAGE>
RISK FACTORS
You should consider carefully the following risk factors in deciding whether to
purchase the certificates.
<TABLE>
<S> <C>
Your Certificates Have Limited Credit Enhancement. You The subordination of the collateral interest and, in the
May Not Receive All Principal and Interest. case of the Class A certificates, the additional
subordination of the Class B certificates, provide
limited credit enhancement. If the available credit
enhancement is reduced to zero, your right to receive
payments of principal and interest will depend solely on
the Trust receiving payments on the receivables. The
spread account is for the sole benefit of the collateral
interest, and is not credit enhancement for your
certificates. You have no right to seek payment from
Saks, the transferor, the servicer, or the bank, or any
of their affiliates, of payments of interest or
principal on the certificates.
If You Hold Class B Certificates, You Will Be Paid If you hold Class B certificates, you will receive
Only After the Class A Certificates Have Been Paid payments of principal only after the holders of the
Class A certificates have been paid all interest and
principal due and owing to them. In addition, if the
collateral interest amount has been reduced to zero, the
Class B investor amount will be reduced to the extent
that payments due on the Class A certificates for any
month cannot be made from the collections allocated to
your series. A reduction in the Class B investor amount
will result in collections of finance charge receivables
allocable to the Class B certificates in future months
being reduced, which may delay or reduce payments on the
Class B certificates.
Additionally, if receivables have to be sold due to a
pay out event occurring, the net sales proceeds
available to pay principal would be paid first to the
Class A certificateholders and any remaining net
proceeds would be paid to the Class B
certificateholders. If that amount is insufficient to
pay the Class B certificateholders in full, they will
suffer a loss. If the collateral interest amount is
reduced to zero, the Class B certificateholders will not
have the benefit of any credit enhancement and will bear
the full credit and other risks associated with their
interest in the Trust.
See "Description of the Certificates and the Pooling
and Servicing Agreement" in the accompanying prospectus
and "Series Provisions -- Principal Payments" and
"-- Pay Out Events" in this prospectus supplement.
</TABLE>
S-16
<PAGE>
<TABLE>
<S> <C>
Principal May be Paid Earlier Than Expected Creating If Saks is unable to generate receivables from store and
Reinvestment Risks, or Later Than Expected Resulting catalog sales at the same rate as in previous years, a
in You Not Receiving Payments When Expected pay out event may occur, causing the rapid amortization
period to begin. During the rapid amortization period,
collections of principal receivables will be used to
reduce the Class A investor amount to zero and then to
reduce the Class B investor amount to zero. The Class A
and Class B investor amounts may be reduced to zero
prior to the expected payment date. If this occurs, you
will receive less interest on your certificates than
expected, and you may be unable to reinvest the returned
principal at a rate of return and with risks similar to
your certificates.
See "Risk Factors -- If Sales at Saks' Stores Decline,
a Pay Out Event Could Occur" in the accompanying
prospectus.
Differences between Interest Rates on Floating Rate The receivables currently accrue interest at a fixed
Certificates and Fixed Rate Assets May Reduce the rate. Your certificates accrue interest at a rate based
Funds Available to Certificateholders and Cause an on LIBOR, which is a floating rate. If the LIBOR rate
Early Repayment of Certificates increases, the trust is required to distribute more
money to certificateholders as interest, but the fixed
interest rate receivables will not provide the trust
with corresponding greater amounts of income. If LIBOR
increases, the trust may have insufficient money to pay
interest on your certificates, and a pay out event and
an early repayment of the principal of your certificates
could occur.
If the bank changes the terms of the accounts in the
future to charge a floating rate of interest, that
floating rate may not be a LIBOR-based rate. In that
case, there will be a so-called "basis risk," which is
the risk that the interest rate on the receivables
changes in an amount or direction different than changes
in LIBOR. In this case, the trust may have insufficient
funds to pay interest on the certificates, and a pay out
event and an early repayment of the principal of your
certificates could occur.
The trust does not have the benefit of any interest rate
hedge arrangement that would reduce these risks. The
bank may, however, subject to competitive conditions,
change the rates or the method of determining the
interest rates charged on its accounts.
</TABLE>
S-17
<PAGE>
<TABLE>
<S> <C>
The Department Stores' Seasonal Sales Affect the Level Sales of Saks' merchandise and services are seasonal,
of Receivables and the Level of Credit Losses with disproportionately high levels during the Christmas
shopping season. Sales are generally weakest during the
summer months due to vacations. The outstanding amount
of receivables reflects this seasonality. Credit losses
typically lag credit sales by seven to eight months
reflecting Saks' write-off policies. Therefore, the
seasonal increase in credit losses due to Christmas
sales coincides with the low summer sales volumes. This
raises the ratio of credit losses to receivables
balances during the summer.
If these higher losses during the summer months cannot
be absorbed by the allocations of finance charge
collections and credit enhancement and new receivables
from additional sales and charges, a pay out event could
occur, and the principal on your certificates may be
returned earlier than expected.
If the Servicer is Unable to Successfully Integrate In June 1999, Saks assumed responsibility from a third
the Saks Fifth Avenue Credit Card Operations, the party for servicing the Saks Fifth Avenue receivables.
Trust Portfolio's Performance Could Be Affected While Saks has successfully integrated the credit card
operations of acquired businesses in the past,
unanticipated problems could occur in this conversion. A
failure to successfully integrate Saks Fifth Avenue
credit card operations could materially adversely affect
the performance of the Trust portfolio, which could
result in payments on your certificates not being made
when expected.
See "Credit Card Program" in this prospectus
supplement.
</TABLE>
S-18
<PAGE>
CREDIT CARD PROGRAM
Saks Incorporated ("Saks") and its subsidiaries provide credit card services
for all of National Bank of the Great Lakes' (the "Bank") credit card customers
at servicing facilities located in Jackson, Mississippi and Elmhurst, Illinois
(each, a "Credit Service Center"). All credit card servicing, credit granting,
administration and collection functions not performed directly by the Bank are
conducted centrally by the Credit Service Centers on behalf of the Bank and Saks
Credit Corporation ("SCC" or the "Transferor") pursuant to service agreements.
Both Credit Service Centers use versions of the Vision21 credit and processing
system. Vision 21 is a fully automated system, obtained from a third party
vendor, that has been modified to meet Saks' specific needs.
Saks Fifth Avenue, comprising the Saks Fifth Avenue, Bullock & Jones and Folio
retail businesses ("Saks Fifth Avenue"), employed Alliance Data Systems ("ADS"),
(formerly JC Penney Business Services Incorporated) to perform all credit
processing services from 1992 to June 1999, pursuant to Saks Fifth Avenue's
performance rules and guidelines, at ADS' Dallas facility. Saks terminated the
ADS servicing contract in June 1999 and has converted all processing from ADS
(the "Conversion"). Most processing functions, including application processing,
authorizations, transaction processing, statement rendition, customer service,
and collections for the Saks Fifth Avenue accounts now are performed directly by
the Bank or by contracts with affiliates. Certain activities are performed by
unaffiliated third parties under agreements with the Bank. All references to the
administration and processing of the Saks Fifth Avenue accounts describe the
post-Conversion administration and processing.
Approximately _____% of Saks' consolidated net sales in calendar year 1999
were charged to the Bank's credit cards. Frequent use of the Bank's proprietary
credit cards by Department Store customers is an important element in Saks'
marketing and growth strategies, and generates significant finance charge income
which augments the income received from the sale of merchandise and services.
Saks believes that the Bank's proprietary credit cardholders shop more
frequently with the retail businesses operated by Saks (the "Department
Stores"), purchase more merchandise, and are generally more loyal to the
Department Stores than customers who use other payment methods.
Saks seeks to expand the number and use of the Bank's proprietary credit cards
by, among other things, providing incentives to sales associates to open
"instant credit" accounts with the Bank. This generally takes approximately
three minutes using automated voice response units and other systems that
provide rapid credit verification. Also, customers who open accounts are
entitled to discounts on first day purchases made using their new Bank credit
card account. See "-- Account Origination and Underwriting."
The Trust has an aggregate of approximately __________ million credit card
accounts outstanding that have been active in the last 12 months.
Retail Businesses
Saks Incorporated is a national retailer currently operating more than 350
Department Stores in 38 states. Saks' stores are principally anchor department
stores in leading regional or community malls and typically offer a broad
selection of fashion apparel, shoes, accessories, jewelry, cosmetics, decorative
home furnishings, and furniture in selected locations. In addition, Saks
operates the Folio and Bullock & Jones catalog businesses.
Store Formats
Saks believes that by positioning the stores in diverse geographic locations
and by using different store formats and trade names, it is able to appeal to a
broad portion of its potential customer base. For example, the Younkers and
Proffitt's store formats generally appeal to middle and upper-middle income
customers in smaller
S-19
<PAGE>
and mid-size trade areas, while the Parisian store format generally appeals to
upper-middle and upper-income customers in larger metropolitan trade areas.
Complementing these formats are:
. The Saks Fifth Avenue format, which has a leadership position in luxury
merchandise primarily through stores located in major urban and suburban
trade areas and many resort locations;
. The Off 5/th/ outlet format, which offers off-price merchandise to a more
moderate-income segment of customers; and
. The Folio and Bullock & Jones catalog formats, which offer merchandise by
direct mail.
In smaller communities, Saks' stores cater to middle and upper income
customers with a selection of name-brand merchandise that is not otherwise
available in that trade area. In larger metropolitan areas, Saks tries to
maximize its presence by operating several stores (sometimes with different
formats) in prime locations. In addition, management believes that Saks Fifth
Avenue stores serve as destination stores that draw customers from a wide
geographic base. Each of the stores carry name-brand merchandise selected to
appeal to the particular customer base of the store. Key brands featured in the
more traditional Department Stores include [Liz Claiborne, Calvin Klein,
Polo/Ralph Lauren, Tommy Hilfiger, Nautica, Estee Lauder, Clinique, Lancome,
Nine West, Enzo, Waterford, and Bali. In addition to the above brands, Parisian
stores carry many brands typically carried only at specialty stores, including
Sigrid Olson, Robert Talbott, Ike Behar, MAC, Bobbi Brown, Trish McEvoy, BCBG,
and Brighton. Saks Fifth Avenue has key relationships with the leading fashion
houses, including Giorgio Armani, Chanel, Dolce and Gabbana, Salvatore
Ferragamo, Gucci, Prada, Oscar de la Renta, St. John, Yves St. Laurent, J.P.
Tod, Ermenegildo Zegna, and Max Mara] [subject to revision].
Acquisition and Integration Strategy
Saks has grown through the acquisition of principally anchor department store
businesses, such as Parisian, Herberger's, Carson Pirie Scott ("CPS"), and in
Fall 1998, the national chain of Saks Fifth Avenue. Saks complemented these
department store company acquisitions with selective real estate acquisitions,
new store openings and purchases of single-store locations and groups of stores;
all part of Saks' goal of achieving a leading position in each trade area in
which it operates. Given current trends toward limited new mall development,
management believes the attractiveness of its existing locations provides Saks
with a distinct competitive advantage.
Through its acquisitions, Saks has developed, as one of its key strengths, the
ability to integrate and enhance the back office functions of the acquired
stores. Saks' integration philosophy includes:
. Retaining key store management;
. Maintaining store identity and store level sales personnel to assure that
the acquisition does not adversely affect customer service;
. Retaining previously developed regional expertise and knowledge of the
local customer base, which allows each store format to tailor a portion of
its merchandise selection to the local customer;
. Using a "best practices" process where each store's operating procedures
and policies are reviewed to see if there are practices which will provide
more efficient operations at other stores;
. Coordinating most merchandise planning and buying (except for Saks Fifth
Avenue stores) through Saks'
S-20
<PAGE>
central merchandising group to obtain the benefits of vendor relationships;
and
. Centralizing support functions, such as credit card operations, logistics
and information systems, to reduce expenses and promote efficiency.
Saks successfully implemented this strategy in the acquisitions of McRae's,
Younkers, Parisian, Herberger's, and Carson Pirie Scott, each of which resulted
in enhanced efficiencies and improved earnings, and is currently implementing
this strategy with the Saks Fifth Avenue stores.
Saks evaluates possible acquisitions of department store chains and individual
department stores, and new stores may be opened for the Department Stores. The
Bank may acquire or offer credit card programs to customers of such stores, and
as a result, additional receivables may be added to the Trust, either as
Automatic Additional Accounts, or if above a certain level or if the accounts or
receivables are otherwise not eligible for addition as Automatic Additional
Accounts, as Additional Accounts, subject to the Rating Agency Condition and
other conditions described herein and in the related Prospectus. See also
"Description of the Certificates and the Pooling and Servicing Agreement --
Addition of Accounts" in the Prospectus.
Bank Regulation
As a national bank, the Bank is regulated, supervised and examined by the
Office of the Comptroller of the Currency ("OCC"). OCC examinations include,
among other items, a detailed review of underwriting policies and procedures,
compliance with the Truth-in-Lending Act and other consumer laws, credit
reporting, community reinvestment and other legal requirements, adequacy of
financial reporting, adequacy of management, capital and earnings, and a review
of the adequacy of the system of internal controls. Such examinations are not
conducted for the benefit of the Certificateholders or other holders of
securities.
Portfolio Information
The Bank determined that some of the accounts and the related receivables
(collectively, the "Excluded Accounts") that it acquired in Fall 1998 were
originated or administered under guidelines less stringent than those applied to
the Accounts designated to the Trust and the related Receivables in the Trust
(collectively, the "Trust Portfolio"). The Excluded Accounts included
approximately $__________ million of receivables at _______________, 20__ (the
"Series Cut-Off Date"), which are not included in the Trust Portfolio, and
some of which have been sold to a separate facility. The assets of the Trust
consist of all of the Receivables in the Accounts at the Series Cut-Off Date,
plus Receivables in new Accounts originated by the Bank from the Series Cut-Off
Date through the Closing Date. After the Closing Date, the Trust will also
include all Receivables in Additional Accounts (including Additional Accounts
that may be contributed in connection with Automatic Additional Accounts), less
Receivables in Removed Accounts.
All information below regarding the "Bank Portfolio" includes all of the
Bank's credit card accounts and all receivables generated from these accounts
and therefore includes receivables generated from both the Trust Portfolio, as
well as from the Excluded Accounts which are not part of the Trust Portfolio.
The following table shows Receivables outstanding in the Bank Portfolio for the
periods presented. Amounts and percentages in the following tables may not add
to the totals because of rounding. The Bank Portfolio's future composition may
not be similar to this historical experience. See "The Accounts."
S-21
<PAGE>
Receivables Outstanding
Bank Portfolio
(Dollars In Thousands)
<TABLE>
<CAPTION>
As of __________, As of December 31,
---------------------------- ---------------------------------------------
19__ 19__ 19__ 19__ 19__
---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Receivables
Outstanding(1)..........
Number of Accounts(3)....
</TABLE>
- --------------
(1) Receivables outstanding typically decrease from December to May due to
payments of holiday purchases and decreased sales volumes in the summer
months.
(2) For CPS, the number of Accounts is not available for the period specified.
(3) Excludes Accounts with zero balances.
Receivables in the Trust Portfolio are created by purchases of merchandise and
services (including, without limitation, travel agency services, dining room
charges and alterations) from the Department Stores. Accordingly, the Trust
depends on the ability of the Department Stores to generate sales charged to the
Bank's credit cards. In addition, since the Department Stores accept cash,
checks and debit and other credit cards, including American Express, MasterCard,
VISA and Discover cards, the Trust will also depend upon the decisions of
customers to use the Bank's credit cards rather than other payment methods.
Bank credit cardholders are offered a variety of incentives to use their
credit cards. These incentives, which vary from time to time and may be changed
at any time in the future, have included discounts on first day purchases under
the Instant Credit program described below and discount coupons for new
cardholders, for cardholders with no recent activity in their accounts, and for
cardholders whose monthly purchases exceed specified levels. Such coupons are
usable only in connection with new purchases using Bank credit cards.
The Department Stores' future sales made using the Bank's credit cards may not
be similar to the historical experience set forth below.
Department Stores' Sales by Form of Payment
<TABLE>
<CAPTION>
For the __________ Months For the 12 Months Ended
Ended __________, December 31,
----------------------------- --------------------------------------------------
19__ 19__ 19__ 19__ 19__
---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Bank Credit Cards................. % % % % %
Third Party Credit Cards
(Visa, MasterCard, etc.)........
Cash, Check or Other..............
---------- ---------- ----------- ---------- -----------
100% 100% 100% 100% 100%
========== ========== =========== ========== ===========
</TABLE>
- --------------
(1) Does not include percentages for Younkers for January 1997.
(2) Does not include percentages for Younkers or Saks Fifth Avenue for the 12
months ended December 1996.
(3) Does not include percentages for Proffitt's for January 1996.
S-22
<PAGE>
Account Origination And Underwriting
Each of the Bank's credit card accounts is governed by a written agreement
containing the terms and conditions of the account. In these agreements, the
Bank reserves the right to change or terminate any term, condition, service or
feature of the account (including, among others, increasing or decreasing
finance charges, other charges or minimum payments). Credit card accounts for
Department Store customers are generally created through three new account
programs:
New Account Programs
In-Store "Instant Credit" Applications. The Bank offers instant credit to
customers applying for a credit card at the time of a purchase in the Department
Stores. Approximately 75% of the Bank's new accounts were generated through in-
store instant credit applications in 1998. Sales associates are encouraged
through various incentives and promotional events to help customers establish
instant credit accounts with the Bank, and approved customers may receive a
discount on their first day purchases with the new card. The customer completes
the instant credit application at the point of sale and must have a valid third
party credit card in the customer's name and valid picture identification. Upon
receipt of the necessary information, the sales associate relays the information
to the applicable Credit Service Center over the telephone. A full credit report
is then obtained and a credit bureau derived risk score is generated. If the
Bank's policy rules are passed and the risk score is above the cut-off, a credit
card account number is immediately assigned by the system. The credit limit is
based on the risk score. Rejected applicants are notified by letters generated
by the Vision21 System in accordance with applicable law.
Mail-In Applications. Mail-in credit applications are available in the
Department Stores. During 1998, approximately 8% of new accounts were generated
through mail-in applications. Upon completion by the customer, these
applications can be submitted either at the service desk in one of the
Department Stores or mailed to a Credit Service Center. When received, the
application is reviewed for completeness. The application is processed and acted
upon in the same manner as instant credit applications.
Promotional (Pre-approved) Applications. Promotional (pre-approved)
applications are used as part of the credit solicitation effort for new and
existing Department Stores and trade areas. During 1999, approximately _____% of
the Bank's new accounts were generated by pre-approved applications. Of this
pre-approved group, _____% was related to the acquisitions of new stores
(certain of whose customers were solicited for new Bank credit card accounts),
_____% represented prescreened direct mail and phone solicitations for new and
remodeled stores; and ____% represented pre-screened direct mail and phone
solicitations in existing markets. In these new account promotions, the Bank
provides the credit bureaus with minimum criteria for potential account holders
in the targeted area. The lists generated by the credit bureaus are compared by
computer against the Bank's existing account holders to eliminate duplications.
Qualifying persons are sent a marketing package which includes information about
the relevant Department Store and the related Bank credit card program, along
with an application to be signed. If the application is returned, signed and
unaltered, and if the application passes any post-screen tests, which have been
permitted since 1997, a credit limit is established based on the risk score
associated with the account. If the application is returned with a change in
name or address indicated, the application is reviewed in a similar manner to a
mail-in application. Management believes that post-screening has improved credit
quality for accounts originated through pre-approved solicitations.
Account Monitoring
No automatic adjustment to a cardholder's credit limit is made during the
initial six months from account activation. Ongoing monitoring of customers'
credit limits is conducted through the use of updated credit bureau generated
risk scores and through behavioral scoring models. Currently, risk scores are
updated semi-annually.
S-23
<PAGE>
The risk score is a measure of the customer's current creditworthiness as
derived by payment and delinquency patterns with the entire credit granting
community. Based on the score, number of months with a balance and the current
delinquency status of the account, the credit limit may be raised or lowered.
Accounts are generally closed to additional purchases no later than two payments
past due, and higher risk accounts (based on dollars at risk, length of time on
the file, credit bureau risk score or behavioral score) can be closed from
additional purchases as soon as one day past the payment due date.
Saks has purchased "Probe" account management software from Experian, Inc.,
a credit management consultant. Probe enables a creditor to develop and test
multiple account management strategies simultaneously, allowing continual
refinement of account management policies to improve performance. A test group
of customers is selected by random sampling and different operating strategies
are assigned to the test group and the balance of the portfolio. The strategies
are tracked to determine the best performing strategy, which then may be used as
the primary or "champion" strategy. The Probe adaptive control system is
expected to enhance the Bank's ability to test, measure, administer and monitor
changes in operational strategy. Probe will be used in connection with
authorization, line management, collections, fraud and select monitoring and
marketing programs.
Automatic Over Limit Authorization
When customers (other than customers of CPS) attempt to incur charges that
exceed their designated credit limit ("over limit charges"), the Vision 21
system automatically reviews the account during the authorization process and
determines an acceptable dollar amount of over limit privileges for the
customer. The amount of the over limit authorization is determined by the number
of times the account has been billed, the current delinquency status of the
account and the account's credit bureau derived risk score. The process for CPS
receivables is generally the same, except that customized behavioral scoring is
used in the decision process, consistent with historic practice.
The system provides for automatic over-limit discretionary criteria, which
allows a manager or supervisor to increase the acceptable amount of over-limit
temporarily to improve customer service levels during high volume periods.
A credit authorizer may override the Vision 21 automatic analysis and take the
following actions based on certain pre-defined criteria: increase the credit
limit, approve the sale without increasing the credit limit or reject the sale.
Generally, the credit authorizer will evaluate one or more of the following
factors: (i) credit bureau risk score; (ii) length of time the account has been
active; (iii) delinquency/payment history; and (iv) a new credit report.
Deactivation/Cancellation of Accounts
Cardholders or the Bank can deactivate accounts. Currently, an account is
automatically deactivated if it has no balance, and remains unused, for 36
consecutive months. A deactivated account is removed from the Bank's mailing
list and cannot be used by the account holder. If an account is deactivated
solely due to non-use, it generally can be reactivated if the account holder
presents his/her credit card together with evidence of identity and current
address. When an account is reactivated, its credit limit is set at $500 until a
new credit bureau risk score is obtained. If an account holder cannot produce
his/her credit card or if the deactivation occurred for a reason other than non-
use, then the account holder must reapply for credit through one of the normal
credit origination programs described above. The Bank or the cardholder may
terminate a credit card account without advance notice at any time. The
cardholder will, however, remain liable for any outstanding balance on the
account.
S-24
<PAGE>
Billing And Payments
Account holders are given an interest (or a "finance charge") grace period
of approximately 25 to 30 days after each billing cycle closes to make a
payment. Generally, the Bank assesses interest charges on an account based upon
the average daily balance outstanding on the account during a monthly billing
cycle. However, no finance charge is imposed if there is no balance at the
beginning of the billing cycle and the entire balance of the account is paid
during the grace period. If the entire balance is not paid during the grace
period, a finance charge is imposed on the unpaid balance to the date of
repayment. The annual percentage rate charged by the Bank ranges from 19.8% to
21.6%.
Credit cardholders are generally charged $25 if a check is dishonored after
the second presentment. A late charge is assessed for each minimum payment that
is not made timely. No annual fees, transaction-related or over limit service
fees are imposed currently.
The minimum monthly payment that account holders must make under the Bank's
credit card programs is the greater of 7.5% (5% for the Saks Fifth Avenue and
CPS programs) of the account balance or $10 ($15 in the case of Saks Fifth
Avenue). Payments by account holders are applied first to interest and other
charges or fees, and then to purchases in the order made. Each such minimum
payment specified in this paragraph is referred to herein as a "qualified
minimum payment."
During March 1999, all active Saks Fifth Avenue accountholders received terms
change notices that described changes to their accounts. These changes permit
the Bank, with the exception for customers who do not use their accounts after
July 1, 1999, to standardize finance charge rates at 21.6%, and to impose late
fees of $15, return check fees of $25, and a $0.50 minimum finance charge. The
Bank terminated inactive Saks Fifth Avenue accounts and, subject to credit
approval, opened new accounts (with new terms) for customers with the closed
accounts who made a purchase after March 7, 1999.
The Bank periodically evaluates the terms of its agreements with cardholders
in light of competition and possible effects on credit quality. The Bank is now
considering a number of terms changes, such as lowering the minimum monthly
payment to the greater of 5% of the account balance or $10. The Bank may make
these terms changes in the future.
Delinquency, Collections And Losses
Accounts are aged based on the number of days contractually delinquent.
Payments and credits are applied to the account, and the new age of delinquency
and past due amount is calculated. Accounts aged 1 to 29 days past due are
considered delinquent.
The Credit Service Centers each utilize a Melita predictive dialing system,
which assigns collection tasks in all stages of collection to collectors on a
random basis. The Elmhurst Credit Service Center uses two behavioral scoring
models developed by Fair, Isaacs & Co. for managing and prioritizing collections
efforts. These account history scoring models are the basis for collection
strategies including timing and frequency of calls and dunning policies. The
priority assigned to collection efforts is based on each account's risk based on
delinquency status and outstanding balance. The later stages of delinquency are
administered "cradle-to-grave" to enable late-stage collector teams to develop
a familiarity with borrower circumstances and design appropriate solutions to
bring delinquent accounts current. Certain high balance Saks Fifth Avenue
Accounts are routed to a specialized collections group trained in handling
sensitive accounts.
Saks' collection strategy and process includes:
S-25
<PAGE>
. When an account becomes one payment past due, a reminder is printed on the
bottom of the next account statement.
. When an account becomes two payments past due, a suspension message is
printed on the statement notifying the customer that they will be unable to
use their account until payment is made. Currently, most accounts enter the
collection system at this point and are scheduled to be worked 10 days
later. However, higher risk accounts (based on various factors such as
dollars at risk, length of time on file, and high risk behavioral score)
can be worked as soon as one day after missing the payment due date.
. When the account ages to 40 days past due, a follow-up reminder is mailed
to the customer.
. When the account is three payments past due, (i) a stronger message
appears on the customer's account statement and (ii) a collection letter is
sent to the customer notifying them that the past due status of their
account will adversely affect their credit rating.
. An account is worked strenuously on the predictive dialer until a payment
is made or it ages past 120 days delinquent. At this point, it is assigned
to a "Late Stage Collection Team." The Late Stage Collection Team initiates
more strenuous action on the account. These actions include:
- Detailed skip tracing utilizing Credit Bureau Services, Fast Data-Phone,
Address, Neighbor Search, and Cross Reference Directory Search;
- Customized letter generation of demand notices;
- Specialized phone-based collection techniques, including predictive
autodialing; and
- Selective pre-charge off utilization of collection agencies and
attorneys.
. Prior to the eighth billing date, if a qualifying minimum payment has not
been received and the account is at least six months past due, the account
is written off. See "-- Charge Offs."
. Following write-off, accounts are assigned to collection agencies or
attorneys. Accounts are assigned by geographic location. Third-party
collectors are paid on a contingency basis and are awarded business based
on past collection performance. Third-party collectors utilize remedies
that are lawfully available to collect the accounts. Historically, the
third-party collectors have collected between 20% and 30% of the account
balances assigned to them.
Credit Service Center collections representatives have the authority to make
payment arrangements with customers. The arrangements go into the collector
queue for the day after the promise to pay is to be fulfilled. If the promise to
pay is broken, a collector may contact the customer immediately, depending on
the stage of collection, and reverse the payment arrangements. During all stages
of delinquency, computer logs of collectors' efforts to contact accounts are
maintained with the Servicer, thereby allowing management to monitor the
collection efforts and status of delinquent accounts.
