AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1998
REGISTRATION NO. 333-29495
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 6
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PARTNERS FIRST RECEIVABLES FUNDING, LLC
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
PARTNERS FIRST CREDIT CARD MASTER TRUST
(Issuer with respect to the Securities)
DELAWARE 52-2072056
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
PARTNERS FIRST RECEIVABLES FUNDING, LLC
900 ELKRIDGE LANDING ROAD
SUITE 301
LINTHICUM, MARYLAND 21090-2925
(410) 855-8600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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TERENCE F. BROWNE, ESQ.
GENERAL COUNSEL
PARTNERS FIRST HOLDINGS, LLC
900 ELKRIDGE LANDING ROAD
SUITE 300
LINTHICUM, MARYLAND 21090-2925
(410) 865-8700
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
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COPIES TO:
ANDREW M. FAULKNER, ESQ. EDWARD M. DESEAR, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP ORRICK, HERRINGTON & SUTCLIFFE LLP
919 THIRD AVENUE 666 FIFTH AVENUE
NEW YORK, NEW YORK 10022-3897 NEW YORK, NEW YORK 10103
(212) 735-2853 (212) 506-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective as determined
by market conditions.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
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. |_|
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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. |_|
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PROPOSED MAXIMUM AMOUNT OF
REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
- ------------------- ------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Asset Backed
Securities...... $1,000,000 100% $1,000,000 $303.03(2)
</TABLE>
- -----------------
(1) Estimated solely for purpose of calculating the registration fee.
(2) $303.03 of which was previously paid in connection with the original
filing of the Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL 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.
============================================================================
[FLAG]
The 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.
SUBJECT TO COMPLETION, DATED MAY 20, 1998
PROSPECTUS
PARTNERS FIRST CREDIT CARD MASTER TRUST
ASSET BACKED SECURITIES
PARTNERS FIRST RECEIVABLES FUNDING, LLC
TRANSFEROR
PARTNERS FIRST HOLDINGS, LLC
SERVICER
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Partners First Receivables Funding, LLC ("PFRF"), as transferor (in
such capacity, the "Transferor"), may sell from time to time one or more
series (each, a "Series") of asset backed securities (the "Securities")
evidencing undivided interests in certain assets of the Partners First
Credit Card Master Trust (the "Trust"), created pursuant to a pooling and
servicing agreement (as may be amended from time to time, the "Pooling and
Servicing Agreement") among the Transferor, Partners First Holdings, LLC,
as Servicer (in such capacity, the "Servicer"), and The Bank of New York,
as trustee (the "Trustee"). The property of the Trust includes, among other
things, the receivables (the "Receivables") that are generated from time to
time in a portfolio of consumer revolving credit card accounts (the
"Accounts"), collections thereon, funds on deposit in certain accounts of
the Trust, any Participation Interests (as defined herein) included in the
Trust, collections thereon and any Credit Enhancement (as defined herein)
with respect to any particular Series or Class as more fully described
herein and, with respect to a Series offered hereby, in the related
Prospectus Supplement (as defined below). The Receivables in the Accounts
are sold to PFRF and then transferred by PFRF to the Trust as more fully
described herein. All of the Receivables in the Trust on the date hereof
were originated or acquired by BankBoston (NH), National Association
("BKB") and Harris Trust and Savings Bank ("Harris"). As more fully set
forth herein, it is anticipated that in the future, Receivables originated
by financial institutions other than BKB and Harris may be included in the
Trust, upon satisfaction of certain conditions, including the Rating Agency
Condition. Each of BKB and Harris has retained , and any such other
financial institution may retain, the receivables in certain of their
respective accounts.
Securities will be sold from time to time under this Prospectus on
terms determined for each Series at the time of the sale and described in
the related prospectus supplement (each, a "Prospectus Supplement"). Each
Series will consist of one or more classes of Securities (each, a "Class").
Each Security will represent an undivided interest in certain assets of the
Trust and the interest of the holders of each Class or Series will include
the right to receive a varying percentage of each month's collections with
respect to the Receivables at the times, in the manner and to the extent
described herein and, with respect to any Series offered hereby, in the
related Prospectus Supplement. Interest and principal payments with respect
to each Series offered hereby will be made as specified in the related
Prospectus Supplement. A Series offered hereby (or any Class within such
Series) may be entitled to the benefits of a cash collateral account or
guaranty, spread account, yield supplement account, collateral interest,
letter of credit, surety bond, insurance policy or other form of credit
enhancement as specified in the Prospectus Supplement relating to such
Series. In addition, any Series offered hereby may include one or more
Classes which are subordinated in right and priority of payment to one or
more other Classes of such Series or another Series, in each case to the
extent described in the related Prospectus Supplement. Each Series of
Securities or Class offered hereby will be rated in one of the four highest
categories by at least one nationally recognized statistical rating
organization.
POTENTIAL INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH IN "RISK
FACTORS" COMMENCING ON PAGE 29 HEREIN.