Both Credit Service Centers offer incentive programs to compensate collectors
for improvements in charge offs. Collector turnover is low due to a competitive
pay program.
Re-aging of Accounts
Manual re-aging is generally used only in cases where billing errors, customer
disputes, incorrect addresses, or other account problems warrant such action. A
manager must approve any re-aging of accounts. The Vision21
S-26
<PAGE>
system produces a reage report that allows management to review manual reage
volume and performance at any time. A delinquent account will generally be
automatically cured (i.e., made current) if the accountholder makes at least
three minimum monthly payments in a three-month period in any combination of
amounts. An account is not permitted to be reaged more than once every six
months.
Charge offs
All receivables are charged off if a minimum qualified payment has not been
received prior to the eighth billing date and the account is 180 days or more
past due. In addition, receivables are charged off upon notice of bankruptcy, in
the event of an accountholder's death absent a surviving joint accountholder, or
upon the account becoming otherwise uncollectible.
The credit evaluation, servicing and charge off policies and collections
practices may be changed at any time in the Bank's and the Servicer's business
judgment to reflect, among other things, changing economic conditions and risks,
changing competition in the Department Stores' markets, changes suggested by the
behavioral models and adaptive control systems and changes in applicable law.
The following table sets forth the loss experience with respect to the credit
card accounts in the Bank Portfolio for each of the periods shown. Future loss
experience for the Receivables may not be similar to the historical experience
set forth below. See "Risk Factors" herein and in the Prospectus.
Loss Experience
Bank Portfolio
(Dollars In Thousands)
<TABLE>
<CAPTION>
For the __________ Months For the 12 Months Ended
Ended __________ December 31,
------------------------------ -----------------------------------------------
19__ 19__ 19__ 19__ 19__
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Total Principal Charge Offs(2). $ $ $ $ $
Recoveries.....................
Net Principal Charge Offs......
Net Principal Charge Offs
Percentage (3)............... % % % % %
</TABLE>
- --------------
(1) Average Principal Receivables for a particular period is the average of the
principal balances outstanding at the beginning and the end of each month
during such period.
(2) Total Principal Charge Offs are charge offs before Recoveries and do not
include fraud losses.
(3) The percentages for the five months ended May 31, 1999 and 1998 are
annualized figures, which are not necessarily indicative of results that may
be realized for the entire year.
The following tables set forth the delinquency experience with respect to
payments by cardholders that were 31 days or more past due for each of the
periods shown for the Bank Portfolio. Because delinquencies are affected by a
number of factors, including competitive and general economic conditions and
consumer debt levels, the delinquency experience for the Receivables in the
future may not be similar to the historical experience set forth below.
S-27
<PAGE>
Historical Delinquencies
Bank Portfolio
(Dollars In Thousands)
<TABLE>
<CAPTION>
As of __________, As of December 31,
--------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
19__ 19__ 19__
-------------------------- -------------------------- --------------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
Current(1)....... $ % $ % $ %
31 to 60 days
delinquent......
61 to 90 days
delinquent......
Over 91 days
Delinquent......
----------- ----------- ----------- ----------- ----------- -----------
Total
Delinquent...... $ % $ % $ %
----------- ----------- ----------- ----------- ----------- -----------
Total
Receivables..... $ 100.00% $ 100.00% $ 100.00%
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE> <CAPTION>
As of December 31,
--------------------------------------------------------
<S> <C> <C> <C> <C>
19__ 19__
------------------------- -------------------------
Percentage Percentage
of Total of Total
Receivables Receivables Receivables Receivables
----------- ----------- ----------- -----------
Current(1)....... $ % $ %
31 to 60 days
delinquent......
61 to 90 days
delinquent......
Over 91 days
Delinquent......
----------- ----------- ----------- -----------
Total
Delinquent...... $ % $ %
----------- ----------- ----------- -----------
Total
Receivables..... $ 100.00% $ 100.00%
=========== =========== =========== ===========
</TABLE>
(1) Includes both current Accounts and Accounts that are less than 31 days past
due as well as Accounts with credit balances.
The Bank Portfolio's net principal charge offs and delinquencies at any time
reflect, among other factors, the overall credit quality of the cardholders, the
seasoning of the accounts, the success of collection efforts and general
economic conditions. New accounts generally exhibit higher delinquencies and
losses than seasoned accounts, beginning approximately six months from issuance,
and stabilize within approximately two to three years. The Bank believes that
this tendency has not had a material effect on the Bank Portfolio given the
moderate growth historically exhibited by the Bank Portfolio. The Bank utilizes
its underwriting procedures and risk management policies to establish and
maintain its Accounts while promoting the sale of Saks' merchandise within the
context of acceptable risk characteristics (including delinquencies and losses)
and the Bank's safety and soundness. See "--Account Origination and
Underwriting" herein and "Description of the Certificates and the Pooling and
Servicing Agreement -- Addition of Accounts" in the Prospectus.
COMPOSITION OF THE TRUST PORTFOLIO
General
The following information describing the Trust Portfolio is as of the
dates shown. The composition of the Trust Portfolio in the future may not be
similar to the historical information reflected below. Amounts and percentages
in the following tables may not add to the totals because of rounding.
S-28
<PAGE>
Composition of the Trust Portfolio
by Credit Limit
as of _______________, 20__
(Dollars In Thousands)
<TABLE>
<CAPTION>
Percentage of Percentage of
Number of Total Numbers Aggregate Total Aggregate
Credit Limit Accounts(1) of Accounts Credit Limit Credit Limit
- ------------ ----------------- ---------------- ---------------- ------------------
<C> <S> <C> <C> <C>
Zero.......................... % $ %
$ 0.01 - $600.00...........
$ 600.01 - $1,000.00.........
$1,000.01 - $2,000.00.........
$2,000.01 - $3,000.00.........
$3,000.01 - $4,000.00.........
$4,000.01 - $5,000.00.........
$5,000.01 or more............. -------------- ------------- ------------ ------------
Total ........................ 100.00% $ 100.00%
============== ============= ============ ============
</TABLE>
- ------------------
(1) Includes all Accounts with activity during the preceding 12 months.
Composition of the Trust Portfolio
by Payment Status
as of _______________, 20__
(Dollars In Thousands)
<TABLE>
<CAPTION>
Percentage of Percentage of Total
Number of Total Numbers Receivables Receivables
Payment Status Accounts(1) of Accounts Outstanding Outstanding
- -------------- -------------- --------------- -------------- ---------------------
<S> <C> <C> <C> <C>
Current(2)................... % $ %
31 to 60 days delinquent.....
61 to 90 days delinquent.....
Over 91 days delinquent......
-------------- --------------- -------------- ---------------------
Total.............. 100.00% $ 100.00%
============== =============== ============== =====================
</TABLE>
(1) Includes all Accounts with balances.
(2) Includes both current Accounts and Accounts that are less than 31 days past
due as well as Accounts with credit balances.
S-29
<PAGE>
Composition of the Trust Portfolio
by Age
as of _______________, 20__
(Dollars in Thousands)
<TABLE>
<CAPTION>
Percentage of Percentage of Total
Number of Total Numbers Receivables Receivables
Age Accounts(1) of Accounts Outstanding Outstanding
- --- --------------- ----------------- ---------------- -----------------------
<S> <C> <C> <C> <C>
Under 6 months.......... % $ %
6 months to 1 year......
1-2 years ..............
2-3 years ..............
3 years and older ......
--------------- ----------------- ---------------- -----------------------
Total ........ 100.00% $ 100.00%
=============== ================= ================ =======================
</TABLE>
(1) Includes all Accounts with activity during the preceding 12 months.
Composition of the Trust Portfolio
by Account Balance
as of _______________, 20__
(Dollars In Thousands)
<TABLE>
<CAPTION>
Percentage of Percentage of Total
Number of Total Numbers Receivables Receivables
Account Balance Accounts(1) of Accounts Outstanding Outstanding
- --------------- -------------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
No Balance(2)............ % $ %
$0.01 to $500.00.........
$500.01 to $1000.00......
$1,000.01 to $2,000.00...
$2,000.01 to $3,000.00...
$3,000.01 to $4,000.00...
$4,000.01 to $5,000.00...
$5,000.00+...............
Credit balance(3)........
-------------- ----------------- ----------------- --------------------
Total.......... 100.00% $ 100.00%
============== ================= ================= ====================
</TABLE>
- ---------------------------
(1) Includes all Accounts with activity during the preceding 12 months.
(2) Accounts currently having no outstanding balance are included, as
Receivables may be generated in such Accounts in the future.
(3) Credit balances are a result of cardholder payments and credit adjustments
applied in excess of an Account's unpaid balance. Accounts currently having
an outstanding credit balance are included, as Receivables may be generated
in such Accounts in the future.
Geographic Distribution
Except for the states listed below, no state accounted for more than 5%
of the number of active aggregate credit card accounts in the Trust Portfolio or
5% of the Receivables outstanding in the Trust Portfolio as of _______________,
20__.
S-30
<PAGE>
Composition of the Trust Portfolio
by State
as of _______________, 20__
(Dollars In Thousands)
<TABLE>
<CAPTION>
Percentage of Percentage of Total
Number of Total Number of Receivables Receivables
State Accounts(1) Accounts Outstanding Outstanding
- ----- --------------- ------------------ ------------------ ----------------------
<S> <C> <C> <C> <C>
Illinois ............ % $ %
Alabama ............
Wisconsin............
Mississippi..........
Tennessee............
Florida..............
New York.............
Iowa.................
Other................
--------------- ---------------- --------------- -------------
Total......... 100.00% $ 100.00%
--------------- ---------------- --------------- -------------
</TABLE>
- ------------------------------
(1) Includes all Accounts with activity during the preceding 12 months.
THE ACCOUNTS
The Receivables in the Accounts designated to the Trust Portfolio as of
_______________, 20__ included approximately $__________ million of Finance
Charge Receivables and approximately $__________ million of Principal
Receivables (which amounts include overdue Finance Charge Receivables and
overdue Principal Receivables, respectively). As of _______________, 20__, there
were approximately __________ million active Accounts which had an average
credit limit of $__________. Excluding zero balance accounts, the average
principal balance was $__________. As of _______________, 20__, the average
principal receivables balance in the Accounts as a percentage of the average
credit limit with respect to the Accounts was approximately _____%. The Accounts
were selected from the Bank Portfolio in the manner described in the Prospectus
under "The Accounts."
USE OF PROCEEDS
Net proceeds from the sale of the Offered Certificates in the amount of
the initial Class A and Class B Investor Amounts less offering expenses, will be
paid to SCC. SCC will use such net proceeds to repay approximately $__________
of the Trust Series 1997-1 Variable Funding Certificates, certain of which are
held by multi-seller commercial paper vehicles administered by affiliates of two
of the underwriters of this offering. See "Underwriting" and "Annex I Other
Series" in this Prospectus Supplement.
MATURITY ASSUMPTIONS
The Series 20__-_ Supplement provides that the Class A
Certificateholders and the Class B Certificateholders will not receive payments
of principal until _______________, 20__ (the "Expected Payment Date"), except
in the event of a Pay Out Event which results in the commencement of the Rapid
Amortization Period; provided that in no event will the Class B
Certificateholders receive payments of principal until the Class A Certificates
have been paid in full. See "Description of the Certificates and the Pooling
and Servicing Agreement -- Pay Out Events" and "Risk Factors -- Principal
Could Be Paid Earlier or Later Than Expected" in the Prospectus.
S-31
<PAGE>
Assuming that the Rapid Amortization Period has not commenced, during
the Accumulation Period a portion of the Collections in respect of the
Receivables equal to the product of (i) the Investor Percentage with respect to
Collections of Principal Receivables and (ii) Collections in respect of
Principal Receivables received during such Monthly Period will be deposited in
the Principal Account. Such amount to be deposited is limited to the Controlled
Accumulation Amount (equal to $__________), subject to adjustment based on the
calculated Accumulation Period Length beginning with the first Distribution Date
of the Accumulation Period and ending when the amount held in the Principal
Account is sufficient to pay the Investor Amount in full. In addition, any
existing Deficit Controlled Accumulation Amount will be deposited into the
Principal Account. Amounts held in the Principal Account will be paid first to
the Class A Certificateholders, until the Class A Investor Amount is reduced to
zero, and then to the Class B Certificateholders, until the Class B Investor
Amount is reduced to zero, on the Expected Payment Date, or in each case, the
first Distribution Date during the Rapid Amortization Period, if earlier. A
decline in the rate of cardholder reborrowing together with a decline in the
rate of establishing new Accounts during the Accumulation Period could extend
the time of repayment of principal to the Certificateholders, resulting in a
longer term exposure to loss and liquidity concerns by holders of the Offered
Certificates.
Should a Pay Out Event occur and the Rapid Amortization Period begin,
Available Principal Collections distributable or to be deposited with respect to
the Class A Investor Amount or the Class B Investor Amount will no longer be
limited to the Controlled Accumulation Amount. Instead, Available Principal
Collections will be distributed monthly in their entirety on each Distribution
Date to the Certificateholders, beginning with the Distribution Date in the
month following the commencement of the Rapid Amortization Period. The Class B
Investor Amount will generally begin amortizing only after the Class A Investor
Amount is paid in full, and the Collateral Interest Amount will generally begin
amortizing only after the Class B Investor Amount is paid in full. Allocations
based upon an Investor Percentage with a fixed numerator during the Rapid
Amortization Period may result in greater distributions of principal to
Certificateholders than would be the case if an Investor Percentage with a
floating numerator were used to determine the percentage of Collections
distributed in respect of the Investor Amount. The Offered Certificates are also
subject to an optional repurchase by the Transferor on any Distribution Date on
or after the Distribution Date on which the sum of the Class A Adjusted Investor
Amount, the Class B Adjusted Investor Amount, and the portion of the Collateral
Interest Adjustment Amount held by third party investors is less than or equal
to 10% of the sum of the Class A Investor Amount on the Closing Date, the Class
B Investor Amount on the Closing Date, and the portion of the maximum amount of
the Collateral Interest Amount held by parties other than the Transferor and any
of its affiliates since the Closing Date. See "Description of the Certificates
and the Pooling and Servicing Agreement -- Optional Repurchase; Final Payment of
Principal; Termination" in the Prospectus.
The Transferor may, at or after the time the Accumulation Period commences
for Series 20__-_, cause the Trust to issue another Series as a Paired Series
with respect to Series 20__-_ to be used to finance the increase in the
Transferor Interest caused by the accumulation of principal in the Principal
Account with respect to Series 20__-_. No assurances can be given as to whether
such other series will be issued and, if issued, the terms thereof, since the
terms of the Certificates may vary from the terms of such other series, the pay
out events with respect to such other series may vary from the Pay Out Events
with respect to Series 20__-_ and may include pay out events which are unrelated
to the status of the Transferor or the Receivables, such as pay out events
related to the continued availability and rating of certain providers of credit
enhancement with respect to such series. If a pay out event does occur with
respect to any such Paired Series prior to the payment in full of the
Certificates, the final payment of principal to the Certificateholders may be
delayed. If a pay out event occurs with respect to the Paired Series when Series
20__-_ is in the Accumulation Period, the percentage used for allocating
Collections of Principal Receivables for Series 20__-_ and for the Paired Series
may be reset as specified herein. See "Series Provisions -- Investor Percentages
and Transferor Percentage" herein and "Description of the Certificates and the
Pooling and Servicing Agreement -- Paired Series" in the Prospectus.
Principal payments on the Offered Certificates will begin prior to the
Expected Payment Date in the event of a Pay Out Event. Pay Out Events may be
caused, by among other things, a decrease in Portfolio Yield or an inability
S-32
<PAGE>
to generate sufficient new Receivables. A reduction in Portfolio Yield may
result from reductions in Collections of Finance Charge Receivables or an
increase in charge offs, especially during the summer months due to seasonal
sales and Account charge off patterns. A reduction in Collections of Finance
Charge Receivables may occur as a result of increased delinquencies, or as a
result of increased payments of principal being made by cardholders on a monthly
basis. Such increased payments would result in lower Finance Charges being
assessed. A decline in the rate of reborrowing or a decline in the rate of
establishing new Accounts would also contribute to a reduction in the creation
and collection of Finance Charge Receivables. The Offered Certificates will be
paid after the Expected Payment Date if sufficient Principal Receivables are not
collected during the Accumulation Period. A reduction in Collections of
Principal Receivables may occur due to a reduction in payment rates. See "Risk
Factors."
Although it is anticipated that principal payments will be made to Class
A Certificateholders and to the Class B Certificateholders on the Expected
Payment Date, no assurance can be given in that regard. The ability of the Trust
to make such payments depends on the payment rates on the Receivables, the
amount of outstanding Receivables from time to time, delinquencies, the rate of
charge offs on the Receivables, the potential issuance by the Trust of
additional Series and the availability of Shared Principal Collections. The
Transferor cannot predict, and no assurance can be given as to, any of the
foregoing. Thus no assurance can be given as to the actual rate of payment of
principal of the Offered Certificates. See "Credit Card Program" and
"Composition of the Trust Portfolio" herein and "Risk Factors" in the
Prospectus.
The following table sets forth the highest and lowest credit card
account holder monthly payment rates for the Bank Portfolio during any month in
the periods shown and the average account holder monthly payment rates for all
months during the periods shown, in each case calculated as a percentage of the
total opening monthly credit card account balances during the periods shown.
Payments shown in the table include amounts which would be deemed payments of
Principal Receivables and Finance Charge Receivables with respect to the
Accounts. There can be no assurance that monthly payment rates in the future
will be similar to this historical experience. See "Risk Factors" herein and
"Risk Factors" in the Prospectus.
Account Holder Monthly Payment Rates(1)
Bank Portfolio
<TABLE>
<CAPTION>
For the __________ Months Ended __________, For the 12 Months Ended December 31,
----------------------------------------------------- -------------------------------------------
19__ 19__ 19__ 19__ 19__
------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Lowest Month........
Highest Month.......
Monthly Average.....
</TABLE>
- ---------------------
(1) The monthly payment rates are calculated as the amount of total payments
received during the month, divided by total Receivables outstanding at the
beginning of each month.
The amount of Collections on Receivables may vary from month to month due to
seasonal variations, general economic conditions and the payment habits of
individual account holders. There can be no assurance that Collections of
Principal Receivables with respect to the Accounts, and thus the rate at which
Certificateholders could expect to receive payments of principal on their
Offered Certificates, will be similar to the historical experience set forth
above. In addition, if a Pay Out Event occurs, the average life and maturity of
the Offered Certificates could be significantly reduced.
During the Accumulation Period, a slow down in the payment rate below the
assumed payment rate used to determine the Accumulation Period Length or a Pay
Out Event may occur, either of which would initiate the Rapid Amortization
Period. Accordingly, the actual number of months elapsed from the beginning of
the Accumulation Period to the final Distribution Date with respect to the
Offered Certificates may not equal the expected number of months. The amount of
outstanding Receivables and the rates of payments, delinquencies, charge offs
and new
S-33
<PAGE>
borrowings on the Accounts depend upon a variety of factors, including seasonal
variations, the availability of other sources of credit, general economic
conditions and consumer spending and borrowing patterns. Future account holder
monthly payment rate experience may not be similar to historical experience. See
"Risk Factors" herein and in the Prospectus.
RECEIVABLES YIELD CONSIDERATIONS
The yield for active credit card accounts in the Bank Portfolio for each of
the periods shown is set forth in the following table. The historical yield
figures in the table are calculated on an as-billed basis. Collections on
Receivables included in the Trust will be on a cash collection basis and may not
reflect the historical yield experience in the table. Revenues from Finance
Charges and fees will be affected by numerous factors, including the rates of
the Finance Charges on Principal Receivables, the amount of other fees paid by
account holders, the percentage of account holders who pay off their balances in
full each month or who have the benefit of a deferred billing or interest free
option and thus do not incur monthly periodic charges on purchases, and changes
in delinquency rates. There can be no assurance that the yield in the future
will be similar to the historical experience set forth below. See "Risk Factors"
herein and in the Prospectus.
Portfolio Yield
Bank Portfolio
(Dollars In Thousands)
<TABLE>
<CAPTION>
For the __________Months Ended
__________, For the 12 Months Ended December 31,
--------------------------------------- ---------------------------------------------
19__ 19__ 19__ 19__ 19__
--------------- ----------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables(1)........
Billed Finance Charges
and Fees, Unadjusted.........
Portfolio Yield,
Unadjusted(2)(3).............
Discount Option Receivable
Collections (2% Discount
Percentage)..................
Portfolio Yield,
Discount Adjusted(2)(4)......
</TABLE>
- --------------------------
(1) Average Receivables for a particular period is the average of the total
balances outstanding at the beginning and the end of each month during such
period.
(2) The percentages for the __________ months ended _______________ and
_______________ are annualized figures, which are not necessarily indicative
of results that may be realized for the entire year.
(3) The term "unadjusted" represents the Portfolio Yield without the inclusion
of Discount Option Receivable Collections.
(4) Represents the historical Portfolio Yield adjusted to reflect the inclusion
of Discount Option Receivable Collections and a Discount Percentage of [2%
for all periods indicated.] See "Risk Factors -- If the Transferor Elects
to Treat a Portion of Principal Receivables as Finance Charge Receivables,
Principal Payments Could be Delayed" in the Prospectus for a description of
the risk factors associated with the Discount Option and "Series Provisions
-- Discount Option Receivables" herein.
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POOL FACTORS
The "Class A Pool Factor," the "Class B Pool Factor" and the "Collateral
Interest Pool Factor" are each a seven-digit decimal, which the Servicer will
compute monthly, expressing as of each Record Date, the Class A Investor Amount
as a proportion of the Class A Investor Amount as of the Closing Date, the Class
B Investor Amount as a proportion of the Class B Investor Amount as of the
Closing Date, and the Collateral Interest Amount as a proportion of the
Collateral Interest Amount as of the Closing Date, respectively. On the Closing
Date, the Class A Pool Factor, the Class B Pool Factor and the Collateral
Interest Pool Factor (collectively, the "Pool Factors") will each be 1.0000000
and will remain unchanged during the Revolving Period, except in certain limited
circumstances. Thereafter, on and after the beginning of the Rapid Amortization
Period, the Class A Pool Factor will decline to reflect reductions in the Class
A Investor Amount, and after the Class A Investor Amount has been reduced to
zero, the Class B Pool Factor will decline to reflect reductions in the Class B
Investor Amount. The Collateral Interest Pool Factor will decline to reflect
reductions in the Collateral Interest Amount. See "Series Provisions --
Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge
Offs."
Pursuant to the Pooling and Servicing Agreement, monthly reports concerning
the Investor Amount, the Adjusted Investor Amount, the Pool Factors and various
other items of information will be made available to the Certificateholders. See
"Description of the Certificates and the Pooling and Servicing Agreement --Book-
Entry Registration" and "-- Reports to Certificateholders" in the Prospectus.
SERIES PROVISIONS
General
The Offered Certificates and the Collateral Interest will be issued pursuant
to the Pooling and Servicing Agreement and a Supplement thereto (the "Series
20__-_ Supplement"). The Class A Certificates and the Class B Certificates are
herein collectively referred to as the "Offered Certificates." Reference
should be made to the Prospectus for additional information concerning the
Pooling and Servicing Agreement.
The Offered Certificates will represent undivided interests in the Trust,
including an interest in all payments on the Receivables in the Trust based upon
the applicable Investor Percentage. Each Class A Certificate represents the
right to receive monthly payments of interest at the applicable Class A
Certificate Rate for the related Interest Period and each Class B Certificate
represents the right to receive monthly payments of interest at the applicable
Class B Certificate Rate for the related Interest Period. Each Offered
Certificate represents the right to receive payments of principal on the
Expected Payment Date or during the Rapid Amortization Period funded from
Collections of Finance Charge Receivables, Recoveries and Collections of
Principal Receivables, respectively, allocated to the Investor Amount. See "--
Investor Percentages and Transferor Percentage" "-- Applications of
Collections" and "-- Allocation of Investor Default Amount; Adjustment
Amounts; Investor Charge Offs."
The Transferor initially will own the Collateral Interest and intends to
sell some or all of the Collateral Interest to investors. The Collateral
Interest will represent an undivided interest in the Trust, including the right
to a floating percentage (the "Collateral Percentage") of all payments on the
Receivables in the Trust. The Transferor will be permitted to assign any or all
of its interests in the Collateral Interest to Saks or any of its affiliates.
The ability of the Transferor to sell some or all of the Collateral Interest is
subject to certain additional conditions, including delivery to the Trustee of
an opinion of counsel that the issuance of such interests in the Collateral
Interest will not have a material adverse effect on the Federal income tax
characterization of any outstanding series or class. See "-- Investor
Percentages and Transferor Percentage."
The Transferor initially will own the interest not represented by the
Offered Certificates, the Collateral Interest, or other series of certificates
(the "Transferor Interest"). The Transferor Amount will be evidenced by the
Exchangeable Transferor Certificate, which will represent an undivided interest
in the Trust, including the
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right to a floating percentage (the "Transferor Percentage") of all payments on
the Receivables in the Trust. The Transferor will be permitted to assign any or
all of its interests in the Exchangeable Transferor Certificate to Saks or any
of its affiliates. The Exchangeable Transferor Certificate may be subdivided and
a portion thereof may be sold to third parties in the form of a separate Series.
The ability of the Transferor to issue other Series and to subdivide the
Exchangeable Transferor Certificate is subject to certain additional conditions,
including delivery to the Trustee of (i) an opinion of counsel that the issuance
of such new series will not have a material adverse effect on the Federal income
tax characterization of any outstanding series, (ii) written confirmation from
each Rating Agency rating each of the outstanding series that the issuance of
such new series will not result in such Rating Agency reducing or withdrawing
its rating on any certificates then outstanding, and (iii) the approval of
certain holders of Certificates of unrated Series or Classes of Certificates.
See "-- Investor Percentages and Transferor Percentage."
During the Revolving Period, the Investor Amount will remain constant,
except in 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 or removed. The Transferor Amount will fluctuate,
therefore, to reflect the changes in the amount of the Principal Receivables in
the Trust. During the Accumulation Period, all or a portion of the Collections
of Principal Receivables allocable to the entire Investor Amount will be
deposited in the Principal Account until the Expected Payment Date or the
commencement of the Rapid Amortization Period. During the Rapid Amortization
Period, the Investor Amount will decline as payments of Principal Receivables
allocated to the Investor Amount are collected and distributed monthly to the
Certificateholders on the applicable payment dates. As a result, the Transferor
Amount during the Accumulation Period or a Rapid Amortization Period may
generally increase relative to the Investor Amount to reflect the reductions in
the Investor Amount and will also change to reflect the variations in the amount
of Principal Receivables in the Trust or the amount held in the Excess Funding
Account. See "-- Allocation of Investor Default Amount; Adjustment Amounts;
Investor Charge Offs."
The Offered Certificates initially will be represented by two or more
certificates, each registered in the name of Cede, as nominee of DTC. The
Offered Certificates will be available for purchase in minimum denominations of
$1,000 and integral multiples thereof in book-entry form. No Certificate Owner
will be entitled to receive a certificate representing such person's interest in
the Offered Certificates, except as described under "Description of the
Certificates and the Pooling and Servicing Agreement -- Definitive
Certificates" in the Prospectus. Unless and until Definitive Certificates are
issued under the limited circumstances described therein, all references herein
to actions by Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants 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 Offered Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC's procedures. See "Listing and
Clearing of Certificates" herein, and "Description of the Certificates and the
Pooling and Servicing Agreement -- Book-Entry Registration" and "-- Definitive
Certificates" and Annex I in the Prospectus.
Interest Payments
Interest will accrue on the Class A Certificates at the Class A Certificate
Rate and on the Class B Certificates at the Class B Certificate Rate from
_______________, 20__ (the "Closing Date"). Each "Interest Period" begins on and
includes a Distribution Date and excludes the next Distribution Date. However,
the first Interest Period will begin on and include the Closing Date and end on
and include _______________, 20__, the day preceding the first Distribution
Date. Interest will be distributed on _______________, 20__ and on the 15th day
of each month thereafter (or, if such 15th day is not a business day, the next
succeeding business day) (each, a "Distribution Date"). For purposes of this
Prospectus Supplement and the accompanying Prospectus, a "business day" is,
unless otherwise indicated, any day other than a Saturday, a Sunday or a day on
which banking institutions in Birmingham, Alabama; Jackson, Mississippi; Dallas,
Texas; Atlanta, Georgia; Charlotte, North
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<PAGE>
Carolina; Minneapolis, Minnesota; Chicago, Illinois; or New York, New York are
authorized or obligated by law or executive order to be closed.
Interest payments on the Class A Certificates and the Class B Certificates
on any Distribution Date will be calculated on the outstanding principal balance
of the Class A Certificates and the outstanding principal balance of the Class B
Certificates, respectively, as of the preceding Record Date, except that
interest for the first Distribution Date will accrue at the applicable
Certificate Rate on the initial outstanding principal balance of the Class A
Certificates and the initial outstanding principal balance of the Class B
Certificates, as applicable, from the Closing Date.
Interest due on the Certificates but not paid on any Distribution Date will
be payable on the next succeeding Distribution Date together with additional
interest (the "Additional Interest") on such amount at the applicable
Certificate Rate plus 2% per annum (such amount with respect to the Class A
Certificates, the "Class A Additional Interest" and such amount with respect
to the Class B Certificates, the "Class B Additional Interest"). To the extent
permitted by law, such Additional Interest shall accrue on the same basis as
interest on the Certificates, and shall accrue from the Distribution Date such
overdue interest became due, to but excluding the Distribution Date on which
such Additional Interest is paid.
Interest payments on the Class A Certificates on any Distribution Date will
be paid from Class A Available Funds for the related Monthly Period and, to the
extent such Class A Available Funds are insufficient to pay such interest, from
Excess Spread and Reallocated Principal Collections (to the extent available)
for such Monthly Period. Interest payments on the Class B Certificates on any
Distribution Date will be paid from Class B Available Funds for the related
Monthly Period and, to the extent such Class B Available Funds are insufficient
to pay such interest, from Excess Spread and Reallocated Principal Collections
(to the extent available) remaining after payments have been made with respect
to the Class A Certificates.
The Class A Certificates will accrue interest from and including the Closing
Date through but excluding _______________, 20__, from and including
_______________, 20__ through but excluding _______________, 20__, and with
respect to each Interest Period thereafter, at a rate of _____% per annum above
LIBOR prevailing on the related LIBOR Determination Date with respect to each
such period. The Class B Certificates will accrue interest from and including
the Closing Date through but excluding _______________, 20__, from and including
_______________, 20__ through but excluding _______________, 20__, and with
respect to each Interest Period thereafter, at a rate of _____% per annum above
LIBOR prevailing on the related LIBOR Determination Date with respect to each
such period.
The Trustee will determine LIBOR on _______________, 20__ for the period
from and including the Closing Date through but excluding _______________, 20__,
on _______________, 20__ for the period from and including _______________, 20__
through but excluding _______________, 20__, and for each Interest Period
thereafter, on the second London business day prior to the first day of such
Interest Period (each, a "LIBOR Determination Date"). For purposes of
calculating LIBOR, a "London business day" is any business day on which
dealings in deposits in United States dollars are transacted in the London
interbank market.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a one-month period which appears on Telerate Page 3750
as of 11:00 A.M., London time, on such date. If such rate does not appear on
Telerate Page 3750, the rate for that LIBOR Determination Date will be
determined on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks at approximately 11:00 A.M., London time, on
that day to prime banks in the London interbank market for a one-month period.
The Trustee will request the principal London office of each of the Reference
Banks to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that LIBOR Determination Date will be the arithmetic mean
of such quotations. If fewer than two quotations are provided, the rate for that
LIBOR Determination Date will be the arithmetic mean of the rates quoted by four
major banks in New York City, selected by the Servicer, at
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<PAGE>
approximately 11:00 A.M., New York City time, on that day for loans in United
States dollars to leading European banks for a one-month period.
"Telerate Page 3750" means the display page currently so designated on the
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Period may be obtained by
telephoning the Trustee at its Corporate Trust Office at (612) 667-3536.
Interest on the Certificates will be calculated on the basis of the actual
number of days in the related Interest Period and a 360-day year.
Principal Payments
During the Revolving Period, which begins on the Closing Date and ends on
the close of business 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 of certificates,
applied as Reallocated Principal Collections, if required, or deposited in the
Excess Funding Account rather than deposited to the Principal Account or paid to
the Certificateholders. Under certain circumstances, the commencement of the
Accumulation Period may be postponed by the Transferor. On or prior to the
Distribution Date occurring 12 months prior to the Expected Payment Date, the
Transferor shall designate the number of Monthly Periods in the Accumulation
Period and the commencement date of the Accumulation Period. In the absence of
such a designation, the Accumulation Period will commence at the close of
business on the last day of the _______________, 20__ Monthly Period.
During the Accumulation Period, a portion of Available Principal Collections
will be deposited in the Principal Account on each Distribution Date. During the
Rapid Amortization Period, which would begin upon the occurrence of a Pay Out
Event, any amounts held in the Principal Account will be distributed first to
the Class A Certificateholders, second to the Class B Certificateholders, with
the balance, if any, to the holders of the Collateral Interest to the extent of
the Class A Investor Amount, the Class B Investor Amount and the Collateral
Interest Amount, respectively, and thereafter Available Principal Collections
will be paid to the Certificateholders and the holders of the Collateral
Interest on each Distribution Date.
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 has designated that as of
September 1, 1999, the Discount Percentage is 1%. See "Discount Option
Receivables" in the Prospectus.
Postponement of Accumulation Period
The Accumulation Period is scheduled to commence at the close of business on
the last day of the _______________, 20__ Monthly Period. Upon written notice to
the Trustee, the Transferor may elect to postpone the commencement of the
Accumulation Period and extend the length of the Revolving Period, subject to
certain
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conditions, including those set forth below. The Transferor may make such
election only if the Accumulation Period Length (determined as described below)
is less than 12 months. On each Determination Date, until the Accumulation
Period begins, the Servicer will determine the "Accumulation Period Length,"
which is the number of months expected to be required to fund the Principal
Account up to the Initial Investor Amount no later than the Expected Payment
Date, based on (a) the monthly Collections of Principal Receivables expected to
be distributable to the certificateholders of all series (excluding certain
other series), assuming a principal payment rate no greater than the lowest
monthly principal payment rate on the Receivables for the preceding 12 months
and (b) the amount of principal expected to be distributable to
certificateholders of all series (excluding certain other series) which are not
expected to be in their revolving periods during the Accumulation Period. If the
Accumulation Period Length is less than 12 months, the Transferor may, at its
option, postpone the commencement of the Accumulation Period such that the
number of months included in the Accumulation Period will be equal to or exceed
the Accumulation Period Length. The effect of the foregoing calculation is to
permit the reduction of the length of the Accumulation Period based on the
investor amounts of certain other series which are scheduled to be in their
revolving periods during the Accumulation Period and on increases in the
principal payment rate occurring after the Closing Date. The length of the
Accumulation Period will never be less than one month nor greater than 12
months.
Reserve Account
The Servicer will establish and maintain, or cause to be established or
maintained, a "Reserve Account" with a Qualified Institution in the Trustee's
name as a segregated Trust account and for the benefit of the holders of the
Certificates and the Collateral Interest. As described in "-- Applications of
Collections," after the Reserve Account Funding Date but prior to the
termination of the Reserve Account, a portion of the amounts held in the
Collection Account will be applied to fund the Reserve Account. During the
Accumulation Period, the Trustee will withdraw an amount equal to the lesser of
the amount held in the Reserve Account and the difference between (a) the
product of amounts held in the Principal Account and the interest rates
applicable to the Offered Certificates and the Collateral Interest and (b)
investment income on the Principal Account, and deposit such amount in the
Collection Account. Amounts on deposit in the Reserve Account in excess of the
amounts required to be maintained therein from time to time will be distributed
to the Transferor.
The "Reserve Account Funding Date" will be the Distribution Date with
respect to the Monthly Period which commences three months prior to the
commencement of the Accumulation Period (or earlier, under certain circumstances
relating to the yield on the Receivables).
Subordination of the Class B Certificates and the Collateral Interest
The Class B Certificates and the Collateral Interest will be subordinated to
the extent necessary to fund certain payments with respect to the Class A
Certificates and the Collateral Interest will be subordinated to the extent
necessary to fund payments with respect to the Class B Certificates. Certain
Collections of Principal Receivables otherwise allocable to the Class B
Certificateholders ("Class B Subordinated Principal Collections") may be
reallocated to the Class A Certificateholders and the Class B Investor Amount
may be reduced. Similarly, Collections of Principal Receivables allocable to the
Collateral Interest that are included in Collateral Subordinated Principal
Collections (which may be subdivided pursuant to the Series 20__-_ Supplement to
reflect any subdivision of the Collateral Interest), may be reallocated to the
Class A Certificateholders and the Class B Certificateholders, and the
Collateral Interest Amount may be reduced as a result. To the extent the Class B
Investor Amount is reduced, the percentage of Collections of Finance Charge
Receivables allocated to the Class B Certificateholders in subsequent Monthly
Periods will be reduced. Moreover, to the extent the amount of such reduction in
the Class B Investor Amount is not reimbursed, the amount of principal
distributable to the Class B Certificateholders will be reduced. See "--
Investor Percentages and Transferor Percentage," "-- Reallocation of Cash
Flows," and "-- Applications of Collections."
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<PAGE>
Investor Percentages and Transferor Percentage
The Investor Percentage (the "Investor Percentage") will be calculated as
follows:
Principal Receivables during Revolving Period, Finance Charge Receivables
(other than during the Rapid Amortization Period) and Allocable Amounts. With
respect to (A) Principal Receivables during any Monthly Period during the
Revolving Period, (B) Finance Charge Receivables during any Monthly Period other
than during a Rapid Amortization Period, and (C) the Allocable Amounts during
any Monthly Period, the percentage equivalent of a fraction the numerator of
which is equal to the Adjusted Investor Amount as of the last day of the
immediately preceding Monthly Period (or the Initial Investor Amount, in the
case of the first Monthly Period applicable to Series 20__-_) and the
denominator of which is the greater of (i) the sum of the aggregate Principal
Receivables in the Trust and the amount on deposit in the Excess Funding
Account, in each case at the close of business on the last day of the
immediately preceding Monthly Period and (ii) the sum of the numerators used to
calculate the applicable investor percentages with respect to Principal
Receivables, Finance Charge Receivables or the Allocable Amounts, as applicable,
for all Series outstanding as of the date on which such determination is being
made.
Finance Charge Receivables during the Rapid Amortization Period. With
respect to Finance Charge Receivables (and any other amounts treated as Finance
Charge Receivables) during any Monthly Period during a Rapid Amortization
Period, the percentage equivalent of a fraction the numerator of which is equal
to the Adjusted Investor Amount as of the last day of the Revolving Period and
the denominator of which is the greater of (i) the sum of the aggregate
Principal Receivables in the Trust and the amount on deposit in the Excess
Funding Account, in each case at the close of business on the last day of the
immediately preceding Monthly Period and (ii) the sum of the numerators used to
calculate the investor percentages with respect to Finance Charge Receivables
for all Series outstanding as of the date on which such determination is being
made.
Principal Receivables during the Accumulation Period and the Rapid
Amortization Period. With respect to Principal Receivables during any Monthly
Period during the Accumulation Period or the Rapid Amortization Period, the
percentage equivalent of a fraction the numerator of which is equal to the
Adjusted Investor Amount as of the last day of the Revolving Period and the
denominator of which is the greater of (i) the sum of the aggregate Principal
Receivables in the Trust and the amount on deposit in the Excess Funding
Account, in each case at the close of business on the last day of the
immediately preceding Monthly Period and (ii) the sum of the numerators used to
calculate the investor percentages with respect to Principal Receivables for all
series outstanding as of the date on which such determination in being made;
provided, however, if the Offered Certificates are paired with a Paired Series
and a Rapid Amortization Period commences for such Paired Series, the Transferor
may, by written notice to the Trustee and Servicer, designate a different
numerator to be used to determine such percentage.
As used herein, the following terms have the meanings indicated:
"Adjusted Investor Amount" shall mean, as of any date of determination, an
amount equal to the sum of the Class A Adjusted Investor Amount, the Class B
Adjusted Investor Amount and the Collateral Interest Adjusted Amount, in each
case as of such date.
"Class A Investor Amount" means, on any date of determination, an amount
equal to (a) the Class A Initial Investor Amount, minus (b) the aggregate amount
of principal payments made to the Class A Certificateholders prior to such date,
minus (c) the excess, if any, of the aggregate amount of Class A Investor Charge
Offs for all prior Distribution Dates over the sum of the aggregate amount of
reimbursed Class A Investor Charge Offs and, without duplication, the aggregate
amount of reductions of the Series Adjustment Amount allocable to the Class A
Certificates); provided, however, that the Class A Investor Amount may not be
reduced below zero.
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<PAGE>
"Class A Adjusted Investor Amount" means, on any date of determination while
the Class A Certificates are outstanding, an amount equal to the Class A
Investor Amount minus the amount, if any, of funds held in the Principal Account
(the "Principal Account Balance") (but not less than zero).
"Class A Investor Percentage" shall be calculated by substituting the Class
A Adjusted Investor Amount and the Class A Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount,
respectively, in the definition of Investor Percentage.
"Class B Investor Amount" means, on any date of determination, an amount
equal to (a) the Class B Initial Investor Amount, minus (b) the aggregate amount
of principal payments made to the Class B Certificateholders prior to such date,
minus (c) the aggregate amount of Class B Investor Charge Offs for all prior
Distribution Dates, minus (d) the amount of Class B Subordinated Principal
Collections used to make payments in respect of the Class A Certificates on all
prior Distribution Dates, minus (e) an amount equal to the amount by which the
Class B Investor Amount has been reduced on all prior Distribution Dates in
respect of the Class A Allocable Amount, plus (f) the sum of the amount of
Excess Spread and Shared Excess Finance Charge Collections allocated and
available on all prior Distribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c), (d) and (e) and, without
duplication, the aggregate amount of the reductions of the Series Adjustment
Amount allocable to the Class B Investor Amount; provided, however, that the
Class B Investor Amount may not be reduced below zero.
"Class B Adjusted Investor Amount" shall mean, on any date of determination,
an amount equal to the Class B Investor Amount minus the excess of the Principal
Account Balance over the Class A Investor Amount on such date (up to the Class B
Investor Amount).
"Class B Investor Percentage" shall be calculated by substituting the Class
B Adjusted Investor Amount and the Class B Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount
respectively, in the definition of Investor Percentage.
"Collateral Interest Amount" means, on any date of determination, an amount
equal to (a) the initial Collateral Interest Amount equal to $__________, minus
(b) the aggregate amount of principal payments made to the holders of the
Collateral Interest on or prior to such date, minus (c) the amount of Collateral
Interest Principal Collections used to make payments in respect of the Offered
Certificates on all prior Distribution Dates that have resulted in a reduction
of the Collateral Interest Amount, minus (d) an amount equal to the amount by
which the Collateral Interest Amount has been reduced on all prior Distribution
Dates in respect of the Class A Allocable Amount, the Class B Allocable Amount
and the Collateral Interest Allocable Amount, plus (e) the sum of the amount of
Excess Spread and Shared Excess Finance Charge Collections allocated and
available on all prior Distribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c) and (d) and, without duplication,
reductions of the Series Adjustment Amount allocable to the Collateral Interest
Amount; provided, however, that the Collateral Interest Amount may not be
reduced below zero.
"Collateral Interest Adjusted Amount" for any date of determination, means
an amount equal to the Collateral Interest Amount, minus the excess of the
Principal Account Balance over the sum of the Class A Investor Amount and the
Class B Investor Amount on such date (up to the Collateral Interest Amount). The
Collateral Interest Adjusted Amount may be subdivided pursuant to the Series
20__-_ Supplement to reflect any subdivision of the Collateral Interest.
"Collateral Interest Percentage" shall be calculated by substituting the
Collateral Interest Adjusted Amount and the initial Collateral Interest Amount
in all references to the Adjusted Investor Amount and the Initial Investor
Amount, respectively, in the definition of Investor Percentage. The Collateral
Interest Percentage may be subdivided pursuant to the Series 20__-_ Supplement
to reflect any subdivision of the Collateral Interest.
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"Collateral Subordinated Principal Collections" means, with respect to any
Monthly Period, an amount equal to the product of (i) the applicable Collateral
Interest Percentage with respect to Collections of Principal Receivables and
(ii) the aggregate amount of Collections of Principal Receivables for such
Monthly Period. The Collateral Subordinated Principal Collections may be
subdivided pursuant to the Series 20__-_ Supplement to reflect any subdivision
of the Collateral Interest.
The Transferor Percentage will be equal to 100% minus the sum of the investor
percentages for all Series outstanding.
As described above, during the Revolving Period, the Investor Percentage
applied when allocating Collections on Principal Receivables is expected to vary
from month to month because the Investor Amount as a percentage of the total
amount of Principal Receivables in the Trust will fluctuate from day to day.
During the Rapid Amortization Period, the amount of Collections on Principal
Receivables allocated to the Investor Amount each day will be determined by
reference to a percentage based on the Investor Amount on the last day of the
Revolving Period.
Reallocation of Cash Flows
On each Determination Date, the Servicer will determine the amount (the
"Class A Required Amount"), if any, by which (a) the sum of (i) Class A
Monthly Interest for the following Distribution Date, (ii) any Class A Monthly
Interest previously due but not paid to the Class A Certificateholders on a
prior Distribution Date, (iii) any Class A Additional Interest for the following
Distribution Date and any Class A Additional Interest previously due but not
paid to the Class A Certificateholders on a prior Distribution Date, (iv) the
Class A Allocable Amount, if any, for such Distribution Date and (v) if Saks is
no longer the Servicer, the Class A Servicing Fee for the related Distribution
Date and any unpaid Class A Servicing Fee for a prior Distribution Date exceeds
(b) the Class A Available Funds for the preceding Monthly Period. If the Class A
Required Amount is greater than zero, Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 20__-_ and available for such purpose
will be used to fund the Class A Required Amount with respect to such
Distribution Date. If such Excess Spread and Shared Excess Finance Charge
Collections available with respect to such Distribution Date are insufficient to
fund the Class A Required Amount, Collections of Principal Receivables allocable
first to the Collateral Interest and then to the Class B Certificates for the
related Monthly Period ("Reallocated Principal Collections") will then be used
to fund the remaining Class A Required Amount. If such Reallocated Principal
Collections with respect to the related Monthly Period are insufficient to fund
the remaining Class A Required Amount, then the Collateral Interest Amount, the
Class B Investor Amount, and the Class A Investor Amount may be reduced. See
"-- Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge
Offs."
On each Determination Date, the Servicer will determine the amount (the
"Class B Required Amount"), if any, equal to the sum of (a) the amount, if
any, by which the sum of (i) Class B Monthly Interest for the following
Distribution Date, (ii) any Class B Monthly Interest previously due but not paid
to the Class B Certificateholders on a prior Distribution Date, (iii) any
Class B Additional Interest for the following Distribution Date and any Class B
Additional Interest previously due but not paid to the Class B
Certificateholders on a prior Distribution Date and (iv) if Saks is no longer
the Servicer, the Class B Servicing Fee for the related Distribution Date and
any unpaid Class B Servicing Fee for a prior Distribution Date exceeds the
Class B Available Funds for the preceding Monthly Period and (b) the amount, if
any, by which the Class B Allocable Amount, if any, for such Distribution Date
exceeds the amount of Excess Spread and Shared Excess Finance Charge Collections
allocable to Series 20__-_ available on such Distribution Date as specified in
clause (d) under "-- Application of Collections -- Excess Spread; Shared Excess
Finance Charge Collections." If the Class B Required Amount is greater than
zero, Excess Spread and Shared Excess Finance Charge Collections allocable to
Series 20__-_ not required to fund the Class A Required Amount or reimburse
Class A Investor Charge Offs will be used to fund the Class B Required Amount
with respect to such Distribution Date. If such Excess Spread and Shared Excess
Finance Charge Collections available with respect to such Distribution Date are
insufficient to fund the Class B Required Amount, Reallocated
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Principal Collections allocable to the Collateral Interest not required to fund
the Class A Required Amount will then be used to fund the remaining Class B
Required Amount. If such Reallocated Principal Collections with respect to the
related Monthly Period are insufficient to fund the remaining Class B Required
Amount, then the Collateral Interest Amount and the Class B Investor Amount may
be reduced. See "-- Allocation of Investor Default Amount; Adjustment Amounts;
Investor Charge Offs."
On each Determination Date, the Servicer will determine the amount (the
"Collateral Interest Required Amount"), if any, equal to the sum of (a) the
amount, if any by which the sum of (i) Collateral Monthly Interest for the
following Distribution Date, (ii) any Collateral Monthly Interest previously due
but not paid to the Collateral Interest on a prior Distribution Date, (iii) any
Collateral Interest Additional Interest for the following Distribution Date and
any Collateral Interest Additional Interest previously due but not paid to the
Collateral Interest on a prior Distribution Date and (iv) if Saks is no longer
the Servicer, the Collateral Interest Servicing Fee for such Distribution Date
and any unpaid Collateral Interest Servicing Fee for a prior Distribution Date
exceeds the Collateral Interest Available Funds and Excess Spread and Shared
Excess Finance Charge Collections with respect to the preceding Monthly Period
available to make payments with respect thereto and (b) the amount, if any, by
which the Collateral Interest Allocable Amount, if any, for such Distribution
Date exceeds the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 20__-_ available on such Distribution Date as
specified in clause (i) under "-- Applications of Collections -- Excess Spread;
Shared Excess Finance Charge Collections." The Collateral Interest Required
Amount may be subdivided pursuant to the Series 20__-_ Supplement to reflect any
subdivision of the Collateral Interest. If the Collateral Interest Required
Amount is greater than zero, available Excess Spread and Shared Excess Finance
Charge Collections and amounts, if any, held in the Spread Account will then be
used to fund the remaining Collateral Interest Required Amount. If such Excess
Spread and Shared Excess Finance Charge Collections and amounts, if any,
available in the Spread Account are insufficient to fund the Collateral Interest
Required Amount, then the Collateral Interest Amount may be reduced. See
"-- Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge
Offs."
Reallocated Principal Collections allocable to the Collateral Interest may be
reimbursed from amounts available in the Spread Account. The Spread Account will
be established with the Trustee solely for the benefit of the Collateral
Interest. Class A Certificateholders and Class B Certificateholders should not
view the Spread Account as credit enhancement for their Certificates.
Applications of Collections
During the Revolving Period, Collections of Principal Receivables allocable to
Series 20__-_ with respect to each Monthly Period will only be required to be
deposited into the Collection Account on a daily basis during such Monthly
Period under limited circumstances as provided in the Series 20__-_ Supplement;
provided, however, that in the event that the Minimum Transferor Amount exceeds
the Transferor Amount on any date, such Collections of Principal Receivables
shall be deposited into the Excess Funding Account until the Transferor Amount
equals the Minimum Transferor Amount. During the Accumulation Period, after an
amount of Collections of Principal Receivables allocable to Series 20__-_ equal
to the Controlled Deposit Amount with respect to each Monthly Period has been
deposited into the Collection Account, Collections of Principal Receivables
allocable to Series 20__-_ with respect to each Monthly Period need not be
deposited into the Collection Account on a daily basis during such Monthly
Period, except under limited circumstances as provided in the Series 20__-_
Supplement; provided, however, that in the event that the Minimum Transferor
Amount exceeds the Transferor Amount on any date, such Collections of Principal
Receivables shall be deposited into the Excess Funding Account until the
Transferor Amount equals the Minimum Transferor Amount.
The Servicer may make deposits into the Collection Account and the Excess
Funding Account on any date, net of amounts payable to the Transferor from such
accounts on such date.
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Allocations
The Servicer will allocate among Series 20__-_, the interests of all other
series issued and outstanding, and the Transferor Interest, all Collections of
Finance Charge Receivables and Principal Receivables and all Allocable Amounts
with respect to each Monthly Period based on the applicable Investor Percentage
for such Monthly Period.
Payment of Interest, Fees and Other Items
On each Distribution Date, the Trustee, acting pursuant to the Servicer's
instructions, will apply the Class A Available Funds, Class B Available Funds,
and Collateral Interest Available Funds as follows:
(A) On each Distribution Date, an amount equal to the Class A Available Funds
with respect to the Monthly Period immediately preceding such Distribution Date
will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for such Distribution Date,
plus the amount of any Class A Monthly Interest previously due but not paid to
the Class A Certificateholders on a prior Distribution Date, plus any Class A
Additional Interest, will be distributed to the Class A Certificateholders;
(ii) if Saks is no longer the Servicer, an amount equal to the Class A
Servicing Fee for such Distribution Date, plus the amount of any Class A
Servicing Fee previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer;
(iii) an amount equal to the Class A Allocable Amount, if any, for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payments of
Principal;" and
(iv) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared Excess
Finance Charge Collections."
(B) On each Distribution Date, an amount equal to the Class B Available Funds
with respect to such Distribution Date will be distributed in the following
priority:
(i) an amount equal to Class B Monthly Interest for such Distribution Date,
plus the amount of any Class B Monthly Interest previously due but not paid to
the Class B Certificateholders on a prior Distribution Date, plus any Class B
Additional Interest, will be distributed to the Class B Certificateholders;
(ii) if Saks is no longer the Servicer, an amount equal to the Class B
Servicing Fee for such Distribution Date, plus the amount of any Class B
Servicing Fee previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer; and
(iii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared Excess
Finance Charge Collections."
(C) On each Distribution Date, an amount equal to the Collateral Interest
Available Funds with respect to such Distribution Date will be distributed in
the following priority (provided, however, the Collateral Interest Available
Funds and allocations thereof may be subdivided pursuant to the Series 20__-_
Supplement to reflect any subdivision of the Collateral Interest):
(i) if Saks is no longer the Servicer, an amount equal to the Collateral
Interest Servicing Fee for such Distribution Date, plus the amount of any
Collateral Interest Servicing Fee previously due but not
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distributed to the Servicer on a prior Distribution Date, will be distributed
to the Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared Excess
Finance Charge Collections."
"Available Principal Collections" means, with respect to any Distribution
Date, an amount equal to (a) the applicable Investor Percentage of Collections
of Principal Receivables for the related Monthly Period, plus (b) the portion of
the Class A Available Funds used to cover the Class A Allocable Amount, plus (c)
amounts designated as Available Principal Collections as described under "--
Excess Spread; Shared Excess Finance Charge Collections," minus (d) any applied
Reallocated Principal Collections for the related Monthly Period, plus (e)
Shared Principal Collections allocated to Series 20__-_.