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THE SECURITIES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF THE TRANSFEROR, THE
SERVICER OR ANY AFFILIATE OF EITHER OF THEM. A SECURITY IS NOT A DEPOSIT
AND NEITHER THE SECURITIES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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Securities may be sold by the Transferor directly to purchasers,
through agents designated from time to time, through underwriting
syndicates led by one or more managing underwriters or through one or more
underwriters acting alone. If underwriters or agents are involved in the
offering of the Securities of any Series offered hereby, the name of the
managing underwriter or underwriters or agents will be set forth in the
related Prospectus Supplement. If an underwriter, agent or dealer is
involved in the offering of the Securities of any Series offered hereby,
the underwriter's discount, agent's commission or dealer's purchase price
will be set forth in, or may be calculated from, the related Prospectus
Supplement, and the net proceeds to the Transferor from such offering will
be the public offering price of such Securities less such discount in the
case of an underwriter, the purchase price of such Securities less such
commission in the case of an agent or the purchase price of such Securities
in the case of a dealer, and less, in each case, the other expenses of the
Transferor associated with the issuance and distribution of such
Securities. See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES OF
ANY SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
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THE DATE OF THIS PROSPECTUS IS _____ __, 1998
TABLE OF CONTENTS
Page
PROSPECTUS SUPPLEMENT.....................................................6
REPORTS TO SECURITYHOLDERS................................................6
AVAILABLE INFORMATION.....................................................6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...........................6
PROSPECTUS SUMMARY........................................................8
RISK FACTORS.............................................................29
USE OF PROCEEDS..........................................................39
THE TRUST................................................................39
CREDIT CARD ACTIVITIES...................................................40
General............................................................40
Development of the Business Model of Partners First;
The Role of FAMIS................................................41
Business Strategy..................................................43
Processing and Servicing of Credit Card Accounts...................44
Account Origination................................................44
Underwriting Procedures............................................46
Additional Accounts................................................46
Billing and Payments...............................................47
Interchange........................................................49
Collection of Delinquent Accounts..................................49
Recoveries.........................................................50
Fraud Prevention...................................................50
PARTNERS FIRST HOLDINGS, LLC.............................................50
PARTNERS FIRST RECEIVABLES FUNDING, LLC..................................51
THE ACCOUNTS.............................................................51
DESCRIPTION OF THE SECURITIES............................................52
General............................................................52
Book-Entry Registration............................................53
Definitive Securities..............................................55
Interest...........................................................56
Principal..........................................................56
Pay Out Events and Reinvestment Events.............................58
Servicing Compensation and Payment of Expenses.....................59
Termination of the Trust...........................................60
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT.......................60
Conveyance of Receivables..........................................60
Eligible Accounts and Receivables..................................61
Representations and Warranties.....................................62
Transferor Securities..............................................63
Additions of Accounts or Participation Interests...................64
Removal of Accounts................................................64
Discount Option....................................................65
Yield Supplement Account...........................................66
Premium Option.....................................................66
Indemnification....................................................67
Collection and Other Servicing Procedures..........................67
New Issuances......................................................68
Collection Account.................................................69
Allocations........................................................70
Groups of Series...................................................71
Reallocations Among Securities of Different Series
within a Reallocation Group.....................................71
Sharing of Excess Finance Charge Collections Among Excess
Allocation Series...............................................73
Shared Principal Collections.......................................73
Paired Series......................................................74
Special Funding Account............................................74
Funding Period; Pre-Funding Account................................74
Defaulted Receivables; Rebates and Fraudulent Charges..............75
Credit Enhancement.................................................75
Interest Rate Swaps and Related Caps, Floors and Collars...........78
Servicer Covenants.................................................78
Certain Matters Regarding the Servicer.............................78
Servicer Default...................................................79
Evidence as to Compliance..........................................80
Amendments.........................................................80
List of Securityholders............................................81
The Trustee........................................................81
DESCRIPTION OF THE PURCHASE AGREEMENTS...................................81
PFR Purchase Agreements............................................81
Transferor Purchase Agreement......................................83
Formation Transactions; Account Origination........................84
Limitations on Liability...........................................85
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................................85
Transfer of Receivables............................................85
Certain Matters Relating to Insolvency.............................86
Consumer Protection Laws...........................................89
Proposed Legislation...............................................89
U.S. FEDERAL INCOME TAX CONSEQUENCES.....................................89
General............................................................89
Characterization of the Securities as Indebtedness.................90
Taxation of Interest Income of Securityholders.....................90
Sale of a Security.................................................91
Tax Characterization of the Trust..................................92
FASIT .............................................................93
Foreign Investors..................................................93
Defeasance.........................................................94
STATE AND LOCAL TAXATION.................................................95
ERISA CONSIDERATIONS.....................................................96
PLAN OF DISTRIBUTION.....................................................98
LEGAL MATTERS............................................................99
INDEX OF DEFINED TERMS..................................................100
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to any Series will, among other
things, set forth with respect to such Series: (a) the initial aggregate
principal amount of each Class of such Series; (b) the rate of interest on
each Security (the "Security Rate") (or method of determining the Security
Rate) of each such Class; (c) the expected date or dates on which the
Invested Amount with respect to each such Class will have been paid to the
holders of the Securities of such Class ("Securityholders"); (d) the extent
to which any Class within a Series is subordinated to any other Class of
such Series or any other Series; (e) the Distribution Dates for the
respective Classes; (f) relevant financial information with respect to the
Receivables; (g) additional information with respect to any Series
Enhancement relating to such Series; and (h) the plan of distribution of
such Series.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Securities (as defined herein) are
issued, monthly and annual unaudited reports, containing information
concerning the Trust and prepared by the Servicer, will be sent on behalf
of the Trust to Cede & Co. ("Cede"), as nominee of The Depository Trust
Company ("DTC") and registered holder of the Securities pursuant to the
Pooling and Servicing Agreement. Such reports will be made available by DTC
and its participants to the Securityholders in accordance with the rules,
regulations and procedures creating and affecting DTC. See "Description of
the Pooling and Servicing Agreement -- Evidence as to Compliance." Such
reports will not constitute financial statements prepared in accordance
with generally accepted accounting principles. The Pooling and Servicing
Agreement does not require the sending of, and the Transferor does not
intend to send, any of its financial reports to the Securityholders or to
the owners of beneficial interests in the Securities ("Security Owners").