"Class A Account Percentage" means, with respect to any Determination Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount on deposit in the Principal Account with respect to Class A Monthly
Principal and the denominator of which is the aggregate amount on deposit in the
Principal Account, in each case as of the last day of the preceding Monthly
Period.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (i) the applicable Class A Investor Percentage of
Collections of Finance Charge Receivables with respect to such Monthly Period
plus any other amounts that are to be treated as Collections of Finance Charge
Receivables, (ii) an amount equal to the product of (a) the Class A Account
Percentage and (b) the earnings (net of losses and investment expenses), if any,
earned on the Principal Account with respect to such Monthly Period, (iii) the
amount, if any, to be withdrawn from the Reserve Account and included in Class A
Available Funds pursuant to the Series 20__-_ Supplement with respect to such
Distribution Date and (iv) the amount of investment earnings (net of losses and
investment expenses), if any, on amounts held in the Reserve Account required to
be included in Class A Available Funds pursuant to the Series 20__-_ Supplement
with respect to such Distribution Date.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class A Certificate Rate for the related
Interest Period , (ii) the actual number of days in such Interest Period divided
by 360, and (iii) the outstanding principal amount of the Class A Certificates
as of the preceding Record Date; provided, however, with respect to the first
Distribution Date, Class A Monthly Interest will be equal to the interest
accrued on the initial outstanding principal balance of the Class A Certificates
at the applicable Class A Certificate Rate for the period from and including the
Closing Date through but excluding _______________, 20__.
"Class B Account Percentage" means, with respect to any Determination Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount on deposit in the Principal Account with respect to Class B Monthly
Principal and the denominator of which is the aggregate amount on deposit in the
Principal Account, in each case as of the last day of the preceding Monthly
Period.
"Class B Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (i) the applicable Class B Investor Percentage of
Collections of Finance Charge Receivables with respect to such Monthly Period
plus any other amounts that are to be treated as Collections of Finance Charge
Receivables, (ii) an amount equal to the product of (a) the Class B Account
Percentage and (b) the earnings (net of losses and investment expenses), if any,
earned on the Principal Account with respect to such Monthly Period, (iii) the
amount, if any, to be withdrawn from the Reserve Account and included in Class B
Available Funds pursuant to the Series 20__-_ Supplement with respect to such
Distribution Date and (iv) the amount of investment earnings (net of losses and
investment expenses), if any, on amounts in the Reserve Account required to be
included in Class B Available Funds pursuant to the Series 20__-_ Supplement
with respect to such Distribution Date.
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class B Certificate Rate for the related
Interest Period, (ii) the actual number of days in such Interest Period
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divided by 360, and (iii) the outstanding principal amount of the Class B
Certificates as of the preceding Record Date; provided, however, with respect to
the first Distribution Date, Class B Monthly Interest will be equal to the
interest accrued on the initial outstanding principal balance of the Class B
Certificates at the applicable Class B Certificate Rate for the period from and
including the Closing Date through but excluding _______________, 20__.
"Collateral Interest Account Percentage" means, with respect to any
Determination Date, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount on deposit in the Principal Account with respect
to Collateral Interest Monthly Principal and the denominator of which is the
aggregate amount on deposit in the Principal Account, in each case as of the
last day of the preceding Monthly Period.
"Collateral Interest Available Funds" means, with respect to any Monthly
Period, an amount equal to the sum of (i) applicable Collateral Interest
Percentage of the Collections of Finance Charge Receivables with respect to such
Monthly Period and any other amounts that are to be treated as Collections of
Finance Charge Receivables, (ii) an amount equal to the product of (a) the
Collateral Interest Account Percentage and (b) the earnings (net of losses and
investment expenses), if any, earned on the Principal Account with respect to
such Monthly Period, (iii) the amount, if any, to be withdrawn from the Reserve
Account and included in Collateral Interest Available Funds pursuant to the
Series 20__-_ Supplement with respect to such Distribution Date and (iv) the
amount of investment earnings (net of losses and investment expenses), if any,
on amounts in the Reserve Account required to be included in Collateral Interest
Available Funds pursuant to the Series 20__-_ Supplement with respect to such
Distribution Date (provided, however, the Collateral Interest Available Funds
and allocations thereof may be subdivided pursuant to the Series 20__-_
Supplement to reflect any subdivision of the Collateral Interest).
"Collateral Interest Rate" means a rate equal to LIBOR plus _____% per
annum, or a lesser rate.
"Collateral Monthly Interest" means, with respect to any Distribution Date,
an amount equal to the product of (i) an amount equal to the product of the
outstanding principal amount of the Collateral Interest as of the preceding
Record Date (or, in the case of the first Distribution Date, as of the Closing
Date) and the Collateral Interest Rate for the related Interest Period and (ii)
a fraction, the numerator of which is the actual number of days in the related
Interest Period and the denominator of which is 360. Collateral Monthly Interest
may be subdivided pursuant to the Series 20__-_ Supplement to reflect any
subdivision of the Collateral Interest.
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clauses (A)(iv), (B)(iii) and
(C)(ii) above.
Excess Spread; Shared Excess Finance Charge Collections
On each Distribution Date, the Trustee, acting pursuant to the Servicer's
instructions, will apply Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 20__-_ with respect to the related Monthly
Period to make the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with respect to
such Distribution Date will be used to fund any deficiency pursuant to clauses
(A)(i), (ii) and (iii) above under "-- Payment of Interest, Fees and Other
Items," in that order of priority;
(b) an amount equal to the aggregate amount of Class A Investor Charge Offs
which have not been previously reimbursed will be treated as a portion of
Available Principal Collections for such Distribution Date as described under
"-- Payments of Principal;"
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<PAGE>
(c) an amount up to the Class B Required Amount, if any, with respect to such
Distribution Date will be used to fund any deficiency pursuant to clauses (B)(i)
and (ii) above under "-- Payment of Interest, Fees and Other Items," in that
order of priority;
(d) an amount equal to the Class B Allocable Amount for such Distribution Date
will be treated as a portion of Available Principal Collections for such
Distribution Date as described under "-- Payments of Principal;"
(e) an amount equal to the excess, if any, of the Required Reserve Account
Amount over the amount held in the Reserve Account will be deposited into the
Reserve Account;
(f) an amount equal to unreimbursed reductions of the Class B Investor Amount,
if any, due to: (i) Class B Investor Charge Offs; (ii) allocations of
Reallocated Principal Collections for the benefit of the Class A Certificates on
all prior Distribution Dates that have resulted in a reduction of the Class B
Investor Amount; or (iii) reallocations of the Class B Investor Amount to the
Class A Investor Amount as a result of uncovered Class A Allocable Amounts will
each be treated as a portion of Available Principal Collections for such
Distribution Date as described under "-- Payments of Principal;"
(g) an amount equal to Collateral Monthly Interest (as such amount may be
subdivided pursuant to the Series 20__-_ Supplement to reflect any subdivision
of the Collateral Interest), for such Distribution Date, plus the amount of
Collateral Monthly Interest previously due but not paid to the holders of the
Collateral Interest on a prior Distribution Date, plus any additional interest
with respect to interest amounts that were due but not paid to the holders of
the Collateral Interest on a prior Distribution Date at a rate equal to the
Collateral Interest Rate plus 2% per annum ("Collateral Interest Additional
Interest") will be distributed to the holders of the Collateral Interest;
(h) an amount equal to the Class A Servicing Fee, the Class B Servicing Fee
and the Collateral Interest Servicing Fee (as such amount may be subdivided
pursuant to the Series 20__-_ Supplement to reflect any subdivision of the
Collateral Interest), for such Distribution Date (or, if Saks is no longer the
Servicer, the portion thereof remaining unpaid) plus the amount of any Class A
Servicing Fee, Class B Servicing Fee or Collateral Interest Servicing Fee
previously due but not distributed to the Servicer on a prior Distribution Date,
will be distributed to the Servicer;
(i) an amount equal to the Collateral Interest Allocable Amount (as such
amount may be subdivided pursuant to the Series 20__-_ Supplement to reflect any
subdivision of the Collateral Interest), for such Distribution Date will be
treated as a portion of Available Principal Collections for such Distribution
Date as described under "-- Payments of Principal;"
(j) an amount equal to the unreimbursed reductions of the Collateral Interest
Amount (as such amount may be subdivided pursuant to the Series 20__-_
Supplement to reflect any subdivision of the Collateral Interest), if any, due
to: (i) Collateral Interest Charge Offs (as such amount may be subdivided
pursuant to the Series 20__-_ Supplement to reflect any subdivision of the
Collateral Interest); (ii) Reallocated Principal Collections used to make
payments in respect of the Offered Certificates on all prior Distribution Dates
that have resulted in a reduction of the Collateral Interest Amount (as such
amount may be subdivided pursuant to the Series 20__-_ Supplement to reflect any
subdivision of the Collateral Interest), and (iii) reallocations of the
Collateral Interest Amount (as such amount may be subdivided pursuant to the
Series 20__-_ Supplement to reflect any subdivision of the Collateral Interest),
to the Class A Investor or the Class B Investor Amount as a result of uncovered
Class A Allocable Amounts or uncovered Class B Allocable Amounts, respectively,
will be treated as a portion of Available Principal Collections for such
Distribution Date as described under "-- Payments of Principal;"
(k) an amount equal to the excess, if any, of the Required Spread Account
Amount over the Available Spread Account Amount will be deposited into the
Spread Account;
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(l) an amount equal to the aggregate of any other amounts, if any, then due to
the Collateral Interest; and
(m) the balance, if any, will constitute "Shared Excess Finance Charge
Collections" with respect to Group One to be applied with respect to other
Series in Group One.
"Available Spread Account Amount" means the amount specified as such in the
Series 20__-_ Supplement or such higher amount designated by the Transferor.
"Required Spread Account Amount" means the amount specified as such in the
Series 20__-_ Supplement or such higher amount designated by the Transferor.
"Required Reserve Account Amount" means the amount specified as such in the
Series 20__-_ Supplement, which shall be zero prior to the Reserve Account
Funding Date, and thereafter shall not be less than _____% of the Investor
Amount without satisfaction of the Rating Agency Condition.
Payments of Principal
On each Distribution Date, the Trustee, acting pursuant to the Servicer's
instructions, will distribute Available Principal Collections in the following
priority:
(A) On each Distribution Date with respect to the Revolving Period, all such
Available Principal Collections will be treated as Shared Principal Collections
with respect to other Series and applied as described under "-- Shared
Principal Collections;"s20 and
(B) On each Distribution Date with respect to the Accumulation Period or the
Rapid Amortization Period, all such Available Principal Collections will be
deposited or distributed in the following priority:
(i) an amount equal to Class A Monthly Principal for such Distribution Date
will, during the Accumulation Period, be deposited in the Principal Account
for payment to the Class A Certificateholders on the earlier to occur of the
Expected Payment Date and the first Distribution Date with respect to the
Rapid Amortization Period or, during the Rapid Amortization Period, be
distributed to the Class A Certificateholders;
(ii) an amount equal to Class B Monthly Principal for such Distribution
Date will, during the Accumulation Period, after an amount equal to the Class
A Investor Amount has been deposited in the Principal Account, be deposited in
the Principal Account for payment to the Class B Certificateholders on the
Expected Payment Date or with respect to the Rapid Amortization Period, after
the Class A Investor Amount has been paid in full;
(iii) an amount equal to Collateral Monthly Principal will, during the
Accumulation Period, after an amount equal to the sum of the Class A Investor
Amount and the Class B Investor Amount has been deposited in the Principal
Account, be deposited in the Principal Account for payment to the holder(s) of
the Collateral Interest on the Expected Payment Date, or with respect to the
Rapid Amortization Period, after the Class A Investor Amount and the Class B
Investor Amount has been paid in full, be distributed to the holder(s) of the
Collateral Interest.
(iv) the balance, if any, will be treated as Shared Principal Collections
with respect to other Series in Group One and applied as described under
"Description of the Certificates and The Pooling and Servicing Agreement --
Shared Principal Collections" in the Prospectus.
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"Class A Monthly Principal" with respect to any Distribution Date relating
to the Accumulation Period or the Rapid Amortization Period will equal the least
of (i) the Available Principal Collections held in the Collection Account with
respect to such Distribution Date, (ii) for each Distribution Date with respect
to the Accumulation Period, the Controlled Deposit Amount for such Distribution
Date, and (iii) the Class A Adjusted Investor Amount on such Distribution Date.
"Class B Monthly Principal" with respect to any Distribution Date relating
to the Accumulation Period, beginning with the Distribution Date on which an
amount equal to the Class A Investor Amount has been deposited in the Principal
Account (after taking into account deposits to be made on such Distribution
Date), or with respect to any Distribution Date relating to the Rapid
Amortization Period, beginning with the Distribution Date on which the Class A
Certificates have been paid in full (after taking into account payments to be
made on such Distribution Date), will equal the least of (i) the Available
Principal Collections on deposit in the Principal Account with respect to such
Distribution Date (minus the portion of such Available Principal Collections
applied to Class A Monthly Principal on such Distribution Date), (ii) for each
Distribution Date with respect to the Accumulation Period, the Controlled
Deposit Amount for such Distribution Date (minus the Class A Monthly Principal
with respect to such Distribution Date) and (iii) the Class B Adjusted Investor
Amount prior to any deposits on such Distribution Date.
"Collateral Interest Monthly Principal" with respect to any Distribution
Date relating to the Accumulation Period, beginning with the Distribution Date
on which an amount equal to the sum of (i) the Class A Investor Amount and (ii)
the Class B Investor Amount has been deposited in the Principal Account (after
taking into account deposits to be made on such Distribution Date), or with
respect to any Distribution Date relating to the Rapid Amortization Period,
beginning with the Distribution Date on which the Class B Certificates have been
paid in full (after taking into account payments to be made on such Distribution
Date), will equal the least of (i) the Available Principal Collections on
deposit in the Principal Account with respect to such Distribution Date (minus
the portion of such Available Principal Collections applied to Class A Monthly
Principal and Class B Monthly Principal on such Distribution Date), (ii) for
each Distribution Date with respect to the Accumulation Period, the Controlled
Deposit Amount for such Distribution Date (minus the sum of the Class A Monthly
Principal and the Class B Monthly Principal with respect to such Distribution
Date) and (iii) the Collateral Interest Adjustment Amount prior to any deposits
on such Distribution Date.
"Controlled Accumulation Amount" means for any Distribution Date with
respect to the Accumulation Period, $__________; provided, however, if the
Accumulation Period Length is determined to be less than 12 months, the
Controlled Accumulation Amount shall be equal to (i) the product of (x) the
Initial Investor Amount and (y) the Accumulation Period Factor for such Monthly
Period divided by (ii) the Required Accumulation Factor Number.
"Accumulation Period Factor" means, for each Monthly Period, a fraction, the
numerator of which is equal to the sum of the initial investor amounts of all
outstanding Series, and the denominator of which is equal to the sum of (a) the
Initial Investor Amount, (b) the initial investor amounts (or other applicable
amounts) of all outstanding Series (other than Series 20__-_) which are not
expected to be in their revolving periods during such Monthly Period and (c) the
initial investor amounts (or other applicable amounts) of all other outstanding
Series which are not allocating Shared Principal Collections to other Series and
are expected to be in their revolving periods during such Monthly Period.
"Required Accumulation Factor Number" is a fraction, rounded upwards to the
nearest whole number, the numerator of which is one and the denominator of which
is equal to the lowest monthly principal payment rate on the Accounts for the 12
months preceding the date of such calculation (or any lower monthly principal
payment rate selected by the Servicer at its option in its sole discretion),
expressed as a decimal.
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<PAGE>
"Controlled Deposit Amount" means, for any Distribution Date with respect to
the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.
"Deficit Controlled Accumulation Amount" means (a) on the first Distribution
Date with respect to the Accumulation Period, the excess, if any, of the
Controlled Accumulation Amount for such Distribution Date over the amount
deposited into the Principal Account for such Distribution Date, and (b) on each
subsequent Distribution Date with respect to the Accumulation Period, the
excess, if any, of the applicable Controlled Deposit Amount for such subsequent
Distribution Date over the amount deposited into the Principal Account for such
subsequent Distribution Date.
Example of Distributions
The following is an example of the application of the foregoing provisions to
the first Monthly Period during which the Offered Certificates will be
outstanding:
____________________ .......... Monthly Period
____________________ .......... Record Date
____________________ .......... Determination Date
____________________ .......... Distribution Date
All payments collected at any time with respect to a Monthly Period will be
deposited in the Collection Account, and will then be allocated and paid or
deposited in accordance with the provisions of the Pooling and Servicing
Agreement. Distributions of interest will be made on the Distribution Date to
Certificateholders of record at the close of business on the Record Date.
"Determination Date" with respect to any Monthly Period will be a business day
occurring in the first ten days of the succeeding calendar month as selected
from time to time by the Servicer. On the Determination Date, the Servicer will
instruct the Trustee regarding amounts to be withdrawn from the Collection
Account on the Distribution Date. On the Distribution Date, the Servicer shall
deposit to the Collection Account the amount of Collections required to be
deposited therein, if daily deposits of Collections are not required. See
"Description of the Certificates and the Pooling and Servicing Agreement--
Book-Entry Registration" and "-- Definitive Certificates" in the Prospectus.
Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge Offs
"Defaulted Receivables" for any Monthly Period are Principal Receivables in
Accounts which were charged off as uncollectible in such Monthly Period
("Defaulted Accounts"). 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 usual and customary 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 that were charged off in such Monthly Period
less (b) the amount of Recoveries received by the Servicer with respect to
Defaulted Accounts during such Monthly Period.
On each Determination Date, the Servicer will calculate the Investor Default
Amount for the preceding Monthly Period. The term "Investor Default Amount"
means, for any Monthly Period, the product of (i) the Investor Percentage
applicable to Allocable Amounts with respect to such Monthly Period and (ii) the
Default Amount for such Monthly Period. A portion of the Investor Default Amount
will be allocated to the Class A Certificateholders (the "Class A Investor
Default Amount") on each Distribution Date in an amount equal to the product of
(i) the Class A Investor Percentage applicable during the related Monthly Period
and (ii) the Default
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Amount for such Monthly Period. A portion of the Investor Default Amount will be
allocated to the Class B Certificateholders (the "Class B Investor Default
Amount") on each Distribution Date in an amount equal to the product of (i) the
Class B Investor Percentage applicable during the related Monthly Period and
(ii) the Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Collateral Interest (the "Collateral
Interest Default Amount") (as such amount may be subdivided pursuant to the
Series 20__-_ Supplement to reflect any subdivision of the Collateral Interest)
on each Distribution Date in an amount equal to the product of (i) the
Collateral Interest Percentage applicable during the related Monthly Period and
(ii) the Default Amount for such Monthly Period.
On each Determination Date, the Servicer will also calculate the Series
Adjustment Amount, as described below under "-- Allocation of Adjustment
Amounts." A portion of the Series Adjustment Amount will be allocated to the
Class A Certificateholders (the "Class A Adjustment Amount") on each
Distribution Date in an amount equal to the product of (i) the Series Adjustment
Amount for Series 20__-_ with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class A
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period. A portion of the Series Adjustment Amount will be allocated to
the Class B Certificateholders (the "Class B Adjustment Amount") on each
Distribution Date in an amount equal to the product of (i) the Series Adjustment
Amount for Series 20__-_ with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class B
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period. A portion of the Series Adjustment Amount will be allocated to
the Collateral Interest (the "Collateral Interest Adjustment Amount") (as such
amount may be subdivided pursuant to the Series 20__-_ Supplement to reflect any
subdivision of the Collateral Interest) on each Distribution Date in an amount
equal to the product of (i) the Series Adjustment Amount for Series 20__-_ with
respect to the related Monthly Period and (ii) the percentage equivalent of a
fraction the numerator of which is the Collateral Interest Amount (as such
amount may be subdivided pursuant to the Series 20__-_ Supplement to reflect any
subdivision of the Collateral Interest) and the denominator of which is the
Adjusted Investor Amount, each as of the last day of the Monthly Period
preceding the related Monthly Period.
The sum of the Class A Investor Default Amount and the Class A Adjustment
Amount with respect to a Distribution Date is referred to as the "Class A
Allocable Amount." The sum of the Class B Investor Default Amount and the Class
B Adjustment Amount with respect to a Distribution Date is referred to as the
"Class B Allocable Amount." The sum of the Collateral Interest Default Amount
and the Collateral Interest Adjustment Amount with respect to a Distribution
Date is referred to as the "Collateral Interest Allocable Amount" (as such
amount may be subdivided pursuant to the Series 20__-_ Supplement to reflect any
subdivision of the Collateral Interest). The sum of the Class A Allocable
Amount, the Class B Allocable Amount and the Collateral Interest Allocable
Amount equals the "Allocable Amount."
An amount equal to the Class A Allocable Amount for each Monthly Period will
be funded with Class A Available Funds, Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 20__-_ and Reallocated Principal
Collections applied as described above in "-- Applications of Collections --
Payment of Interest, Fees and Other Items" and "-- Reallocation of Cash
Flows." An amount equal to the Class B Allocable Amount for each Monthly Period
will be funded with Class B Available Funds, Excess Spread and Shared Excess
Finance Charge Collections allocable to Series 20__-_ and Reallocated Principal
Collections applied as described above in "-- Applications of Collections --
Payment of Interest, Fees and Other Items" and "-- Reallocation of Cash
Flows."
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 20__-_ and Reallocated Principal
Collections, then the Collateral Interest Amount (as such amount may be
subdivided pursuant to the Series 20__-_ Supplement to reflect any subdivision
of the Collateral Interest) will be reduced by the amount of such excess, but
not by more than the excess of the Class A Allocable Amount for such
Distribution Date over the amount of Excess
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Spread and Shared Excess Finance Charge and the amount of Reallocated Principal
Collections used to fund the Class A Allocable Amount for such Distribution
Date. In the event that such reduction would cause the Collateral Interest
Amount to be a negative number, the Collateral Interest Amount will be reduced
to zero, and the Class B Investor Amount will be reduced by the amount by which
the Collateral Interest Amount would have been reduced below zero, but not by
more than the excess, if any, of the Class A Allocable Amount for such
Distribution Date over the amount of such reduction, if any, of the Collateral
Interest Amount with respect to such Distribution Date and the amount of Excess
Spread and Shared Excess Finance Charge Collections and the amount of
Reallocated Principal Collections used to fund the Class A Allocable Amount for
such Distribution Date. In the event that such reduction would cause the Class B
Investor Amount to be a negative number, the Class B Investor Amount will be
reduced to zero, and the Class A Investor Amount will be reduced by the amount
by which the Class B Investor Amount would have been reduced below zero, but not
by more than the excess, if any, of the Class A Allocable Amount for such
Distribution Date over the aggregate amount of the reductions, if any, of the
Collateral Interest Amount and the Class B Investor Amount for such Distribution
Date and the amount of Excess Spread and Shared Excess Finance Charge
Collections and the amount of Reallocated Principal Collections used to fund the
Class A Allocable Amount for such Distribution Date (a "Class A Investor Charge
Off"), which will have the effect of slowing or reducing the return of principal
to the Class A Certificateholders. If the Class A Investor Amount has been
reduced by the amount of any Class A Investor Charge Offs, it will thereafter be
increased on any Distribution Date (but not by an amount in excess of the
aggregate Class A Investor Charge Offs) by the amount of Excess Spread and
Shared Excess Finance Charge Collections allocable to Series 20__-_ and
available for such purpose as described above in "-- Applications of
Collections -- Excess Spread; Shared Excess Finance Charge Collections." In
addition, to the extent that such reduction is due to the allocation of Series
Adjustment Amounts, such reduction may be reimbursed as a result of deposits in
the Excess Funding Account, increases in the amount of Principal Receivables in
the Trust or certain decreases in the aggregate Investor Amount of the Trust.
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 20__-_ not required to pay the Class A
Required Amount or reimburse Class A Investor Charge Offs, and Reallocated
Principal Collections (exclusive of any Class B Subordinated Principal
Collections) not required to pay the Class A Required Amount, then the
Collateral Interest Amount (as such amount may be subdivided pursuant to the
Series 20__-_ Supplement to reflect any subdivision of the Collateral Interest)
will be reduced by the amount of such excess, but not by more than the excess of
the Class B Allocable Amount for such Distribution Date over the amount of
Excess Spread and Shared Excess Finance Charge Collections, and the amount of
Reallocated Principal Collections used to fund the Class B Allocable Amount for
such Distribution Date. In the event that such reduction would cause the
Collateral Interest Amount to be a negative number, the Collateral Interest
Amount remaining after any reduction for the benefit of the Class A Certificates
will be reduced to zero, and the Class B Investor Amount remaining after any
reduction for the benefit of the Class A Certificates will be reduced by the
amount by which the Collateral Interest Amount would have been reduced below
zero, but not by more than the excess, if any, of the Class B Allocable Amount
for such Distribution Date over the amount of the reductions, if any, of the
Collateral Interest Amount with respect to such Distribution Date and the amount
of Excess Spread and Shared Excess Finance Charge Collections, and the amount of
Reallocated Principal Collections used to fund the Class B Allocable Amount for
such Distribution Date (a "Class B Investor Charge Off"), which will have the
effect of slowing or reducing the return of principal to the Class B
Certificateholders. If the Class B Investor Amount has been reduced by the
amount of any Class B Investor Charge Offs, it will thereafter be increased on
any Distribution Date (but not by an amount in excess of the aggregate Class B
Investor Charge Offs) by the amount of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 20__-_ and available for such purpose as
described above in "-- Applications of Collections -- Excess Spread; Shared
Excess Finance Charge Collections." In addition, to the extent that such
reduction is due to the allocation of Series Adjustment Amounts, such reduction
may be reimbursed as a result of deposits in the Excess Funding Account,
increases in the amount of Principal Receivables in the Trust or certain
decreases in the aggregate Investor Amount of the Trust.
On each Distribution Date, if the Collateral Interest Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 20__-_ not required to
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pay the Class A Required Amount, reimburse Class A Investor Charge Offs, pay the
Class B Required Amount, or reimburse Class B Investor Charge Offs and the
amounts, if any, in the Spread Account, then the Collateral Interest Amount (as
such amount may be subdivided pursuant to the Series 20__-_ Supplement to
reflect any subdivision of the Collateral Interest), remaining after any
reduction for the benefit of the Class A Certificates or the Class B
Certificates will be reduced by the amount of such excess, but not by more than
the Collateral Interest Allocable Amount for such Distribution Date (a
"Collateral Interest Charge Off") (as such amount may be subdivided pursuant to
the Series 20__-_ Supplement to reflect any subdivision of the Collateral
Interest).
Allocation of Adjustment Amounts
The Minimum Transferor Interest Percentage applicable to Series 20__-_ will
initially be zero; provided, however, that (a) the Transferor may, at its option
and in its sole discretion, designate a higher percentage as the Minimum
Transferor Interest Percentage so long as, after giving effect to such
designation and any repurchase of certificates or designation of Additional
Accounts, the Transferor Amount equals or exceeds the Minimum Transferor Amount
and (b) if on any Distribution Date during the Revolving Period (after giving
effect to all distributions and adjustments to be made on such Distribution
Date), the portion of the Collateral Interest Amount owned by the Transferor is
less than 2% of the Investor Amount and the Minimum Transferor Interest
Percentage is then less than 2%, the Transferor will be required, on or before
the last day of the second Monthly Period following the Monthly Period in which
such Distribution Date occurs (unless the portion of the Collateral Interest
Amount owned by the Transferor then equals or exceeds 2% of the Investor
Amount), to (i) repurchase or otherwise repay certificates (to the extent
permitted) or designate Additional Accounts to the extent necessary to permit
the designation of a Minimum Transferor Interest Percentage of 2% without
causing the Transferor Amount to be less than the Minimum Transferor Amount and
(ii) upon compliance with clause (i), designate 2% as the Minimum Transferor
Interest Percentage. In the event that the Transferor has designated a Minimum
Transferor Interest Percentage in excess of 0%, the Transferor may, during the
Revolving Period, designate a lower percentage (not less than 0%) if the portion
of Collateral Interest Amount owned by the Transferor as a percentage of the
Investor Amount averaged over the three Distribution Dates preceding such
designation (after giving effect to all distributions and adjustments made on
each such Distribution Date) equals or exceeds 4%; provided, however, such lower
percentage may not be less than 2% if the portion of Collateral Interest Amount
owned by the Transferor as a percentage of the Investor Amount on the
Distribution Date preceding such designation (after giving effect to all
distributions and adjustments made on such Distribution Date) does not equal or
exceed 2%. The "Minimum Transferor Amount" will generally be equal to the
product of the aggregate adjusted investor amount for all Series outstanding and
the applicable Minimum Transferor Interest Percentage.
If as a result of an Adjustment (i) the Principal Receivables plus the Excess
Funding Account balance is less than (ii) the aggregate investor amount of all
Series (after giving effect to any required transfer of Receivables in
Additional Accounts to the Trust and any amounts deposited 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 on their respective Investor
Percentages (a "Series Adjustment Amount"). The Series Adjustment Amount, as
applicable to Series 20__-_, will be allocated as described above under "--
Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge
Offs." A Series Adjustment Amount will be reduced and the investor amount
increased to the extent that allocations of Excess Spread 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 Series 20__-_ in respect of an Adjustment. Reductions in
a Series Adjustment Amount will be allocated first to the Class A Certificates,
then to the Class B Certificates, and finally to the Collateral Interest, in
each case to the extent of any reductions in the Class A Investor Amount, the
Class B Investor Amount, or the Collateral Interest Amount, as applicable,
attributable to a Series Adjustment Amount.
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Under the terms of the Pooling and Servicing Agreement, fraud-related
receivables will be treated as an Adjustment and not as Defaulted Receivables.
Pay Out Events
The Revolving Period will continue through and include the last day of the
June 2001 Monthly Period, unless the Transferor has designated a different date
for the commencement of the Accumulation Period or a Pay Out Event occurs prior
to such date. See "-- Principal Payments."
A "Pay Out Event" refers to any of the events specified in the Pooling and
Servicing Agreement, and described in the Prospectus under "Description of the
Certificates and the Pooling and Servicing Agreement -- Pay Out Events,"
together with the following events applicable to Series 20__-_:
(a) failure on the part of the Transferor or the Servicer (i) to make any
payment or deposit required by the terms of (A) the Pooling and Servicing
Agreement, or (B) the Series 20__-_ Supplement, on or before the date
occurring five Business Days after the date such payment or deposit is
required to be made or (ii) duly to observe or perform in any material respect
any covenants or agreements applicable to it set forth in the Pooling and
Servicing Agreement or the Series 20__-_ Supplement, which failure has a
material adverse effect on the holders of the Offered Certificates and the
Collateral Interest, and which continues unremedied for a period of 60 days
after the date on which written notice of such failure, requiring the same to
be remedied, shall have been given to the Transferor by the Trustee, or to the
Transferor and the Trustee by the holders of the Offered Certificates and the
Collateral Interest representing not less than 50% of the Investor Amount, and
continues to materially and adversely affect the holders of the Offered
Certificates and the Collateral Interest for such period; or
(b) any representation or warranty made by the Transferor in the Pooling
and Servicing Agreement or the Series 20__-_ Supplement, or any information
contained in a computer file, microfiche or written list required to be
delivered by the Transferor pursuant to the Pooling and Servicing Agreement,
shall prove to have been incorrect in any material respect when made or when
delivered, (i) which continues to be incorrect in any material respect for a
period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Transferor by
the Trustee, or to the Transferor and the Trustee by the holders of the
Offered Certificates and the Collateral Interest representing not less than
50% of the Investor Amount, and (ii) as a result of which the interests of the
holders of the Offered Certificates and the Collateral Interest are materially
and adversely affected and continue to be materially and adversely affected
for such period; provided, however, that a Pay Out Event shall not be deemed
to have occurred if the Transferor has accepted reassignment of the related
Receivable, or all of such Receivables, if applicable, during such period in
accordance with the provisions of the Pooling and Servicing Agreement; or
(c) the average of the Portfolio Yields for any three consecutive Monthly
Periods is a rate which is less than the average Base Rate for such three
consecutive Monthly Periods; or
(d) failure to pay the Investor Amount on the Expected Payment Date; or
(e) the Transferor shall fail to designate, or be unable to designate,
Additional Accounts the Receivables of which will be Eligible Receivables, as
required by the Pooling and Servicing Agreement, and such failure shall
continue for a period of five business days; or
(f) any Servicer Default shall occur which would have a material adverse
effect on the holders of the Offered Certificates and the Collateral Interest;
then (x) in the case of any such event described in clauses (a), (b) or (f)
above, after the applicable grace period set
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forth in such subparagraphs, either the Trustee or holders of the Offered
Certificates and the Collateral Interest representing more than 50% of the
Investor Amount, by written notice then given in writing to the Transferor and
the Servicer (and to the Trustee if given by the holders of the Offered
Certificates and the Collateral Interest) may declare that a Pay Out Event has
occurred with respect to only the Offered Certificates and the Collateral
Interest as of the date of such notice, and (y) in the case of any such event
described in clauses (c), (d), (e) or (g) above, a Pay Out Event with respect to
only the Offered Certificates and the Collateral Interest will be deemed to have
occurred, without any notice or other action, immediately upon the occurrence of
such event.
"Portfolio Yield" means with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is (x) the sum of
(i) the amount of collections of Finance Charge Receivables and Shared Excess
Finance Charge Collections allocated to Series 20__-_ for such Monthly Period
(provided, however, that Shared Excess Finance Charge Collections will be
included in Portfolio Yield only to the extent that the Rating Agency Condition
is satisfied with respect to Standard & Poor's), (ii) the amount of investments
earnings (net of investment expenses and losses), if any, on the Principal
Account and Reserve Account balances, (iii) the amount of funds withdrawn from
the Reserve Account less (iv) an amount equal to the Default Amount allocable to
Series 1991-1 for such Monthly Period, and the denominator of which is (y) the
Investor Amount as of the last day of the preceding Monthly Period.
"Base Rate" means with respect to any Monthly Period, the sum of (i) the
annualized percentage equivalent of a fraction, the numerator of which is the
sum of the Class A Monthly Interest, Class B Monthly Interest, and Collateral
Monthly Interest payable on the Offered Certificates and the Collateral Interest
on the following Distribution Date and the denominator of which is the Investor
Amount as of the last day of the preceding Monthly Period and (ii) the product
of (a) 2% per annum and (b) a fraction, the numerator of which is the Adjusted
Investor Amount and the denominator of which is the Investor Amount, in each
case determined as of the last day of the preceding Monthly Period.
Servicing Compensation and Payment of Expenses
The share of the Investor Monthly Servicing Fee allocable to each class of
Certificates will be calculated as follows: (i) the share of such fee allocable
to the Class A Certificates (the "Class A Servicing Fee") with respect to any
Distribution Date shall be equal to one-twelfth (1/12th) of the product of (a)
2% (the "Servicing Fee Percentage") and (b) the Class A Adjusted Investor
Amount; provided, however, with respect to the first Distribution Date, the
Class A Servicing Fee shall be equal to $__________, (ii) the share of such fee
allocable to the Class B Certificates (the "Class B Servicing Fee") with
respect to any Distribution Date shall be equal to one-twelfth (1/12th) of the
product of (a) the Servicing Fee Percentage and (b) the Class B Adjusted
Investor Amount; provided, however, with respect to the first Distribution Date,
the Class B Servicing Fee shall be equal to $__________, (iii) the share of such
fee allocable to the Collateral Interest (the "Collateral Interest Servicing
Fee") (as such amount may be subdivided pursuant to the Series 20__-_
Supplement to reflect the subdivision of the Collateral Interest) with respect
to any Distribution Date shall be equal to one-twelfth (1/12th) of the product
of (a) the Servicing Fee Percentage and (b) the Collateral Interest Adjusted
Amount; provided, however, with respect to the first Distribution Date, the
Collateral Interest Servicing Fee shall be equal to $__________.
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 Subservicer(s),
if any.
LISTING AND CLEARING OF CERTIFICATES
We expect to list the Certificates on the Luxembourg Stock Exchange. We cannot
guaranty that the application for the listing will be accepted or, if accepted,
when such listing will be accepted. In connection with
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the listing application, the Certificate of Incorporation and Bylaws of the
Transferor, as well as the legal notice relating to the issuance of the Offered
Certificates will be deposited prior to listing with the Chief Registrar of the
District Court in Luxembourg, where copies thereof may be obtained upon request.
The Class A Certificates and the Class B Certificates have been accepted for
clearance through the facilities of DTC, Cedel and Euroclear (ISIN number for
the Class A Certificates __________, and for the Class B Certificates
__________, and Common Code number for the Class A Certificates __________, and
for the Class B Certificates __________).
The Transferor has taken all reasonable care to ensure that the information
contained in this Prospectus Supplement and the Prospectus in relation to the
Transferor and the Offered Certificates is true and accurate in all material
respects and that in relation to the Transferor and the Offered Certificates
there are no material facts the omission of which would make misleading any
statement herein or in the Prospectus, whether fact or opinion. The Transferor
accepts responsibility accordingly. The transactions contemplated in this
Prospectus Supplement were authorized by resolutions adopted by the Transferor
as of _______________, 20__.
Copies of the Pooling and Servicing Agreement, the Series 20__-_ Supplement,
the Annual Independent Public Accountants Servicing Report required pursuant to
the Pooling and Servicing Agreement, and the documents listed under "Where You
Can Find More Information" and "Description of the Certificates and the
Pooling and Servicing Agreement -- Reports to Certificateholders" in the
Prospectus will be available at the office of the listing agent of the Trust in
Luxembourg, Banque Generale du Luxembourg S.A., whose address is 50 Avenue J.F.
Kennedy, L-2951, Luxembourg. Financial information regarding Saks is included in
the consolidated financial statements of Saks in Saks' Annual Report for the
fiscal year ended _______________, 20__, which document is also available
without charge at the office of the listing agent in Luxembourg. The
Certificates, the Pooling and Servicing Agreement and the Series 20__-_
Supplement are governed by the laws of the State of New York.
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) 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 Cedel Customers and the
Euroclear Participants, respectively, through customers' securities accounts in
Cedel's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Customers and Euroclear Participants will occur in the
ordinary way in accordance with their applicable rules and operating procedures.
See "Description of the Certificates and the Pooling and Servicing Agreement --
Book-Entry Registration" and Annex I in the Prospectus.
DTC has advised us that its management is aware that some computer
applications, systems, and the like for processing data that are dependent upon
calendar dates, including dates before, on and after January 1, 2000, may
encounter Year 2000 problems. DTC has informed its participants and other
members of the financial community that it has developed and is implementing a
program so that its systems, as these relate to the timely payment of
distributions (including principal and interest payments) to security holders,
book-entry deliveries and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent upon
other parties, including but not limited to issuers and their agents, as well as
third party vendors from whom DTC licenses software and hardware, and third
party vendors on whom DTC relies for information or the provision of services,
including telecommunication and electrical utility service providers, among
others. DTC has informed its participants and other members of the financial
community that it is contacting (and will continue to contact) third party
vendors from whom DTC acquires services to:
. impress upon them the importance of such services being Year 2000
compliant; and
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. determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services.
In addition, DTC is in the process of developing contingency plans it deems
appropriate. According to DTC, the foregoing information with respect to DTC has
been provided to its participants and other members of the financial community
for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. None of the
Transferor, the Bank, Saks or any of their affiliates makes any representation
as to the accuracy or completeness of such information. See "Description of the
Certificates and the Pooling and Servicing Agreement -- Book-Entry
Registration" in the Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFERED CERTIFICATES
General
The following discussion, summarizing the material anticipated Federal income
tax aspects of the purchase, ownership and disposition of the Offered
Certificates, 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 U.S. Federal income tax
laws that may be relevant to Certificate Owners in light of their personal
investment circumstances or to certain types of Certificate Owners subject to
special treatment under U.S. Federal income tax law (for example, banks and
other financial institutions, insurance companies, dealers in securities and
tax-exempt organizations). Each prospective Certificate Owner is urged to
consult with its own tax advisor in determining the Federal, state, local and
foreign income tax and any other tax consequences of the purchase, ownership and
disposition of the Offered Certificates.
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.
Characterization of the Offered Certificates as Indebtedness
Alston & Bird LLP, Atlanta, Georgia, special tax counsel to the Transferor
("Special Tax Counsel") has rendered an opinion that the Offered Certificates
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 Offered
Certificates will be indebtedness secured by the Receivables. The Transferor
agrees and each Certificateholder and Certificate Owner, by acquiring an
interest in an Offered Certificate, will be deemed to agree to treat the Offered
Certificate as indebtedness of SCC 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
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Receivables and not as a secured loan.
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. 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 factor in making this determination is 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. Based on its
analysis of such factors, it is the opinion of Special Tax Counsel that, under
current law, although no transaction closely comparable to that contemplated
herein has been the subject of any Treasury regulation, revenue ruling or
judicial decision, the Offered 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
It is the opinion of Special Tax Counsel 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
The opinion of Special Tax Counsel with respect to the Offered Certificates
and the Trust is not binding on the courts or the IRS. It is possible that the
IRS could assert that, for purposes of the Code, some or all of the Offered
Certificates 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
resulting from the transaction is that of a partnership, a publicly traded
partnership taxable as a corporation, or an association taxable as a
corporation. The Transferor currently does not intend to comply with the Federal
income tax reporting requirements that would apply if the Offered 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).
If the Trust were treated in whole or in part as a partnership in which some
or all Certificate Owners 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.
S-58
<PAGE>
If a transaction were treated as creating a partnership between the Transferor
and Certificate Owners whose interests in the Trust were treated as equity, the
partnership itself would not be subject to Federal income tax (unless it were to
be characterized as a publicly traded partnership taxable as a corporation);
rather, the partners of such partnership, including the Certificate Owners whose
interests in the Trust are treated as equity, would be taxed individually on
their respective 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 Offered Certificates were held to
constitute partnership interests, rather than indebtedness. Moreover, unless the
partnership were treated as engaged in a trade or business, 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
2% 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 Offered Certificates. Finally, if the
partnership were a publicly traded partnership that qualifies for exemption from
taxation as a corporation, all or a portion of any taxable income 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) may, under
certain circumstances, constitute "unrelated business taxable income" which
generally would be taxable to the holder.
If it were determined that a transaction created an entity classified as an
association or as 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, which would reduce the amounts
available for distribution to the Certificate Owners, possibly including holders
of a Series that is treated as indebtedness. Such classification might also have
adverse state and local tax consequences that would 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, and in the case of non-U.S.
Certificate Owner, would be subject to withholding tax.
Taxation of Interest Income of U.S. Certificate Owners
Assuming, in accordance with Special Tax Counsel's opinion, that the Offered
Certificates are debt obligations for federal income tax purposes, interest
thereon will be includible in income by a U.S. Certificate Owner as ordinary
income in accordance with its method of tax accounting. Interest received on the
Offered Certificates may also constitute "investment income" for purposes of
certain limitations of the Code concerning deductibility of investment interest
expense.
While it is not anticipated that the Offered Certificates will be issued at a
greater than de minimis discount, under applicable Treasury regulations, the
Offered Certificates may nevertheless be deemed to have been issued with
original issue discount ("OID"). This could be the case, for example, if
interest payments are not treated as "qualified stated interest" because the
IRS determines that (i) no reasonable legal remedies exist to compel timely
payment and (ii) the Offered Certificates do not have terms and conditions that
make the likelihood of late payment (other than a late payment that occurs
within a reasonable grace period) or nonpayment a remote contingency. Applicable
regulations provide that, for purposes of the foregoing test, the possibility of
nonpayment due to default, insolvency, or similar circumstances, is ignored.
Although this provision does not directly apply to the Offered Certificates
(because they have no actual default provisions) the Transferor intends to take
the position that, because nonpayment can occur only as a result of events
beyond its control (principally, loss rates and payment delays on the
Receivables substantially in excess of those anticipated), nonpayment is a
remote contingency. Based on the foregoing, and on the fact that generally
interest will accrue on the Offered Certificates at a "qualified floating
rate," the Transferor intends to take the position that interest payments on
the Offered Certificates constitute qualified stated interest. If, however,
interest payments were not "qualified stated interest," all of the taxable
income to be recognized with respect to the Offered Certificates would be
includible in income as OID but would not be includible again when the interest
is actually received.
S-59
<PAGE>
If the Offered Certificates are in fact issued at a greater than de minimis
discount or are treated as having been issued with OID under applicable Treasury
regulations, the excess of the "stated redemption price at maturity" of an
Offered Certificate over the initial offering price at which a substantial
amount of the Offered Certificates are sold to the public will constitute OID. A
U.S. Certificate Owner must include OID in income as interest over the term of
the Offered Certificate under a constant yield method. In general, OID must be
included in income in advance of the receipt of cash representing that income.
In the case of a debt instrument as to which the repayment of principal may be
accelerated as a result of the prepayment of other obligations securing the debt
instrument (a "Prepayable Instrument"), the periodic accrual of OID is
determined by taking into account both the prepayment assumptions used in
pricing the debt instrument and the prepayment experience. If this provision
applies to the Offered Certificates (which is not clear), the amount of OID
which will accrue in any given "accrual period" may either increase or
decrease depending upon the actual prepayment rate. Accordingly, each U.S.
Certificate Owner should consult its own tax advisor regarding the effect of the
OID rules if the Offered Certificates are issued with OID. Under the applicable
Treasury regulations, if an Offered Certificate is issued with de minimis OID, a
U.S. Certificate Owner must include such OID in income proportionately as
principal payments are made.
A U.S. Certificate Owner who purchases an Offered Certificate at a discount
from its adjusted issue price after its original issuance 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 Offered Certificate, and for the deferral of interest
deductions with respect to debt incurred to acquire or carry the market discount
Offered Certificate.
A U.S. Certificate Owner who purchases an Offered Certificate after its
original issuance for an amount in excess of the sum of all amounts payable on
such Offered Certificate after the purchase date other than payment of qualified
stated interest (the "Remaining Redemption Amount") will be considered to have
purchased the Offered Certificate at a premium. Such U.S. Certificate Owner may
generally elect to amortize such premium (as an offset to interest income),
using a constant yield method, over the remaining term of the Offered
Certificate.
A U.S. Certificate Owner who purchases an Offered Certificate that was issued
with OID after its original issuance for an amount less than or equal to the
Remaining Redemption Amount but in excess of the Offered Certificate adjusted
issue price generally is permitted to reduced the daily portion of OID otherwise
includible in such Certificate Owner's taxable income.
Sale or Other Disposition of a Certificate
In general, a U.S. Certificate Owner will recognize gain or loss upon the
sale, exchange, redemption, or other taxable disposition of an Offered
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 tax
basis in the Offered Certificate (which is equal, in general, to the purchase
price of the Offered Certificate 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 Offered Certificate). Subject to
the market discount rules discussed above and to the one-year holding
requirement for long-term capital gain treatment, any such gain or loss
generally will be long-term capital gain, provided that the Offered Certificate
was held as a capital asset and provided, further, that if the rules applicable
to Prepayable Instruments apply, any OID not previously accrued will be treated
as ordinary income. The maximum ordinary income tax rate for individuals,
estates, and trusts exceeds the maximum long-term capital gains tax rate for
such taxpayers. In addition, capital losses generally may be used only to offset
capital gains.
S-60
<PAGE>
Non-U.S. Certificate Owners
As set forth above, Special Tax Counsel will render an opinion, upon issuance,
that the Certificates 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 (x) 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 IRS Form W-8ECI, or (y) 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 in
addition (i) the non-U.S. Certificate Owner does not actually or 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); (ii) the non-U.S. Certificate Owner is not a controlled
foreign corporation with respect to the Transferor (or the holder of such an
interest); (iii) the non-U.S. Certificate Owner is not a bank whose receipt of
interest on a Certificate is described in section 881(c)(3)(A) of the Code; (iv)
such interest is not contingent interest described in section 871(h)(4) of the
Code; and (v) the non-U.S. Certificate Owner does not bear certain relationships
to any holder of either the Exchangeable Transferor Certificate other than the
Transferor or any holder of the Certificates of any Series not properly
characterized as debt. Applicable identification requirements generally will be
satisfied if there is delivered to a securities clearing organization (i) IRS
Form W-8 or IRS Form W-8BEN 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 or IRS
Form W-8BEN, 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") 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
Supplement but generally will be effective for payments made after December 31,
2000. 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 hold true.
S-61
<PAGE>
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 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,
which will depend in part upon the tax laws of jurisdictions where the
Certificateholders reside or are doing business. Certain Illinois and
Mississippi tax implications of an investment in the Certificates are described
below. As each state's tax laws vary, the tax consequences arising to the
Certificateholders under the laws of other jurisdictions in which they are not
already subject to tax are not discussed in this summary. Potential investors
should consult their own tax advisors as to the state and local tax consequences
on an investment in the Certificates with respect to their particular
circumstances.
Certain activities to be undertaken by the Servicer on behalf of the Trust
pursuant to the Pooling and Servicing Agreement will take place in Illinois and
Mississippi. The discussion of the Illinois and Mississippi tax consequences set
forth below is based upon current provisions of the Illinois and Mississippi
statutes and regulations promulgated thereunder, and any applicable judicial or
ruling authority, all of which are subject to change, with possible retroactive
effect. No ruling on any of the issues discussed below will be sought from any
Illinois or Mississippi taxing authority.
If the Trust is not treated as a separate entity subject to tax and the
Certificates are treated as indebtedness of SCC for Federal income tax purposes,
this same treatment should apply for Mississippi and Illinois income tax
purposes. Accordingly, if the Certificates are treated as debt instruments in
Illinois and Mississippi, the Certificateholders not otherwise subject to income
tax in these states would not be subject to the tax solely because of their
ownership of the Certificates. Interest on the Certificates generally would be
taxable to an individual Certificateholder in his state of residence and would
be taxed to a corporate Certificateholder in accordance with the laws of the
jurisdictions in which the corporate Certificateholder is subject to tax.
S-62
<PAGE>
In the alternative, if the Certificates are not treated as debt but are
considered interests in a partnership for Federal income tax purposes, the same
treatment should apply for both Illinois and Mississippi income tax purposes,
and the Illinois Department of Revenue or the Mississippi State Tax Commission
could view the Trust as doing business in Illinois or Mississippi respectively.
In this circumstance, the Trust would not be an entity subject to income
taxation in Mississippi. In Illinois, however, the Trust would not be subject
at the entity level to the income tax, but would be subject at the entity level
to the Illinois Replacement Tax at a rate of 1.5% of its income allocated or
apportioned to Illinois, less certain deductions. In both Illinois and
Mississippi, the Trust's items of income and deduction would be passed through
pro rata to both resident and nonresident partners, who would be responsible
for any income tax imposed at the partner level. Consequently, nonresident
individual partners and corporate partners not otherwise doing business in
Illinois or Mississippi could be required to file income tax returns in
Illinois or Mississippi and pay income tax in these states on their pro rata
distributive share of the Trust's income attributable to Illinois or
Mississippi. In this situation, Certificateholders not otherwise subject to tax
in Illinois or Mississippi could become subject to tax in these states solely
because of their ownership of the Certificates considered to be partnership
interests.
Moreover, if the Certificates are instead treated as ownership interests in
either a publicly traded partnership taxable as a corporation or an entity
classified as an association taxable as a corporation for Federal income tax
purposes, the same treatment should apply for both Illinois and Mississippi tax
purposes, and the entity would be subject to the income tax in these states.
The entity level taxes could result in reduced distributions to
Certificateholders. The Certificateholders would be taxed on distributions from
the Trust in the same manner as they are taxed on regular corporate dividends
and other distributions. Nonetheless, if corporate treatment were to apply,
Certificateholders not otherwise subject to income tax in Illinois or
Mississippi should not become subject to the tax on distributions from the
Trust solely because of their ownership of the Certificates.
Saks has agreed in the Pooling and Servicing Agreement to indemnify and hold
harmless the Certificateholders, the Certificate Owners and the Trustee against
any loss, liability, expense, damage or injury (net of any benefit realized),
that is suffered or sustained by the Trust, the Trustee or any Certificate
Owner or Certificateholder as a result of, and to the extent that, the State of
Illinois (or its taxing authority) determines that the Trust is a partnership
and that the Illinois Replacement Tax is applicable to the Trust and, as a
consequence, any Illinois Replacement Tax (including any interest or penalties
with respect thereto or arising from a failure to comply therewith) are
required to be paid by the Trust, the Certificate Owners or the
Certificateholders. The foregoing indemnity shall terminate upon delivery to
the Trustee of evidence of, among other things, any repeal or modification of
the Illinois Replacement Tax by the State of Illinois (or its taxing authority)
which would make it no longer potentially applicable to the Trust, the Trustee
or any Certificate Owner or Certificateholder (in their capacities as such) or
the occurrence of certain other events having a similar effect.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
relating to the Offered Certificates (the "Underwriting Agreement"), the
Transferor has agreed to sell to the underwriters named below (the
"Underwriters"), and the Underwriters have severally agreed to purchase from
the Transferor, the principal amount of Offered Certificates set forth opposite
their respective names below:
S-63
<PAGE>
Principal Amount
Underwriters of Class A Certificates
- ------------ -----------------------
...................................................... $
......................................................
......................................................
......................................................
-----------------------
$
=======================
Principal Amount
Underwriter of Class B Certificates
- ----------- -----------------------
...................................................... $
=======================
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates
offered hereby if any of the Certificates are purchased.
The Underwriters propose initially to offer the Class A Certificates to the
public at the price set forth on the cover page hereof and to certain dealers
at such price less concessions not in excess of __% of the principal amount
of the Class A Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of __% of the principal amount of the
Class A Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms may be changed by
the Underwriters.
The Underwriter of the Class B Certificates proposes initially to offer the
Class B Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in excess of
__% of the principal amount of the Class B Certificates. The Underwriter may
allow, and such dealers may reallow, concessions not in excess of __% of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Underwriter.
The Transferor and Saks will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
In addition to the underwriting discount to be paid to the Underwriters as
set forth on the cover page hereto, the Transferor has agreed to reimburse the
Underwriters for their reasonable out-of-pocket costs and expenses incurred in
connection with the offering, including the reasonable fees and disbursements
of Underwriters' counsel.
Until the distribution of the Offered Certificates is completed, the rules
of the Commission may limit the ability of the Underwriters and certain selling
group members to bid for and purchase the Offered Certificates. As an exception
to these rules, the Underwriters are permitted to engage in over-allotment
transactions, stabilizing transactions, syndicate coverage transactions and
penalty bids with respect to the Offered Certificates in accordance with
Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the
offering size, which create syndicate short positions. Stabilizing transactions
permit bids to purchase the Offered Certificates as long as the stabilizing
bids do not exceed a specified maximum. Syndicate covering transactions involve
purchases of the Offered Certificates in the open market after the distribution
has been completed in order to cover syndicate short positions. Penalty bids
permit the Underwriters to reclaim a selling concession from a syndicate member
when the Offered Certificates originally sold by such syndicate member are
purchased in a syndicate covering transaction.
Such over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause the prices of the Offered
Certificates to be higher than they would otherwise be in the absence of such
S-64
<PAGE>
transactions. Neither the Transferor nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the prices of the Offered
Certificates. In addition, neither the Transferor nor any of the Underwriters
represent that any of the Underwriters will engage in any such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
Each Underwriter has represented and agreed that (i) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or who is a person to whom
the document may otherwise lawfully be issued or passed on, (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (iii) if
that Underwriter is an authorized person under the Financial Services Act 1986,
it has only promoted and will only promote (as that term is defined in
Regulation 1.02 of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991) to any person in the United Kingdom the scheme described
herein if that person is of a kind described either in Section 76(2) of the
Financial Services Act 1986 or in Regulation 1.04 of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged and may in the future engage in commercial
banking and investment banking and other transactions with Saks and its
affiliates. [Describe specific relationships.]
LEGAL MATTERS
Certain legal matters relating to the issuance of the Offered Certificates
and the Federal income tax consequences of such issuance will be passed upon
for Saks and the Transferor by Alston & Bird LLP, Atlanta, Georgia. Certain
legal matters relating to the issuance of the Offered Certificates will be
passed upon for the Underwriters by _______________, _____________, ___________.
S-65
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C>
Accumulation Period Factor................................................. S-49
Accumulation Period Length................................................. S-39
Additional Interest........................................................ S-37
Adjusted Investor Amount................................................... S-40
ADS........................................................................ S-19
Allocable Amount........................................................... S-51
Available Principal Collections............................................ S-45
Available Spread Account Amount............................................ S-48
Bank....................................................................... S-19
Bank Portfolio............................................................. S-21
Base Rate.................................................................. S-55
Business day............................................................... S-36
Class A Account Percentage................................................. S-45
Class A Additional Interest................................................ S-37
Class A Adjusted Investor Amount........................................... S-41
Class A Adjustment Amount.................................................. S-51
Class A Allocable Amount................................................... S-51
Class A Available Funds.................................................... S-45
Class A Certificate Rate................................................... S-4
Class A Investor Amount.................................................... S-40
Class A Investor Charge Off................................................ S-52
Class A Investor Default Amount............................................ S-50
Class A Investor Percentage................................................ S-41
Class A Monthly Interest................................................... S-45
Class A Monthly Principal.................................................. S-49
Class A Pool Factor........................................................ S-35
Class A Required Amount.................................................... S-42
Class A Servicing Fee...................................................... S-55
Class B Account Percentage................................................. S-45
Class B Additional Interest................................................ S-37
Class B Adjusted Investor Amount........................................... S-41
Class B Adjustment Amount.................................................. S-51
Class B Allocable Amount................................................... S-51
Class B Available Funds.................................................... S-45
Class B Certificate Rate................................................... S-4
Class B Investor Amount.................................................... S-41
Class B Investor Charge Off................................................ S-52
Class B Investor Default Amount............................................ S-51
Class B Investor Percentage................................................ S-41
Class B Monthly Interest................................................... S-45
Class B Monthly Principal.................................................. S-48
Class B Pool Factor........................................................ S-49
Class B Required Amount.................................................... S-42
Class B Servicing Fee...................................................... S-55
Class B Subordinated Principal Collections................................. S-39
Closing Date............................................................... S-36
Code....................................................................... S-57
Collateral Interest Account Percentage..................................... S-46
Collateral Interest Additional Interest.................................... S-47
Collateral Interest Adjusted Amount........................................ S-41
Collateral Interest Adjustment Amount...................................... S-51
Collateral Interest Allocable Amount....................................... S-51
Collateral Interest Amount................................................. S-41
Collateral Interest Available Funds........................................ S-46
Collateral Interest Charge Off............................................. S-53
Collateral Interest Default Amount......................................... S-51
Collateral Interest Monthly Principal...................................... S-49
Collateral Interest Percentage............................................. S-41
Collateral Interest Pool Factor............................................ S-35
Collateral Interest Rate................................................... S-46
Collateral Interest Required Amount........................................ S-43
Collateral Interest Servicing Fee.......................................... S-55
Collateral Monthly Interest................................................ S-46
Collateral Percentage...................................................... S-35
Collateral Subordinated Principal Collections.............................. S-42
Controlled Accumulation Amount............................................. S-49
Controlled Deposit Amount.................................................. S-50
Conversion................................................................. S-19
CPS........................................................................ S-19
Credit Service Center...................................................... S-19
Default Amount............................................................. S-50
Defaulted Accounts......................................................... S-50
Defaulted Receivables...................................................... S-50
Deficit Controlled Accumulation Amount..................................... S-50
Department Stores.......................................................... S-19
Depositaries............................................................... S-56
Determination Date......................................................... S-50
Discount Option Receivables................................................ S-38
Discount Percentage........................................................ S-38
Distribution Date.......................................................... S-36
Excess Spread.............................................................. S-46
Excluded Accounts.......................................................... S-21
Expected Payment Date...................................................... S-31
Final Regulations.......................................................... S-61
Interest Period............................................................ S-36
Investor Default Amount.................................................... S-50
Investor Percentage........................................................ S-40
IRS........................................................................ S-57
LIBOR...................................................................... S-37
LIBOR Determination Date................................................... S-37
London business day........................................................ S-37
Minimum Transferor Amount.................................................. S-53
Non-U.S. Certificate Owner................................................. S-57
</TABLE>
S-66
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
OCC........................................................................ S-21
Offered Certificates....................................................... S-35
OID........................................................................ S-59
Pay Out Event.............................................................. S-54
Pool Factors............................................................... S-35
Portfolio Yield............................................................ S-55
Prepayable Instrument...................................................... S-60
Principal Account Balance.................................................. S-41
Probe...................................................................... S-24
Reallocated Principal Collections.......................................... S-42
Reference Banks............................................................ S-38
Remaining Redemption Amount................................................ S-60
Required Accumulation Factor Number........................................ S-49
Required Reserve Account Amount............................................ S-48
Required Spread Account Amount............................................. S-48
Reserve Account............................................................ S-39
Reserve Account Funding Date............................................... S-39
Saks....................................................................... S-19
Saks Fifth Avenue.......................................................... S-19
SCC........................................................................ S-19
Series Adjustment Amount................................................... S-53
Series Cut-off Date........................................................ S-21
Series 20__-__ Supplement.................................................. S-35
Servicing Fee Percentage................................................... S-55
Shared Excess Finance Charge Collections................................... S-48
Special Tax Counsel........................................................ S-57
Telerate Page 3750......................................................... S-38
Transferor................................................................. S-19
Transferor Interest........................................................ S-35
Transferor Percentage...................................................... S-36
Trust Portfolio............................................................ S-21
U.S. Certificate Owner..................................................... S-57
Underwriters............................................................... S-63
Underwriting Agreement..................................................... S-63
</TABLE>
S-67
<PAGE>
ANNEX I
OTHER SERIES
The following table sets forth the principal characteristics of the Class
A-1, Class A-2 and Class A-3 Variable Funding Certificates of Series 1997-1, the
Class A and Class B Certificates of Series 1997-2, the Class A and Class B
Certificates of Series 1998-1, the Class A and Class B Certificates of Series
1998-2, and the Class A and Class B Certificates of Series 1999-1, the only
Series heretofore issued by the Trust and currently outstanding. For more
specific information with respect to any Series, any prospective investor should
contact the Servicer at (205) 940-4000. The Servicer will provide, without
charge, to any prospective purchaser of the Offered Certificates, a copy of the
Prospectus, Prospectus Supplement, if applicable, and Series Supplement (without
exhibits) for any publicly issued Series.
<TABLE>
<CAPTION>
1. Class A-1, Class A-2 and Class A-3 Variable Funding Certificates, Series
1997-1
<S> <C>
Group....................................................... One
Class A-1 and Class A-2 Maximum Investor Amount............. $750,000,000
Expected Class A-1 and Class A-2 Maximum Investor Amount
immediately following the Closing Date.................... $300,000,000
Class A-1 and Class A-2 Certificate Rate.................... Floating (uncapped)
Credit Enhancement.......................................... Subordination
Series Closing Date......................................... August 21, 1997
Series Termination Date..................................... November 27, 2002
2. Class A and Class B Asset Backed Certificates, Series 1997-2
Group....................................................... One
Class A Initial Investor Amount............................. $180,000,000
Class B Initial Investor Amount............................. $20,000,000
Class A Certificate Rate.................................... 6.50%
Class B Certificate Rate.................................... 6.69%
Class A Expected Payment Date............................... August 2002 Distribution Date
Class B Expected Payment Date............................... September 2002 Distribution Date
</TABLE>
I-1
<PAGE>
<TABLE>
<S> <C>
Credit Enhancement.......................... Subordination
Series Closing Date......................... August 21, 1997
Series Termination Date..................... December 15, 2005
3. Class A and Class B Asset Backed Certificates, Series 1998-1
Group....................................... One
Class A Initial Investor Amount............. $67,000,000
Class B Initial Investor Amount............. $8,000,000
Class A Certificate Rate.................... 6.43%
Class B Certificate Rate.................... 6.61%
Class A Expected Payment Date............... June 2000 Distribution Date
Class B Expected Payment Date............... June 2000 Distribution Date
Credit Enhancement.......................... Subordination
Series Closing Date......................... May 6, 1998
4. Class A and Class B Asset Backed Certificates, Series 1998-2
Group....................................... One
Class A Initial Investor Amount............. $200,000,000
Class B Initial Investor Amount............. $21,500,000
Class A Certificate Rate.................... 6.00%
Class B Certificate Rate.................... 6.15%
Class A Expected Payment Date............... May 2001 Distribution Date
Class B Expected Payment Date............... June 2001 Distribution Date
Credit Enhancement.......................... Subordination
Series Closing Date......................... May 21, 1998
5. Class A and Class B Asset Backed Certificates, Series 1999-1
Group....................................... One
Class A Initial Investor Amount............. $280,000,000
Class B Initial Investor Amount............. $30,275,000
Class A Certificate Rate.................... One-month LIBOR plus 0.22% annually
Class B Certificate Rate.................... One-month LIBOR plus 0.43% annually
Class A Expected Payment Date............... July 2002 Distribution Date
Class B Expected Payment Date............... July 2002 Distribution Date
Credit Enhancement.......................... Subordination
Series Closing Date......................... July 21, 1999
</TABLE>
I-2
<PAGE>
Prospectus
Saks Credit Card Master Trust
Issuer
Saks Credit Corporation
Transferor
Saks Incorporated
Servicer
Asset Backed Certificates
Consider carefully the risk factors beginning on page 5 in this prospectus.
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 government agency.
The certificates will represent interests in the Trust only and will not
represent interests in or obligations of Saks or any Saks affiliate.
This prospectus may be used to offer and sell series of certificates only if
accompanied by the prospectus supplement for that series.
The Trust-
. from time to time may issue asset backed certificates in one or more
series with one or more classes
. will own
. consumer credit card receivables
. payments due on those receivables
. other property described in this prospectus and in the
accompanying prospectus supplement
The Certificates-
. will represent interests in the Trust and will be paid only from
Trust assets
. will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization
. may have credit enhancement
. will be issued as part of a series that may include one or more
classes of certificates and enhancement, and that may be paired or
grouped with other series
The Certificateholders-
. will receive interest and principal payments from a varying percentage
of credit card receivables collections.
Neither the SEC nor any state securities commission has approved these
certificates or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
____________, 2000
<PAGE>
Important Notice About Information In This
Prospectus and the Accompanying Prospectus Supplement
This prospectus is part of a "shelf" registration statement that the Trust
has filed with the SEC. By using a shelf registration statement, the Trust may
offer the certificates from time to time and in one or more offerings. The
Trust may use the shelf registration statement to offer up to $1,000,000,000 of
certificates. We provide information to you about the certificates in two
separate documents that progressively provide more detail: (a) this prospectus,
which provides general information, some of which may not apply to a particular
series of certificates, including your series, and (b) the accompanying
prospectus supplement, which will describe the specific terms of your series of
certificates, including:
. the terms, including interest rates, for each class;
. the timing of interest and principal payments;
. financial and other information about the receivables;
. information about credit enhancement, if any, for each class;
. the ratings for each class; and
. the method for selling the certificates.
If the terms of a particular series of certificates vary between this
prospectus and the accompanying prospectus supplement, you should rely on the
information in the accompanying prospectus supplement.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the offer
is not permitted. We do not claim the accuracy of the information in this
prospectus or the accompanying prospectus supplement as of any date, other than
the dates of the information, and otherwise as stated on their covers.
We include cross-references in this prospectus and in the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The table of contents and the table of contents included
in each prospectus supplement state where these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Principal Terms" beginning on
page 59 in this prospectus.
Reports to Certificateholders
The servicer will prepare monthly and annual reports that will contain
information about the Trust. We will not prepare the financial information in
the reports in accordance with generally accepted accounting principles. Until
definitive certificates are issued, we will send the reports to the trustee who
will deliver copies to Cede & Co. which is the nominee of DTC and the registered
holder of the certificates. We will not send any financial reports directly to
you. The reports will be filed with the SEC. See "Where You Can Find More
Information," "Description of the Certificates-Book-Entry Registration," and "--
Reports to Certificateholders" in this prospectus.
Where You Can Find More Information
We filed a registration statement relating to the certificates with the
SEC. This prospectus is part of the registration statement, but the
registration statement includes additional information.
The servicer, on behalf of the Trust, will file with the SEC all annual,
monthly and special SEC reports and other information about the Trust required
by the Securities Exchange Act of 1934 or by the rules and regulations of the
SEC.
You may read and copy any reports, statements or other information we file
at the SEC's public reference rooms at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549; Seven World Trade Center, 13/th/ Floor, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601-2511.
-i-
<PAGE>
You can request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are
also available to the public on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with
the SEC. This means we disclose important information to you by referring you
to that information. The information we incorporate by reference is considered
to be part of this prospectus. Information that we file later with the SEC will
automatically update the information in this prospectus. In all cases, you
should rely on the updated information. We incorporate by reference any future
SEC reports and proxy materials filed by or on behalf of the Trust until we
terminate our offering of certificates.
You may request a copy of any document we incorporate by reference, except
exhibits to the documents (unless we specifically incorporate the exhibits by
reference), at no cost, by writing or calling Charles J. Hansen at Saks
Incorporated, 750 Lakeshore Parkway, Birmingham, Alabama 35211 (205) 940-4000.
This Prospectus Contains Forward-Looking Statements
This prospectus contains forward-looking statements that involve risks and
uncertainties. You can identify these forward-looking statements through our
use of words such as "may," "will," "intend," "project," "expect," "anticipate,"
"should", "would," "believe," "estimate," "contemplate," "continue," "possible,"
or other similar words. Actual results may differ significantly from the
results Saks discusses in forward-looking statements. Factors that might cause
such a difference include, but are not limited to: general economic and business
conditions, both nationally and in Saks' trade areas; Saks' merchandise mixes;
Saks' site selection for stores; traffic and demographic patterns; general
prospects for the retail industry; 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 Saks'
customers; the effects of weather conditions on seasonal sales in Saks' trade
areas; competition among department and specialty stores and other retailers,
including luxury goods retailers, general merchandise stores, mail order
retailers and off-price and discount stores; the competitive pricing environment
within the retail industry; the effectiveness of Saks' advertising, marketing
and promotional campaigns; changes in bankruptcy and other laws affecting credit
cards; the speed and effectiveness of identification and implementation of Saks'
best practices approach; Saks' ability to determine and implement appropriate
merchandising strategies, merchandise flow and inventory turnover levels; Saks'
realization of planned synergies, cost savings, and cost containment in its
operations and in recent and future acquisitions; Saks' ability to integrate
acquired businesses and stores; and any adverse effects of the Year 2000 problem
on Saks and its vendors.
You should also consider all other factors contained in this prospectus or
in any accompanying supplement, including the information incorporated by
reference. You should pay particular attention to those factors discussed in
any supplement under the heading "Risk Factors." You should not rely on the
information contained in any forward-looking statements, and you should not
expect Saks to update any forward-looking statements.
___________________________
-ii-
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY....................................................... 1
RISK FACTORS............................................................. 5
CREDIT CARD PROGRAM...................................................... 16
THE ACCOUNTS............................................................. 16
THE TRUST................................................................ 17
MATURITY ASSUMPTIONS..................................................... 17
USE OF PROCEEDS.......................................................... 18
SAKS INCORPORATED........................................................ 18
SAKS CREDIT CORPORATION.................................................. 19
DESCRIPTION OF THE CERTIFICATES AND THE POOLING AND SERVICING AGREEMENT.. 19
General.................................................................. 19
Book-Entry Registration.................................................. 20
Definitive Certificates.................................................. 23
Interest Payments........................................................ 24
Principal Payments....................................................... 24
Transfer of Receivables.................................................. 25
Exchanges................................................................ 25
Representations and Warranties........................................... 27
Addition of Accounts..................................................... 28
Removal of Accounts...................................................... 30
Discount Option Receivables.............................................. 30
Collection and Other Servicing Procedures................................ 31
Collection and Principal Accounts........................................ 31
Funding Period........................................................... 32
Investor Percentage and Transferor Percentage............................ 32
Application of Collections............................................... 33
Shared Principal Collections............................................. 34
Excess Funding Account................................................... 34
Shared Excess Finance Charge Collections................................. 35
Paired Series............................................................ 35
Allocation of Investor Default Amount; Adjustment Amounts; Investor
Charge Offs........................................................... 35
Allocation of Adjustment Amounts......................................... 36
Defeasance............................................................... 36
Optional Repurchase; Final Payment of Principal; Termination............. 37
Pay Out Events........................................................... 38
Servicing Compensation and Payment of Expenses........................... 38
Certain Matters Regarding the Servicer................................... 39
Servicer Default......................................................... 39
Reports to Certificateholders............................................ 41
Amendments............................................................... 42
Indemnification.......................................................... 43
Amendments to the Pooling and Servicing Agreement Relating to FASIT
Election.............................................................. 43
List of Certificateholders............................................... 43
The Trustee.............................................................. 44
ENHANCEMENT.............................................................. 44
General.................................................................. 44
Subordination............................................................ 45
Cash Collateral Guaranty or Account...................................... 45
Letter of Credit......................................................... 45
Surety Bond or Insurance Policy.......................................... 45
Spread Account........................................................... 46
Reserve Account.......................................................... 46
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES................................. 46
Transfer of Receivables.................................................. 46
Certain Matters Relating to Bankruptcy or Insolvency..................... 47
Certain Matters Relating to Receivership and Conservatorship of Banks.... 48
Proposed FDIC Policy..................................................... 49
Consumer and Debtor Protection Laws, Recent and Proposed Legislation..... 49
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................. 50
General.................................................................. 50
Characterization of the Certificates as Indebtedness..................... 51
Treatment of the Trust................................................... 51
Possible Classification of the Transaction as a Partnership or as an
Association Taxable as a Corporation.................................. 51
Taxation of Interest Income of U.S. Certificate Owners................... 52
Sale of a Certificate by a U.S. Certificate Owner........................ 53
FASIT Considerations..................................................... 53
Non-U.S. Certificate Owners.............................................. 53
Backup Withholding....................................................... 54
STATE AND LOCAL TAX CONSEQUENCES......................................... 55
ERISA CONSIDERATIONS..................................................... 55
PLAN OF DISTRIBUTION..................................................... 57
LEGAL MATTERS............................................................ 58
INDEX OF TERMS FOR PROSPECTUS............................................ 59
ANNEX I - GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES.. I-1
Initial Settlement....................................................... I-1
Secondary Market Trading................................................. I-1
Certain U.S. Federal Income Tax Documentation Requirements............... I-3
-iii-
<PAGE>
PROSPECTUS SUMMARY
. This summary highlights selected information from this document and does not
contain all the information that you need to make your investment decision.
To understand all of the terms of an offering of the certificates, carefully
read this entire document and the accompanying prospectus supplement.
. This summary provides an overview of the receivables and how they will be
allocated, calculations, cash flows and other information to aid your
understanding. It is qualified by the full description of these allocations,
calculations, cash flows and other information in this prospectus and the
accompanying prospectus supplement.
The Trust and The Trustee
The Saks Credit Card Master Trust was formed on August 21, 1997 as part of a
master pooling and servicing agreement by and among Saks (formerly named
Proffitt's, Inc.), as servicer, Saks Credit Corporation (as successor to
Proffitt's Credit Corporation), as transferor, and Norwest Bank Minnesota,
National Association, as trustee.
The Trust is a master trust under which we may issue multiple series of
certificates. Each series is issued pursuant to a series supplement to the
pooling and servicing agreement. The terms of a series are set forth in the
related series supplement. Some classes or series may not be offered by this
prospectus; for example, they may be offered privately.
Trust Assets
Saks Credit Corporation, as transferor, has transferred to the Trust receivables
arising from a portfolio of revolving consumer credit card accounts owned by
National Bank of the Great Lakes. The bank is a wholly owned, indirect
subsidiary of Saks.
All new receivables generated in the accounts will be transferred automatically
to the Trust. The receivables transferred to the Trust are the primary trust
assets. From time to time the transferor may designate additional accounts to
the Trust. Receivables in such additional accounts will be transferred
automatically to the Trust. The total amount of receivables in the Trust will
fluctuate daily as new receivables are generated and payments are received. The
transferor may also transfer additional assets to the Trust.
See "Information About the Receivables" and "Description of the Certificates and
the Pooling and Servicing Agreement-Addition of Accounts" in this prospectus.
The Trust's assets also include payments due on the receivables and other
proceeds of the receivables and related credit insurance policies.
Additional Trust assets may include:
. monies and investments in the Trust's bank and other accounts; and
. instruments and rights providing credit enhancement to a series or class.
The transferor may also remove, subject to limitations and conditions,
receivables that it has transferred to the Trust.
See "Description of the Certificates and the Pooling and Servicing Agreement-
Removal of Accounts" in this prospectus.
Information About the Receivables
The receivables arise in accounts selected and designated to the Trust by the
transferor from the bank's credit card account portfolio. This selection is
based on criteria established in the pooling and servicing agreement.
The bank's credit card account portfolio consists of private label credit card
accounts established for customers of Saks' retail businesses.
The receivables consist of both principal receivables and finance charge
receivables.
Principal receivables are generally amounts charged by cardholders for
merchandise and services.
Finance charge receivables are finance charges and credit card fees charged to
cardholders. The transferor may also designate a percentage of principal
receivables that will be treated as finance charge receivables. These
redesignated receivables are called discount option receivables.
See "Description of the Certificates and the Pooling and Servicing Agreement-
Discount Option Receivables" in this prospectus.
-1-
<PAGE>
Collections By The Servicer
Saks services the receivables under the pooling and servicing agreement for a
servicing fee. In limited cases, Saks may resign or be removed, and either the
trustee or a third party may be appointed as the new servicer. The servicer
receives a servicing fee from the Trust. Each series pays a portion of the
servicing fee.
See "Saks Incorporated" in this prospectus.
The servicer receives collections on the receivables, deposits those collections
in an account and keeps track of collections of finance charge receivables and
principal receivables. The servicer then allocates those collections.
Allocation of Trust Assets
The Trust assets will be allocated to the holders of certificates and other
interests of each series and to SCC as the holder of the exchangeable transferor
certificate. The exchangeable transferor certificate represents the remaining
interest in the assets of the Trust not represented by the certificates and
other interests issued by the Trust. On any date, this remaining interest is
equal to the aggregate amount of principal receivables in the Trust not
allocated to a series or to holders of other classes of certificates. If there
is more than one class in a series, there may be a further allocation of Trust
assets among each class.
The servicer will allocate (a) collections of finance charge receivables and
principal receivables and (b) receivables in accounts written off as
uncollectible, to each series based on a varying percentage, called the investor
percentage, as described in the accompanying prospectus supplement.
The aggregate amount of principal receivables allocated at any time to a series
establishes that series' "investor interest."
See "Description of the Certificates and the Pooling and Servicing Agreement-
General" and "--Investor Percentage and Transferor Percentage" in this
prospectus.
Interest Payments on the Certificates
Each certificate of a series will represent the right to receive payments of
interest as described in the accompanying prospectus supplement. If a series of
certificates consists of one or more classes, each class may differ in, among
other things, priority of payments, payment dates, interest rates, methods for
computing interest, and rights to credit enhancement.
Each class of certificates may have fixed, floating or any other type of
interest rate. Generally, interest will be paid monthly, quarterly, semi-
annually or on other scheduled dates over the life of the certificates.
See "Description of the Certificates and the Pooling and Servicing Agreement-
Application of Collections," "--Shared Excess Finance Charge Collections" and
"Enhancement" in this prospectus.
Principal Payments on the Certificates
Each certificate of a series will represent the right to receive payments of
principal as described in the accompanying prospectus supplement. If a series of
certificates consists of more than one class, each class may differ in, among
other things, the amounts allocated for principal payments, priority of
payments, payment dates, maturity and rights to credit enhancement.
Revolving Period
The revolving period for a class starts on the date that certificates for that
class are issued and ends at the start of an amortization period or an
accumulation period. The Trust will not pay or accumulate principal for the
related certificateholders in the revolving period. During the revolving
period, the Trust, subject to certain limitations, will usually pay available
principal to the holder of the exchangeable transferor certificate or, in
certain circumstances, available principal may be used to pay amounts due to
holders of certificates of other series issued by the Trust.
Accumulation and Amortization Periods
Following the revolving period, each class of certificates will have one or a
combination of the following periods in which:
. principal is accumulated in specified amounts per month and paid on a
scheduled date;
. principal is paid in fixed amounts at scheduled intervals;
. principal is paid in varying amounts at scheduled intervals;
. principal is paid in varying amounts each month following certain adverse
events.
-2-
<PAGE>
Controlled Accumulation Period
If a class of certificates has a controlled accumulation period, the Trust is
expected to pay available principal to the certificateholders on a scheduled
payment date specified in the accompanying prospectus supplement. If the series
has more than one class, each class may have a different priority for payment.
For a period of time prior to the scheduled payment date, the Trust must deposit
available principal in a trust account in specified amounts plus any specified
amounts not previously deposited. If amounts sufficient to pay the investor
interest for a class have not been accumulated by the scheduled payment date for
that class, a pay out event will occur and the rapid amortization period will
begin. The controlled accumulation period for a class starts on a date specified
in the accompanying prospectus supplement and ends when any one of the following
occurs:
. the investor interest for the class is paid in full;
. a rapid amortization period starts; or
. the latest date by which principal and interest for the series of certificates
can be paid, which is called the stated series termination date.
Controlled Amortization Period
If a class of certificates has a controlled amortization period, the Trust will
pay available principal to the certificateholders on each distribution date
during the controlled amortization period in a fixed amount plus any amounts not
previously paid. If the series has more than one class, each class may have a
different priority for payment. The controlled amortization period for a class
starts on the date specified in the accompanying prospectus supplement and ends
when any one of the following occurs:
. the investor interest for the class is paid in full;
. a rapid amortization period starts; or
. the stated series termination date is reached.
Principal Amortization Period
If a class of certificates has a principal amortization period, the Trust will
pay available principal to the certificateholders on each distribution date
during the principal amortization period. If a series has more than one class,
each class may have a different priority for payment. The principal amortization
period for a class starts on the date specified in the accompanying prospectus
supplement and ends when any one of the following occurs:
. the investor interest for the class is paid in full;
. a rapid amortization period starts; or
. the stated series termination date is reached.
Rapid Amortization Period
If a class of certificates is in a rapid amortization period, the Trust will pay
available principal to the certificateholders on each distribution date. If the
series has more than one class, each class may have a different priority for
payment. The rapid amortization period starts on the day a pay out event occurs.
The rapid amortization period ends when any of the following occurs:
. the investor interest for the class is paid in full; or
. the stated series termination date is reached.
Pay Out Events
A pay out event for any series of certificates will include the adverse events
described in the accompanying prospectus supplement, including:
. events of insolvency or receivership relating to the transferor or Saks; or
. the Trust or the transferor becomes an "investment company" under the
Investment Company Act of 1940.
See "Description of the Certificates and the Pooling and Servicing Agreement-Pay
Out Events" in this prospectus.
Shared Excess Finance Charge Collections
Series may be grouped together. If specified in the accompanying prospectus
supplement, to the extent that collections of finance charge receivables
allocated to any series are not needed for that series, those collections may be
applied to shortfalls of another series in the same group.
See "Description of the Certificates and the Pooling and Servicing Agreement-
Shared Excess Finance Charge Collections" "--Application of Collections" and "--
Allocation of Investor Default Amount; Adjustment Amounts; Investor Charge Offs"
in this prospectus.
Shared Principal Collections
If specified in the accompanying prospectus supplement, to the extent that
collections of principal receivables and certain other amounts that are
allocated to the investor interest for any series are not needed for that
series, those collections may be
-3-
<PAGE>
applied to cover principal payments for another series in the same group.
See "Description of the Certificates and the Pooling and Servicing Agreement-
Shared Principal Collections" in this prospectus.
Credit Enhancement
Each class of a series may be entitled to credit enhancement. Credit enhancement
provides additional payment protection to investors.
Credit enhancement may take one or more forms, including the following:
. subordinated classes . letter of credit
. collateral interest . surety bond
. insurance . spread account
. cash collateral . reserve account
. guaranty or account . swap arrangements
The type, characteristics and amount of any credit enhancement will be:
. based on several factors, including the characteristics of the receivables and
accounts at the time a series of certificates is issued; and
. established based on the requirements of each rating agency rating one or more
classes of the certificates of that series.
See "Enhancement" and "Risk Factors-Credit Ratings Are Limited In Nature and Do
Not Guarantee Payments" in this prospectus.
Optional Repurchase
The transferor has the option to repurchase any series of certificates once the
investor amount for the series is reduced to 10% or less of the initial investor
amount.
See "Description of the Certificates and the Pooling and Servicing Agreement-
Optional Repurchase; Final Payment of Principal; Termination" in this
prospectus.
Tax Status
Information concerning the application of the federal income tax laws, including
whether the certificates will be characterized as debt for federal income tax
purposes is included in this prospectus and the accompanying prospectus
supplement.
See "Certain Federal Income Tax Consequences" in this prospectus and "Certain
Federal Income Tax Consequences of the Offered Certificates" in the accompanying
prospectus supplement.
Certificate Ratings
Any certificate offered by this prospectus and the accompanying prospectus
supplement will be rated in one of the four highest rating categories by at
least one nationally recognized statistical rating organization.
A rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning rating agency. Each rating
should be evaluated independently of any other rating.
See "Risk Factors-Credit Ratings Are Limited And Do Not Guarantee Payments" in
this prospectus.
-4-
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to purchase
the certificates.
You May Not Be Able to Resell Your The underwriters may assist in resales
Certificates of the certificates but they are not
required to do so. A secondary market
for the certificates may not develop. If
a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to
resell your certificates at any time.
Other Interests May Have Priority The transferor has represented in the
Over Your Certificates pooling and servicing agreement that the
transfer of the receivables to the Trust
is a sale of, or alternatively the grant
of a security interest in, the
receivables. The transferor has taken
steps to give the trustee a "first
priority perfected security interest" in
the receivables in the event a court
concludes the transferor still owns the
receivables. If the Trust's interest in
the receivables is deemed a security
interest in the receivables, a tax,
government or other nonconsensual lien
arising before receivables come into
existence may have priority over the
Trust's interest in the receivables.
See "Certain Legal Aspects of the
Receivables--Transfer of Receivables"
and "Description of the Certificates and
the Pooling and Servicing Agreement--
Representations and Warranties" in this
prospectus.
If a Conservator or Receiver is The bank and the transferor believe that
Appointed for the Bank, Its Assets the transfers of the receivables from
May Be Sold at a Loss, and Payments the bank to the transferor are "true
on Your Certificates May Be Affected sales." This is important if a
conservator or receiver were appointed
for the bank. In those circumstances, if
the transfer of receivables were
characterized as a security interest in
the receivables and not a true sale,
reductions or delays in payments to the
transferor could occur. Consequently,
payments on the certificates may be
delayed and you may experience losses in
your investment.
The Federal Deposit Insurance Act, as
amended by the Financial Institutions
Reform, Recovery and Enforcement Act of
1989, and policy statements issued by
the FDIC, provide that the FDIC should
respect a security interest where the
security interest--
. is validly perfected before the
bank's insolvency; and
. was not taken in contemplation of the
bank's insolvency or with the intent
to hinder, delay or defraud the bank
or its creditors.
FDIC staff positions taken prior to the
passage of FIRREA suggest that the FDIC
would not interrupt the timely transfer
to the Trust of payments collected on
the receivables. If the FDIC were to
assert a different position, your
payments of outstanding principal and
interest could be delayed and possibly
reduced. For example, under the FDIA,
the FDIC could--
-5-
<PAGE>
. require the trustee to go through an
administrative claims procedure to
establish its right to those payments;
. request a stay of proceedings with
respect to the bank; or
. reject the bank's sales contract and
limit the Trust's resulting claim to
"actual direct compensatory damages."
If a conservator or receiver were
appointed for the bank, then a pay out
event could occur on all outstanding
series. Under the terms of the pooling
and servicing agreement, new principal
receivables would not be transferred to
the Trust and the trustee would sell the
receivables, unless holders of more than
50% of the investor interest of each
class of outstanding certificates, and
anyone else authorized to vote on those
matters, gave the trustee other
instructions. The Trust would then
terminate earlier than was planned and
you could suffer a loss if the sale of
the receivables produced insufficient
net proceeds to pay you in full.
However, the conservator or receiver may
have the power:
. regardless of the terms of the
pooling and servicing agreement, (a)
to prevent the beginning of a rapid
amortization period, (b) to prevent
the early sale of the receivables and
termination of the Trust or (c) to
require new principal receivables to
continue being transferred to the
Trust; or
. regardless of the instructions of
those authorized to direct the
trustee's actions under the pooling
and servicing agreement, (a) to
require the early sale of the
receivables, (b) to require
termination of the Trust and
retirement of the certificates or (c)
to prohibit the continued transfer of
principal receivables to the Trust.
The FDIC proposed a policy statement in
December 1998 to clarify when the FDIC
will not attempt to reclaim, recover or
recharacterize assets transferred by a
bank to a special purpose entity in
connection with a securitization. The
FDIC withdrew the proposed policy
statement and proposed a regulation on
August 31, 1999. The proposed regulation
confirms that the FDIC's current
practice will apply to securitizations
that satisfy the criteria for sale
accounting and where the documentation
reflects the parties' intention to treat
the transaction as a sale and not as a
secured borrowing. See "Recent
Legislative and Regulatory
Developments."
In addition, if a conservator or
receiver is appointed for the servicer,
the conservator or receiver might have
the power to prevent either the trustee
or the certificateholders from
appointing a new servicer.
See "Certain Legal Aspects of the
Receivables--Certain Matters Relating to
Receivership Bankruptcy or Insolvency"
in this prospectus.
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<PAGE>
Changes to the Receivables Could The bank continues to own the accounts
Adversely Affect Collections and and retains the right to change various
Could Cause an Early Pay Out or a account terms, including the finance
Downgrade of Your Certificates charges and other fees it charges and
the required monthly minimum payment.
Changes to these terms may be made
voluntarily by the bank or may be forced
upon it by law or market conditions.
Changes in the finance charges and other
fees could decrease the effective yield
on the accounts and this could lead to a
pay out event and the early amortization
of your certificates. Changes in account
terms also may alter payment patterns.
If payment rates decrease significantly
at a time when you are scheduled to
receive principal, you might receive
principal more slowly than planned.
Changes could also cause a reduction in
the credit ratings on your certificates.
The bank has agreed that it will not
reduce the interest rate it charges on
the receivables or other fees if that
action would result in a pay out event,
unless it is required to do so by law or
it determines that changes are necessary
to maintain its credit card business,
based on its good faith assessment of
its business competition.
In addition, the bank has agreed that it
will not change the terms of the
accounts or its servicing practices,
including the reduction of the required
minimum monthly payment and the
calculation of the amount or the timing
of finance charges, other fees and
charge offs, unless it reasonably
believes a pay out event would not occur
for any series and takes the same action
on its other substantially similar
accounts, to the extent permitted by
those accounts.
Consumer Protection Laws May Federal and state consumer protection
Adversely Affect Collections and laws regulate the creation and
Yield Maintenance and Lead to an enforcement of consumer loans. The Trust
Early Pay Out or Inability to Pay may be liable for violation of laws that
apply to the receivables, either as an
assignee from the transferor with
respect to the obligations arising
before the transfer of the receivables
to the Trust, or as a party directly
responsible for obligations arising
after the transfer. In addition,
Congress, the states and the regulatory
agencies could further regulate the
credit card industry in ways that make
it more difficult for the servicer to
collect payments on the receivables or
that reduce the finance charges and
other fees that the bank can charge on
to the accounts. Congress has, for
example, considered legislation that, if
enacted, would reduce the bank's ability
to impose overlimit fees. Any reduction
in the finance charges and other fees
would decrease the effective yield on
the accounts and could lead to a pay out
event that would result in the payment
of principal sooner than expected.
Changes in the Bankruptcy Code also
could affect the amount and timing of
collections on receivables.
See "Description of the Certificates and
the Pooling and Servicing Agreement--Pay
Out Events" in this prospectus.
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<PAGE>
The transferor has made representations
and warranties relating to the validity
and enforceability of the receivables
and compliance with laws. Subject to
conditions, the transferor must accept
reassignment of each receivable that
does not comply in all material respects
with applicable laws. However, we do not
anticipate that the trustee will make
any examination of the receivables or
the related records for the purpose of
determining the presence of defects,
compliance with representations and
warranties, or for any other purpose.
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" in this prospectus.
Receivables may also be written off as
uncollectible if a cardholder seeks
protection under federal or state
bankruptcy or debtor relief laws, and a
court reduces or discharges completely
the cardholder's obligations to repay
amounts due on his or her account. This
could reduce or eliminate available
funds to pay you if no funds are
available from credit enhancement or
other sources.
See "Description of the Certificates and
the Pooling and Servicing Agreement--
Allocation of Investor Default Amount;
Adjustment Amounts; Investor Charge
Offs" in this prospectus.
The bank may be named as a defendant in
a lawsuit or administrative action
challenging the terms of its credit card
programs or asserting violations of
consumer protection laws. An adverse
decision could require the bank to pay
refunds to cardholders and could require
changes to the terms of the accounts
that could adversely affect
certificateholders.
Principal Could be Paid Earlier or The receivables may be paid at any time.
Later Than Expected We cannot assure that additional
receivables will be generated or will be
generated at levels needed to maintain
the Trust. To prevent the early
amortization of the certificates, new
receivables must be generated and added
to the Trust.
A significant decline in the amount of
receivables generated could result in
the occurrence of a pay out event and
the commencement of the rapid
amortization period. If a pay out event
occurs, you could receive payment of
principal sooner than expected. Saks'
and the bank's ability to compete in the
retail and credit environment will
affect the amounts of receivables
generated and might also affect payment
patterns on the receivables. In
addition, changes in finance charges can
alter the monthly payment rates of
cardholders. A significant decrease in
monthly payment rates could slow the
return or accumulation of principal
during an amortization or accumulation
period and delay your receipt of
payments.
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<PAGE>
The pooling and servicing agreement
requires that the balance of principal
receivables in the Trust be maintained
at a specified level. If the level of
principal receivables falls below this
minimum level, the transferor is
required periodically to add additional
receivables through the designation of
additional accounts to the Trust. If the
transferor is unable to add additional
receivables when required, an early
amortization will occur.
See "Maturity Assumptions" in this
prospectus.
If You Hold Subordinated If a class is subordinated, principal
Certificates, You Will Be Paid Only payments on the subordinated class
After the Senior Certificates Have certificates generally will not begin
Been Paid until the senior class or classes are
repaid. Additionally, if collections of
finance charge receivables allocated to
a series are insufficient to cover
amounts due for that series' senior
certificates, the investor interest for
the subordinated certificates might be
reduced. This would reduce the amount of
the collections of finance charge
receivables available to the
subordinated certificates in future
periods and could cause possible delays
or reductions in principal and interest
payments on the subordinated
certificates. If receivables had to be
sold, for example, because a conservator
or receiver were appointed for the bank,
the net proceeds of that sale available
to pay principal would be paid first to
senior certificateholders and any
remaining net proceeds would be paid to
the subordinated certificateholders.
A Decline in the Index on Which Currently, all accounts have fixed
Variable Finance Charges Are Based interest rates. In the future, some
Could Reduce Collections accounts may have finance charges set at
a variable rate based on a designated
index such as the prime rate. A series
of certificates may bear interest either
at a fixed rate or at a floating rate
based on a different index. If the rate
charged on the accounts declines,
collections of finance charge
receivables may be reduced without a
corresponding reduction in the interest
payable on the certificates and other
amounts paid from collections of finance
charge receivables. Changes in the rates
charged on the accounts may be different
in terms of both timing and amount from
the changes in the rates payable on
variable rate certificates.
The Issuance of Additional Series The Trust is a master trust and has
Could Adversely Affect Payments on issued other series of certificates, and
Your Certificates and Could Reduce expects to issue additional series from
Your Voting Rights time to time. All of the certificates
are payable from receivables in the
Trust. The Trust may issue additional
series with terms that are different
from your series without your prior
review or consent. Before the Trust may
issue a new series, each rating agency
that has rated an outstanding series
must confirm that the issuance of the
new series will not result in a
reduction or withdrawal of its ratings
of existing series. However, the terms
of a new series could affect the timing
and amounts of payments on other
outstanding series. The owners of the
certificates of any new series will have
voting rights which will reduce the
percentage vote represented by your
series. The actions which may be
affected include the appointment of a
successor servicer following a servicer
default, and amending the pooling and
servicing agreement.
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<PAGE>
Credit Ratings Are Limited And Do Not Each credit rating assigned to
Guarantee Payments certificates is based on the rating
agency's evaluation of the receivables
in the Trust and the availability of any
credit enhancement. The ratings reflect
the rating agency's assessment only of
the likelihood that interest and
principal will be paid on certificates
as required under the pooling and
servicing agreement and series
supplements.
The ratings do not address:
. the likelihood that the principal or
interest on your certificates will be
prepaid, or that principal will be
paid on any particular date before
the termination date of your series;
. the possibility that your
certificates will be paid early or
the possibility of the imposition of
United States withholding tax for
non-U.S. certificateholders;
. the marketability or liquidity of
the certificates or any market price
for the certificates; or
. whether an investment in the
certificates is suitable for you.
A rating is not a recommendation to
purchase, hold or sell certificates of
any class or series and may be changed
or withdrawn at any time.
New Assets Could Erode Existing The transferor expects that it will
Trust Assets' Credit Quality periodically designate additional
accounts to the Trust and may, at times
be obligated to designate additional
accounts. Additional accounts may
include accounts which were originated
using criteria that are different from
the accounts currently designated to the
Trust. There are many reasons that could
cause such differences, including the
fact that the additional accounts were
originated at a different date or were
acquired from an institution which used
different credit card standards or
procedures, or represent a different
segment of Saks' customers or the bank's
credit card business. Consequently
future additional accounts may not have
the same credit quality as those
currently designated to the Trust.
In addition, the pooling and servicing
agreement allows the transferor to add
to the Trust participation interests in
other credit card receivables and
related collections. The addition of
participation interests and of
additional accounts will be subject to
the satisfaction of conditions described
in this prospectus under "Description of
the Certificates and the Pooling and
Servicing Agreement--Addition of
Accounts."
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<PAGE>
If the Transferor Exercises Its The applicable series supplement may
Repurchase Option, You Could Receive permit the transferor to repurchase the
an Early Return of the Principal Due remaining certificates of the series The
to You and Face A Reinvestment Risk appliwhen 10% or less of the original
principal amount of the series remains
outstanding. A repurchase may result in
an early return of your investment. A
premium will not be paid in the event of
the exercise of the repurchase option,
and you may not be able to invest the
early repayment amount at a similar rate
of return.
If the Transferor Elects to Treat a The pooling and servicing agreement
Portion of Principal Receivables as permits the transferor to elect to treat
Finance Charge Receivables, a percentage (a discount percentage) of
Principal Payments Could Be Delayed principal receivables as finance charge
receivables. Currently, 1% of principal
receivables are treated as finance
charge receivables. The ability of the
transferor to adjust the discount is
limited in certain circumstances. The
transferor must give prior written
notice to the servicer, the trustee and
the rating agencies and, on occasion, to
the holders of any unrated series. If
the discount percentage is reduced to
less than 1%, or increased to more that
3%, the rating agencies must confirm
that their ratings will not be affected
and other consents may be required. From
time to time, the transferor may decide,
without notice to or the consent of, any
holders of certificates, to increase,
reduce or discontinue the use of the
discount.
Any election by the transferor to
discount the principal receivables will
increase finance charge receivables and
reduce principal receivables. This may
delay principal payments on the
certificates. Discounting will also
reduce the transferor's interest in the
Trust, (a) increasing the likelihood
that the transferor may have to
designate more accounts to the Trust or
that a pay out event will occur based on
the transferor's interest or the amount
of principal receivables in the Trust,
but (b) reducing the possibility of a
pay out event based in part on the
amount of collections of finance charge
receivables. Any subsequent reduction or
withdrawal of the percentage would have
the opposite effect.
If Amounts In A Prefunding Account The transferor may, create a prefunding
Are Not Invested in Receivables You account for a new series and deposit
Could Receive An Early Return of into it a portion of the proceeds of
Principal and Face a Reinvestment that series. Funds in the prefunding
Risk account will be invested in additional
principal receivables. However, any
funds in the prefunding account not used
by a specific date must be paid to the
holders of the certificates of that
series. This will result in an early
return of principal. The transferor does
not expect to pay a prepayment penalty
or premium in such event. If you receive
an early payment you may not be able to
reinvest at a rate equivalent to the
rate you received on the certificates
that were paid early.
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<PAGE>
The Trustee's Records Will Not Unless stated otherwise in the
Recognize You as a Certificate Owner accompanying prospectus supplement, your
and You Will Not Have Direct certificates initially will be
Ownership Rights represented by one or more certificates
registered in the name of Cede, the
nominee for DTC, and will not be
registered in your name or the name of
your nominees. Unless definitive
certificates are issued for a series,
the trustee will not recognize you as a
certificateholder. As a result, you will
only be able to exercise the rights of
certificateholders indirectly through
DTC, Cedelbank or Euroclear and their
participating organizations and you will
only receive the reports and other
information provided in the pooling and
servicing agreement through DTC. You
may, however, request such reports and
information from the trustee, and the
monthly certificateholders' statements
will be filed with the SEC on Form 8-K.
You may not be able to pledge your
certificates to persons that do not
participate in the DTC system and you
may be unable to take other actions
because you will not have a physical
certificate.
See "Description of Certificates and the
Pooling and Servicing Agreement-Book-
Entry Registration" and "Definitive
Certificates" in this prospectus.
Increased Convenience Use of the Increased convenience use of credit
Bank's Credit Cards and Special cards affects the level of finance
Deferral Arrangements Could Result charge collections. Convenience use
in Principal Being Paid Earlier means that the cardholder pays his or
her account balance in full on or prior
to the due date, and therefore avoids
paying any finance charges on the
account. The bank also offers to waive
finance charges or to defer billing on
certain receivables to encourage the use
of its credit cards by Saks' customers.
This decreases the effective yield on
accounts and could cause an early
amortization of your certificates.
Convenience use is more common among
cardholders who do not pay an annual
fee.
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<PAGE>
If Sales at Saks' Stores Decline, a The bank's credit cards can only be used
Pay Out Event Could Occur to purchase merchandise and services
from Saks' retail businesses. The Trust
is therefore completely dependent on
sales by these businesses that are
charged to the accounts. The stores
compete with other retail outlets in
their respective geographic areas. Some
of these competitors are larger than
Saks and may be able to devote greater
financial and other resources to credit
card marketing and other competitive
activities.
The stores generally compete on the
basis of pricing, quality, merchandise
selection, customer service and
amenities, and store location and
design. The stores' success also depends
in part on their ability to anticipate
and respond to changing merchandise
trends and customer preferences.
Accordingly, any failure to anticipate
and respond to these changes in a timely
manner could materially adversely affect
sales, which in turn could materially
adversely affect the volume and
characteristics of the receivables and
Saks' business, financial condition or
results of operations. The stores may
not continue to expand or experience
sales growth at the same rate as in
prior years. In the event the stores do
not generate an adequate level of
receivables, a pay out event could
occur. In addition, the pooling and
servicing agreement does not prohibit
the stores from disposing of all or any
portion of its business or assets.
See "Credit Card Program" in the
prospectus supplement.
If Credit Losses Increase, a Payout Sales of Saks' merchandise and services
Event Could Occur are seasonal, with disproportionately
high levels during the Christmas
shopping season. Sales are generally
weakest during the summer months . The
outstanding amount of receivables
reflects this seasonality. Credit losses
typically lag credit sales by seven to
eight months reflecting Saks' write-off
policies. Therefore, the seasonal
increase in credit losses due to
Christmas sales coincides with the low
summer sales volumes. This raises the
ratio of credit losses to receivables
balances during the summer.
If these higher losses during the summer
months cannot be absorbed by the
allocations of finance charge
collections and credit enhancement and
new receivables from additional sales
and charges, a pay out event could
occur, and the principal on your
certificates may be returned earlier
than expected.
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<PAGE>
Use of Other Credit Cards and Forms Saks' retail businesses accept other
of Payment Could Reduce the credit cards in addition to the bank's
Receivables in the Trust credit cards, including American
Express(R), MasterCard(R), VISA(R) and
the Discover Card(R). Therefore, not all
Saks' credit sales will generate
receivables. The credit card market is
highly competitive and is experiencing
increased advertising, targeted
marketing and pricing competition, as
traditional and new credit card issuers
seek to enter the market or expand. The
use of incentive programs, for example,
awards for card usage, may also affect
the volumes charged on credit cards.
Customer purchases using the bank's
credit cards in the future may not
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.
The Servicer May Use the Collections If Saks, or one of its affiliates, is
For Its Own Benefit Which May Mean the servicer, collections on receivables
that the Trust Will Not Have a during periods when conditions specified
Perfected Interest in the Collections in the pooling and servicing agreement
are satisfied may be commingled and used
for the servicer's own benefit prior to
each distribution date. In the event of
the bankruptcy, insolvency, receivership
or conservatorship of any of the bank,
the servicer, the subservicers or the
transferor or, in certain circumstances,
the lapse of certain time periods as
provided under the UCC, the Trust may
not have a perfected interest in such
collections. During periods when Saks
fails to maintain its credit rating or
meet other criteria required by the
rating agencies, the servicer will be
required to deposit a portion of the
collections directly into a designated
account.
If Saks is Unable to Successfully Saks has consummated several
Integrate The Credit Card Operations acquisitions and may evaluate future
of Companies Acquired by Saks, the acquisition opportunities, including
Performance of the Bank's Credit acquisitions of other regional
Card Portfolio Could Be Affected department store chains and individual
stores or locations. Acquisitions by
Saks generally result in the transferor
designating additional accounts to the
Trust. Saks' 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 Saks has successfully integrated
the operations of acquired businesses
and managed the related portfolios of
proprietary credit cards in the past, it
may not be able to continue to do so.
The failure to successfully integrate
any such credit card operations could
have a material adverse effect on the
performance of the bank's credit card
portfolio and could result in payments
on certificates not being made when
expected.
See "Credit Card Program -- Retail
Businesses" in the prospectus
supplement.
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<PAGE>
Any Credit Enhancement Will Not Credit enhancement for any series will
Guarantee Payments of Principal and be limited and will be subject to
Interest reduction. If the amount available is
reduced to zero, or if the enhancement
provider fails or is unable to make the
necessary payments, you will bear
directly the credit and other risks
associated with your investment. The
Trust is only obligated to make payments
of principal and interest to
certificateholders from the receivables
in the Trust, and from enhancement, if
any, that is available. If any
certificates are not paid in full on a
timely basis, you have no rights against
the transferor, the servicer, the bank
or any of their affiliates with respect
to such payments.
See "Enhancement."
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<PAGE>
CREDIT CARD PROGRAM
On February 2, 1998, Saks (formerly named "Proffitt's, Inc.") acquired
National Bank of the Great Lakes (the "Bank"), a national credit card bank, as a
result of Saks' acquisition of Carson Pirie Scott & Co. ("CPS"). The Bank has
been issuing proprietary credit cards to CPS customers since February 1996. Upon
the acquisition of CPS, Saks contributed all of its proprietary credit card
accounts to the Bank.
On September 17, 1998, Proffitt's, Inc. acquired Saks Holdings, Inc. ("Saks
Holdings"). Saks Holdings owned the Saks Fifth Avenue, Off 5th, Bullock & Jones
and Folio businesses ("Saks Fifth Avenue"). Immediately following the
acquisition, Proffitt's changed its name to "Saks Incorporated" ("Saks") and
contributed all of Saks Fifth Avenue's proprietary credit card accounts to the
Bank.
On July 1, 1999, the Trust changed its name from the "Proffitt's Credit
Card Master Trust" to the "Saks Credit Card Master Trust", and a new Saks'
subsidiary, Saks Credit Corporation ("SCC" or the "Transferor"), succeeded
Proffitt's Credit Corporation as Transferor to the Trust. SCC also entered into
a new Receivables Purchase Agreement with the Bank that replaced PCC's previous
Receivables Purchase Agreement with the Bank. At the same time, the Transferor
designated to the Trust approximately two million accounts of Saks Fifth Avenue
customers and transferred to the Trust approximately $341 million of related
receivables.
The Bank issues proprietary credit cards to customers of the Saks Fifth
Avenue, Proffitt's, McRae's, Younkers, Herberger's, Parisian, Carson Pirie
Scott, Boston Store and Bergner's department stores (collectively, the
"Department Stores") for in-store, phone and catalog purchases. Saks expects
that the credit cards will be available for use in the future for internet and
similar electronic commerce transactions. Saks uses the Bank's proprietary
credit card programs to help stimulate sales, generate brand loyalty, and to
market Saks' merchandise and services. The Bank originates and administers each
program, performing some functions directly and others by contracts with
affiliates and third parties, under standardized guidelines that maintain
control over the credit underwriting and collections processes. The Bank's
ownership of the credit card accounts creates efficiencies and cost savings, and
increases revenue by, among other things (i) allowing for greater
standardization of terms for all of the Bank's credit card accounts, (ii)
permitting the assessment of uniform interest charges (including other charges
and fees), and (iii) allowing for future flexibility and potential income
generation through various other programs.
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
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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 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 other charges, including credit
insurance.
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 are acquired or operated by
Saks) 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 accompanying 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 accompanying
Prospectus Supplement. The accompanying 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
that are
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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.
The Principal Receivables allocated to be paid to Certificateholders or the
holders of any specified Class thereof may not 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 payment rate assumptions for any Series may not prove to be
correct. The accompanying Prospectus Supplement will provide certain historical
data relating to payments by cardholders, total charge offs and other related
information relating to the Trust Portfolio. Future events may not 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. 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,
may be different when compared to any historical experience set forth in the
accompanying 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 Saks and its subsidiaries. See "Risk Factors -- If Sales At Saks
Stores Decline, a Pay Out Event Could Occur" and "-- Use of Other Credit Cards
and Other Forms of Payment Could Reduce the Receivables in the Trust."
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, and
in each case the actual number of months for the period beginning on the date of
issuance of such Series of Certificates to the final Distribution Date with
respect to the Certificates may not equal the expected number of months for the
period. 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, and consumer spending and borrowing
patterns. Accordingly, future cardholder and monthly payment rate experience may
be different when compared 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 the purchase of Receivables from the
Bank on a daily basis pursuant to the Receivables Purchase Agreement and the
repayment of other Series.
SAKS INCORPORATED
Saks is a national retailer that, as of the date of this prospectus,
operates over 350 department stores in 38 states. Saks is the fourth largest
traditional department store company in the United States.
Saks' stores are principally anchor department stores in leading regional
or community malls and typically offer a broad selection of fashion apparel,
shoes, accessories, jewelry, cosmetics, decorative home furnishings, and, in
selected locations, furniture. Saks' stores operate under the following trade
names: Saks Fifth Avenue, Younkers, Off 5th, Parisian, Herberger's, Carson
Pirie Scott, McRae's, Bergner's, Boston Store, and Bullock & Jones. In addition,
Saks operates the Folio and Bullock & Jones catalog businesses.
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Saks was incorporated under the laws of the State of Tennessee in 1919.
Saks' principal executive offices are located at 750 Lakeshore Parkway,
Birmingham, Alabama 35211, and its telephone number is (205) 940-4000.
SAKS CREDIT CORPORATION
SCC was incorporated in Delaware in June 1999, and is wholly owned,
directly and indirectly, by Saks. SCC 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. The
principal executive offices of SCC are located at 140 Industrial Drive,
Elmhurst, Illinois 60126. Its telephone number is (630) 516-8080.
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. 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, 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 accompanying
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, 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
accompanying 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 accompanying
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 accompanying Prospectus Supplement
to Certificateholders in whose names the Certificates were registered on the
Record Dates specified in the accompanying Prospectus Supplement. Interest will
be distributed to Certificateholders in the amounts, for the periods and on the
dates specified in the accompanying Prospectus Supplement.
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 accompanying 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
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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 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 Agreement, 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 accompanying 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 accompanying 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 accompanying Prospectus Supplement, application will
be made to list the Offered Certificates of such Series, or all or a portion of
any Class thereof, on the Luxembourg Stock Exchange or any other specified
exchange.
Book-Entry Registration
Unless otherwise specified in the accompanying 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
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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 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.
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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. 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
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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."
DTC has advised us that its management is aware that some computer
applications, systems, and the like for processing data that are dependent upon
calendar dates, including dates before, on and after January 1, 2000, may
encounter Year 2000 problems. DTC has informed its participants and other
members of the financial community that it has developed and is implementing a
program so that its systems, as these relate to the timely payment of
distributions (including principal and interest payments) to security holders,
book-entry deliveries and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent upon
other parties, including but not limited to issuers and their agents, as well as
third party vendors from whom DTC licenses software and hardware, and third
party vendors on whom DTC relies for information or the provision of services,
including telecommunication and electrical utility service providers, among
others. DTC has informed its participants and other members of the financial
community that it is contacting (and will continue to contact) third party
vendors from whom DTC acquires services to:
. impress upon them the importance of such services being Year 2000
compliant; and
. determine the extent of their efforts for Year 2000 remediation
(and, as appropriate, testing) of their services.
In addition, DTC is in the process of developing contingency plans it deems
appropriate. According to DTC, the foregoing information with respect to DTC
has been provided to its participants and other members of the financial
community for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. None of the
Transferor, the Bank, Saks or any of their affiliates makes any representation
as to the accuracy or completeness of such information.
Definitive Certificates
Unless otherwise specified in the accompanying 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 accompanying 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 is currently 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
accompanying Prospectus Supplement. Interest will be distributed to
Certificateholders on the Distribution Dates specified in the accompanying
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 accompanying 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 accompanying 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 accompanying
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 accompanying 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
accompanying 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 accompanying 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 accompanying 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
accompanying 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 accompanying
Prospectus Supplement and allocated to such Series or Class and from certain
other sources specified in the accompanying Prospectus Supplement. In the case
of a Series with more than one Class of
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Certificates, the Certificateholders of one or more Classes may receive payments
of principal at different times. The accompanying 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 accompanying 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 accompanying 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 to be 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 and 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. See
"Risk Factors -- Consumer Protection Laws May Adversely Affect Collections and
Yield Maintenance and Lead to an Early Pay Out or Inability to Pay" and "Certain
Legal Aspects of the Receivables."
Exchanges
The Pooling and Servicing Agreement authorizes 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 accompanying 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 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
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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 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 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
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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 accompanying 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 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
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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 Saks 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 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, 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
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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 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
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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 necessarily 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. 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 Discount Percentage as of September 1, 1999 was fixed
at 1%. 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
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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 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 affiliate McRae's, Inc., as a
Subservicer.
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
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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.
Funding Period
For any Series of Certificates, the accompanying 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 accompanying 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 accompanying 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 accompanying Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the accompanying Prospectus Supplement See "Risk Factors -- If
Amounts In a Prefunding Account Are Not Invested in Receivables You Could
Receive An Early Return of Principal and Face a Reinvestment Risk."
If so specified in the accompanying 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 accompanying 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
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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 accompanying 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").
Application of Collections
Unless otherwise specified in a Series Supplement and the accompanying
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 accompanying Prospectus
Supplement) following the date of processing. As long as Saks or an affiliate
of Saks is the Servicer and no Pay Out Event relating to a Servicer Default
shall have occurred and be continuing, and either, (i) Saks 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
accompanying Prospectus Supplement or (ii) Saks 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 Saks
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 accompanying 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 accompanying 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 accompanying 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 accompanying Prospectus Supplement will be
allocated and distributed to Certificateholders or deposited in the Principal
Account as described in the accompanying 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
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Minimum Transferor Amount, or to other amortizing Series, as described in the
accompanying 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 accompanying
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 accompanying Prospectus
Supplement.
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
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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 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.
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. However, the terms of any Paired Series may 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 accompanying Prospectus Supplement. If so described in the
accompanying 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 accompanying 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
accompanying Prospectus
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Supplement may provide that all or a portion 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
accompanying 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 accompanying 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 accompanying 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 accompanying Prospectus Supplement.
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 or Permitted Investments, or both,
sufficient to discharge and pay all
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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 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
accompanying 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 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).
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Pay Out Events
Unless otherwise specified in the accompanying Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the accompanying 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 Saks 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
Saks 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 accompanying 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 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 accompanying Prospectus Supplement.
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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 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
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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 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.
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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, 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, the Servicer will cause a firm of independent public
accountants to furnish a report covering 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 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.
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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 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).
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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 and the Servicer and 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.
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.
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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, the Bank 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 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 accompanying Prospectus Supplement, or
any combination of the foregoing. If so specified in the accompanying
Prospectus Supplement, any form of Enhancement may be structured so as to be
available for the benefit of more than one Class to the extent described
therein.
Unless otherwise specified in the accompanying 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 accompanying
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 accompanying 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'
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surplus, if applicable, and other appropriate financial information as of the
date specified in the Prospectus Supplement. If so specified in the accompanying
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 accompanying Prospectus Supplement, one or more
Classes of any Series will be subordinated as described in the accompanying
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 accompanying Prospectus
Supplement. If so specified in the accompanying Prospectus Supplement,
subordination may apply only in the event of certain types of losses not covered
by another Enhancement. The accompanying 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 accompanying
Prospectus Supplement will specify the manner and conditions for applying such a
cross-support feature.
Cash Collateral Guaranty or Account
If so specified in the accompanying 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 accompanying Prospectus
Supplement. The accompanying 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 accompanying 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 accompanying 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 accompanying
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 accompanying Prospectus Supplement.
Surety Bond or Insurance Policy
If so specified in the accompanying 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 accompanying Prospectus Supplement.
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If so specified in the accompanying 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 accompanying
Prospectus Supplement.
Spread Account
If so specified in the accompanying 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 accompanying Prospectus Supplement.
Reserve Account
If so specified in the accompanying 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 accompanying 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 accompanying Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
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 sale 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.
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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.
If the Transferor were to become a debtor in a bankruptcy case, a receiver
or conservator were 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 director. 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 Saks 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 Saks 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 at least one
member of the Board of Directors of the Transferor will be an individual who is
not affiliated with Saks or any of its affiliates, except as a member 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
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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 director, (ii)
subject to certain assumptions (including the assumption that separateness and
corporate formalities are observed by Saks and the Transferor), the assets and
liabilities of the Transferor would not be substantively consolidated with the
assets and liabilities of Saks in the event of an application for relief under
the Bankruptcy Code with respect to Saks, and (iii) the sale and transfer of
Receivables by the Bank to the Transferor constitutes a valid sale and transfer
and, therefore, such Receivables and the proceeds thereof should not be property
of the Bank under the Federal Deposit Insurance Act ("FDIA"), as currently
interpreted. Such opinions are based on the law as it exists at the date hereof
and is not binding on any court. A court may reach a different conclusion. See
"--Certain Matters Relating to Receivership and Conservatorship of Banks."
If Saks was to become a debtor in a bankruptcy case and a creditor or a
bankruptcy trustee of such debtor or such debtor itself, as debtor-in-
possession, were to take the position that the Transferor should be
substantively consolidated with Saks and/or its other affiliates, and 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 a 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 Certificates could occur and Certificateholders
could experience losses in their investment in the 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 Saks, 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.
Certain Matters Relating to Receivership and Conservatorship of Banks
The FDIA , as amended by the Financial Institutions Reform, Recovery and
Enforcement Act ("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 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.
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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.
Proposed FDIC Policy
The FDIC proposed a regulation on August 31, 1999 with respect to the
treatment of securitizations and loan participations by the FDIC in its role as
conservator or receiver of insured depository institutions. The Federal Deposit
Insurance Act, provides that the FDIC, when acting as conservator or receiver of
an insured depository institution, may repudiate any contract entered into by
such institution, including agreements entered into in connection with
securitizations. Subject to certain conditions, the proposed regulation
specifies that the FDIC, as conservator or receiver of an insured depository
institution, will not, in the exercise of its authority to repudiate or
disaffirm contracts, attempt to reclaim, recover, or recharacterize as property
of the institution, financial assets transferred under specified circumstances.
The assets must have been transferred for adequate consideration, the
documentation effecting the transfer must reflect the parties intent to treat
the transfer as a sale for accounting purposes, and the transfer must not have
been made in contemplation of insolvency, or with the intent to hinder, delay or
defraud the depository institution's creditors.
The FDIC's proposed regulation states that it will not be construed as
waiving, limiting or otherwise affecting the FDIC's power, as conservator or
receiver, to repudiate or disaffirm any agreement imposing continuing duties or
obligations upon the depository institution in conservatorship or receivership.
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 Acts. 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."
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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."
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 of 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
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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.
Characterization of the Certificates as Indebtedness
Unless otherwise specified in the accompanying 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 the IRS may be able
to 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 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 SCC 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 accompanying 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, the Trust could 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 accompanying
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 "investment income"
for purposes of certain limitations of the Code concerning the deductibility of
investment interest expense.
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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 IRS Form W-8ECI, 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 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 or IRS Form W-8BEN signed
under penalties of perjury by the Certificate Owner, stating that the
Certificate Owner is not a U.S.
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Certificate Owner and providing such Certificate Owner's name and address or
(ii) IRS Form 1001 or IRS Form W-8BEN, 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") 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,
1999. 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 hold true.
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 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.
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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. That description, however, pertains
only to states wherein certain activities may take place on behalf of the Trust.
The tax consequences arising to the Certificateholders under the laws of other
state and local 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 (e.g., collective trust funds and certain
insurance company general accounts) 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.
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 regulation (the "Plan Asset 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 Plan Asset Regulation is applicable to the
Certificates of a Series and the Trust.
The Plan Asset 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 Plan Asset Regulation, the Plan Asset
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 Plan
Asset 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
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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. The Certificates will not be registered under the Exchange Act and the
100 investor requirement may not be satisfied.
In addition, the Plan Asset 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.
For purposes of this exception, "benefit plan investors" includes benefit plans
not subject to ERISA or Section 4975 of ERISA (such as governmental, church and
foreign plans) and collective investment vehicles that are deemed to hold "plan
assets" of a Benefit Plan. 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
Plan Asset Regulations) is disregarded. Thus, if such persons purchase
Certificates, the 25% threshold will decrease. Ownership of Certificates by
benefit plan investors may therefore fall below the 25% threshold. No monitoring
or other measures will be taken with respect to the satisfaction of the
conditions to this exception.
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). It is possible that these exemptions, even if all of
the conditions specified therein are satisfied, or any other exemption may not
apply to all transactions involving the Trust's assets.
Because of ERISA's prohibitions and those of Section 4975 of the Code, the
Certificates may not be purchased or held by any Benefit Plan, any entity whose
underlying assets include "plan assets" by reason of any Benefit Plan's
investment in the entity (a "Benefit Plan Entity") or any other person investing
plan assets of any Benefit Plan, unless such purchase or holding is covered by
the exemptive relief provided by PTE 84-14, 91-38, 90-1, 95-60 or 96-23 or
another applicable exemption. If a purchaser or holder of the Certificates that
is a Benefit Plan or a Benefit Plan Entity elects to rely on an exemption other
than PTE 84-14, 91-38, 90-1, 95-60 or 96-23, the Transferor may require a
satisfactory opinion of counsel or other evidence with respect to the
availability of such exemption for such purchase and holding. Any purchaser or
holder of the Certificates that is a Benefit Plan or a Benefit Plan Entity or is
purchasing such securities on behalf of or with plan assets, will be deemed to
have represented by its purchase and holding thereof that (a) the purchase and
holding of the Certificates is covered by the exemptive relief provided by PTE
84-14, 91-38, 90-1, 95-60 or 96-23 or another applicable exemption, and (b) the
Transferor is not a "fiduciary," within the meaning of Section 3921) of ERISA
and the regulations thereunder, with respect to such person's interest in the
Certificates.
Governmental plans and certain church plans are not subject to ERISA or to
the prohibited transaction provisions of Section 4975 of the Code. However,
state laws or regulations governing the investment and management of the assets
of such plans may contain fiduciary and prohibited transaction provisions
similar to those
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under ERISA and the Code discussed above. Accordingly, fiduciaries of
governmental and church plans should consider the impact of their respective
state laws on investments in the Certificates and the considerations discussed
above to the extent applicable.
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.
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 accompanying
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 accompanying 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 accompanying Prospectus
Supplement. Unless
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otherwise indicated in the accompanying 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 Saks 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 will be passed upon by Charles J. Hansen, Esq.,
Senior Vice President and Associate General Counsel of Saks and certain other
matters, including the federal income tax consequences of such issuance, will be
passed upon for Saks 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
accompanying Prospectus Supplement.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Additional Account Closing Date........................................... 28
Additional Account Cut-Off Date........................................... 27
Adjusted Investor Amount.................................................. 36
Adjustment................................................................ 36
Adjustment Payment Obligation............................................. 36
Aggregate Automatic Addition Limit........................................ 30
Aggregate Investor Amount................................................. 27
Aggregate Investor Percentage............................................. 33
Bank...................................................................... 16
Benefit Plan Entity....................................................... 56
Benefit Plans............................................................. 55
Cash Collateral Account................................................... 45
Cash Collateral Guaranty.................................................. 45
Cedel Participants........................................................ 22
Code...................................................................... 50
Cooperative............................................................... 22
CPS....................................................................... 16
Creation Date............................................................. 27
Default Amount............................................................ 35
Defaulted Receivables..................................................... 35
Definitive Certificates................................................... 23
Department Stores......................................................... 16
Depositaries.............................................................. 20
Depositary................................................................ 20
Depository................................................................ 20
Discount Option Receivable Collections.................................... 31
Discount Option Receivables............................................... 30
Discount Percentage....................................................... 30
Dissolution Event......................................................... 38
DOL....................................................................... 55
DTC....................................................................... I-1
DTC Rules................................................................. 21
Eligible Account.......................................................... 17
Eligible Originator....................................................... 17
Eligible Receivable....................................................... 16
Enhancement Investor Amount............................................... 45
Enhancement Provider...................................................... 30
Euroclear................................................................. 22
Euroclear Operator........................................................ 22
Euroclear Participants.................................................... 22
Euroclear System.......................................................... 22
Excess Funding Account.................................................... 34
Excess Spread............................................................. 36
Exchange Date............................................................. 26
Exchange Notice........................................................... 26
FASIT..................................................................... 43
FDIA...................................................................... 48
Final Regulations......................................................... 54
Final Termination Date.................................................... 37
FIRREA.................................................................... 48
Global Securities......................................................... I-1
Indirect Participants..................................................... 21
Ineligible Receivable..................................................... 27
Interest Funding Account.................................................. 24
Investor Charge Off....................................................... 36
Investor Default Amount................................................... 35
IRS....................................................................... 51
L/C Bank.................................................................. 45
Minimum Aggregate Principal Receivables................................... 29
Minimum Transferor Amount................................................. 36
Minimum Transferor Interest Percentage.................................... 36
Monthly Servicer Report................................................... 41
Monthly Servicing Fee..................................................... 38
Moody's................................................................... 31
non-U.S. Certificate Owner................................................ 51
OID....................................................................... 50
OID Regulations........................................................... 50
Participation Agreement................................................... 29
Participations............................................................ 29
Pay Out Event............................................................. 38
Payment Date Statement.................................................... 41
Permitted Investments..................................................... 31
Plan Asset Regulation..................................................... 55
Principal Shortfalls...................................................... 34
Qualified Institution..................................................... 31
Rating Agency Condition................................................... 39
Receivables............................................................... 20
Recoveries................................................................ 35
Reserve Account........................................................... 46
RTC....................................................................... 48
Saks...................................................................... 16
Saks Fifth Avenue......................................................... 16
Saks Holdings............................................................. 16
SCC....................................................................... 16
Series.................................................................... I-1
Series Adjustment Amount.................................................. 36
Service Transfer.......................................................... 39
Servicer Default.......................................................... 40
Servicing Fee Percentage.................................................. 39
Shared Excess Finance Charge Collections.................................. 35
Shared Principal Collections.............................................. 34
Shortfall Amount.......................................................... 34
Special Tax Counsel....................................................... 51
Spread Account............................................................ 46
Standard & Poor's......................................................... 31
Stated Series Termination Date............................................ 37
Terms and Conditions...................................................... 22
</TABLE>
-59-
<PAGE>
<TABLE>
<S> <C>
Transfer Agent and Registrar.............................................. 24
Transferor................................................................ 16
Transferor Percentage..................................................... 19
U.S. Certificate Owner.................................................... 50
U.S. Person............................................................... I-3
</TABLE>
-60-
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Saks 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.
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.
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<PAGE>
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 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;
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<PAGE>
(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.
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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<PAGE>
Saks Credit Card Master Trust
Issuer
Saks Credit Corporation
Transferor
Saks Incorporated
Servicer
Series 20__-_
$_________ Class A [Fixed] [Floating] Rate Asset Backed Certificates
$_________ Class B [Fixed] [Floating] Rate Asset Backed Certificates
----------------
Prospectus Supplement
Dated ______________, 20__
----------------
Underwriters of the Class A Certificates
Underwriter of the Class B Certificates
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information.
We are not offering the certificates in any jurisdiction where the offer is
not permitted.
The delivery of this prospectus supplement and the accompanying prospectus
at any time does not imply that the information in this prospectus supplement
and the accompanying prospectus is correct as of any date after the dates on
their covers or after any other specified dates. We note that if any material
change occurs while this prospectus supplement and the accompanying prospectus
are required by law to be delivered, we will update the relevant information in
this prospectus supplement and the accompanying prospectus to incorporate the
material change.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the certificates and with respect to their unsold allotments or
subscriptions. In addition all dealers selling the certificates will deliver a
prospectus supplement and prospectus until ________________, 20__.
<PAGE>
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...................... $*
Legal Fees and Expenses.................................................. *
Accounting Fees and Expenses............................................. *
Rating Agency Fees....................................................... *
Printing and Engraving................................................... *
Blue Sky Fees and Expenses............................................... *
Miscellaneous............................................................ *
Total............................................................. *
______
* To be filed by amendment or on Form 8-K and incorporated herein by reference.
Item 15. Indemnification of Directors and Officers
The Certificate of Incorporation of Saks Credit Corporation include the
following provisions regarding indemnification:
6.01 Indemnification.
(1) Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, arbitral, governmental, administrative, investigative or
otherwise (hereinafter, a "Proceeding"), by reason of the fact that he or
she, or a Person of whom he or she is the legal representative, is or was a
director, officer or employee of the Corporation or is or was serving at
the request of the Corporation as a director, officer or employee of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official
capacity as a director, officer or employee or in any other capacity while
serving as a director, officer or employee, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expenses, liability and loss (including penalties,
fines, judgments, reasonable attorneys' fees and charges, amounts paid or
to be paid in settlement and excise taxes imposed on fiduciaries with
respect to (i) employee benefit plans, (ii) charitable organizations or
(iii) similar matters) reasonably incurred or suffered by such person in
connection therewith, and such indemnification shall continue as to a
person who has ceased to be a director, officer or employee and shall inure
to the benefit of his or her heirs, executors and administrators; provided,
however, that the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person (other than pursuant to subsection 6.01(2)) only if such
proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this subsection
6.01(1) shall be a contract right and shall include the right to be paid by
the Corporation the reasonable expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if
the Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and in any other
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<PAGE>
capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding shall be
made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not
entitled to be indemnified under this subsection 6.01(1) or otherwise.
(2) If a claim which the Corporation is obligated to pay under
subsection 6.01(1) is not paid in full by the Corporation within 60 days
after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the reasonable expense of
prosecuting such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which
make it permissible under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount claims, but the burden
of proving such defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors, independent legal
counsel or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper
in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel or its shareholders) that the claimant has not
met such applicable standard of conduct, shall be a defense to the action
or create a presumption that the claimant has not met the applicable
standard of conduct.
(3) The provisions of this Section 6.01 shall cover claims,
actions, suits and proceedings, civil or criminal, whether now pending or
hereafter commenced, and shall be retroactive to cover acts or omissions or
alleged acts or omissions which heretofore have taken place. If any part of
this Section 6.01 should be found to be invalid or ineffective in any
proceeding, the validity and effectiveness of the remaining provisions
shall not be affected.
(4) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Section 6.01 are non-exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of
this Certificate of Incorporation, or any Corporation By-Law, insurance
policy or agreement, vote of shareholders or disinterested directors or
otherwise.
(5) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation Law.
(6) The Corporation may, to the extent authorized from time to
time by the Board of Directors, grant rights to indemnification, and rights
to be paid by the Corporation the expenses incurred in defending any
proceeding in advance of its final disposition, to any agent of the
Corporation to the fullest extent of the provisions of this Section 6.01
with respect to the indemnification and advancement of expenses of
directors, officers and employees of the Corporation.
6.02 Limitation of Monetary Damages. A director shall not be
personally liable to the Corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director, except this provision shall not
eliminate liability of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its shareholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payment of dividend or unlawful stock
II-2
<PAGE>
purchase or redemption under Delaware General Corporation Law, Section 174, or
(iv) for any transaction from which the director derived an improper personal
benefit.
Any repeal or modification of this Section 6.02 by the Corporation's
shareholders shall not adversely affect any right of protection of a director of
the Corporation existing at the time of such repeal or modification with respect
to acts or omissions occurring prior to such repeal or modification. If the
Delaware General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Delaware General Corporation Law.
6.03 Severability. In the event that any of the provisions of this
Article Six (including any provision within a single sentence) are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable,
the remaining provisions are severable and shall remain enforceable to the
fullest extent permitted by law.
Saks Incorporated 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 independent director.
Item 16. Exhibits and Financial Statements
(a) Exhibits
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of Saks Credit Corporation (incorporated
by reference to Exhibit 3.1 to the Registrant's Current Report on
Form 8-K filed on July 2, 1999.
3.2 -- Bylaws of Saks Credit Corporation (incorporated by reference to
Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on
July 2, 1999.
4.1 -- Master Pooling and Servicing Agreement dated as of August 21, 1997,
by and among Saks Credit Corporation (as successor to Proffitt's
Credit Corporation), as Transferor, Saks Incorporated, as Servicer,
and Norwest Bank Minnesota, National Association, as Trustee, as
amended by Amendment No. 1 dated as of February 2, 1998, and
Amendment No. 2 dated as of July 1, 1999 (incorporated by reference
to Exhibit 99.2 to the Registrant's Current Report on Form 8-K
filed on September 23, 1997, Exhibit 99.2 to the Registrant's
Current Report on Form 8-K filed on February 18, 1998 and Exhibit
99.1 to the Registrant's Current Report on Form 8-K filed on July
2, 1999).
4.3 -- Receivables Purchase Agreement dated as of July 1, 1999 by and
among National Bank of the Great Lakes, as Seller, Saks Credit
Corporation, as Purchaser, and Saks Incorporated, as Servicer
(incorporated by reference to Exhibit 99.2 to the Registrant's
Current Report on Form 8-K filed on July 2, 1999.
5.1 -- Opinion and consent of Charles J. Hansen, Esq. 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.
________
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<PAGE>
* To be filed by amendment or on Form 8-K and incorporated herein by reference.
(b) Financial Statements and Schedules
All financial schedules of Saks Credit Corporation, Saks Incorporated 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;
(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
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<PAGE>
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-5
<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 Pre-Effective
Amendment No. 1 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Elmhurst, State of
Illinois, on this 28th day of January, 2000.
SAKS CREDIT CORPORATION
By: /s/ Charles J. Hansen
-----------------------
Name: Charles J. Hansen
Title: Senior Vice President
POWER OF ATTORNEY
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 January 28, 2000.
<TABLE>
<CAPTION>
Signatures Title
- ---------- -----
<S> <C>
/s/ * President and Director
- ----------------------- (Principal Executive Officer)
Douglas E. Coltharp
/s/ * Senior Vice President, Treasurer, Assistant Secretary and Director
- ----------------------- (Principal Financial Officer)
James S. Scully
/s/ * Senior Vice President, Assistant Secretary and Director
- ----------------------- (Principal Accounting Officer)
Donald E. Wright
/s/ * Director
- -----------------------
Charles J. Hansen
/s/ * Director
- -----------------------
Andrew L. Stidd
* By: /s/ Charles J. Hansen
----------------------
Charles J. Hansen
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
S-K
Reference
Number Description
- ------ -----------
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of Saks Credit Corporation (incorporated
by reference to Exhibit 3.1 to the Registrant's Current Report on
Form 8-K filed on July 2, 1999).
3.2 -- Bylaws of Saks Credit Corporation (incorporated by reference to
Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed
on July 2, 1999).
4.1 -- Master Pooling and Servicing Agreement dated as of August 21,
1997, by and among Saks Credit Corporation (as successor to
Proffitt's Credit Corporation), as Transferor, Saks Incorporated,
as Servicer, and Norwest Bank Minnesota, National Association, as
Trustee, as amended by Amendment No. 1 dated as of February 2,
1998, and Amendment No. 2 dated as of July 1, 1999 (incorporated
by reference to Exhibit 99.2 to the Registrant's Current Report on
Form 8-K filed on September 23, 1997, Exhibit 99.2 to the
Registrant's Current Report on Form 8-K filed on February 18, 1998
and Exhibit 99.1 to the Registrant's Current Report on Form 8-K
filed on July 2, 1999).
4.2 -- Receivables Purchase Agreement dated as of July 1, 1999 by and
among National Bank of the Great Lakes, as Seller, Saks Credit
Corporation, as Purchaser, and Saks Incorporated, as Servicer
(incorporated by reference to Exhibit 99.2 to the Registrant's
Current Report on Form 8-K filed on July 2, 1999).
5.1 -- Opinion and consent of Charles J. Hansen, Esq. 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 (included herein on the signature page).
________
* To be filed by amendment or on Form 8-K and incorporated herein by
reference.