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended (the "Securities
Act"), with the Securities and Exchange Commission (the "Commission") with
respect to the Securities offered pursuant to this Prospectus. For further
information, reference is made to the Registration Statement and amendments
thereof and exhibits thereto, which are available for inspection without
charge at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549; Seven World
Trade Center, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the
Registration Statement and amendments thereof and exhibits thereto may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Servicer
will file with the Commission such periodic reports, if any, with respect
to the Trust as are required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder. In addition, the Commission maintains a public
access site on the Internet through the World Wide Web at which site
reports, proxy and information statements and other information regarding
registrants, including all electronic filings, may be viewed. The Internet
address of the Commission's World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of
the Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination
of the offering of the Securities offered hereby shall be deemed to be
incorporated by reference into this Prospectus and to be part hereof. Any
statement contained herein or in a document deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained in any other
subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a
copy of this Prospectus is delivered, on the written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests
for such copies should be directed to Partners First Holdings, LLC; 900
Elkridge Landing Road, Suite 300, Linthicum, Maryland 21090-2925;
Attention: Chief Financial Officer. Telephone requests for such copies
should be directed to (410) 865-8700.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the Index of
Defined Terms beginning on page 100 herein for the location herein of the
definitions of certain capitalized terms used herein. Unless the context
requires otherwise, certain capitalized terms, when used herein and in any
accompanying Prospectus Supplement, relate only to the particular Series
being offered by such Prospectus Supplement.
Issuer........................ Partners First Credit Card Master Trust
(the "Trust"). The Trust, as a master
trust, is expected to issue series of
Securities (each, a "Series") from time to
time. See "The Trust."
Servicer...................... Partners First Holdings, LLC, a Delaware
limited liability company ("Partners
First"), as Servicer (in such capacity, the
"Servicer"). The Servicer will receive a
fee as servicing compensation from the
Trust in respect of each Series in the
amounts and at the times specified in the
related Prospectus Supplement (the
"Servicing Fee"). The Servicing Fee may be
payable from Finance Charge Receivables,
Interchange or other amounts as specified
in the related Prospectus Supplement.
In certain limited circumstances, Partners
First may resign or be removed, in which
event the Trustee or, so long as it meets
certain eligibility standards set forth in
the Pooling and Servicing Agreement, a
third-party Servicer may be appointed as
successor Servicer (Partners First, or any
such successor Servicer, is referred to
herein as the "Servicer"). Partners First
is permitted to delegate certain of its
duties as Servicer to any of its affiliates
or, subject to certain conditions, to
third-party service providers, but any such
delegation will not relieve the Servicer of
its liability and responsibility with
respect to such duties under the Pooling
and Servicing Agreement or any Supplement.
Partners First has delegated substantially
all of its servicing duties to First Data
Resources Inc. ("FDR"). See "Description of
the Securities -- Servicing Compensation
and Payment of Expenses."
Trustee....................... The Bank of New York (the "Trustee"), a New
York banking corporation.
Transferor.................... Partners First Receivables Funding, LLC
("PFRF" or, in its capacity as transferor,
the "Transferor"), a Delaware limited
liability company and a special purpose
wholly owned subsidiary of Partners First
Receivables, LLC ("PFR"), a Delaware
limited liability company. PFR is a wholly
owned subsidiary of Partners First.
Account Originators........... The Partners First Portfolio will be
originated and serviced following a
business model which evolved from a
business model originally established by
BankBoston, N.A. ("BankBoston") and First
Annapolis Marketing Information Services,
Inc. ("FAMIS"). Currently, under such
business model: (i) the functions required
to be performed by an insured financial
institution under applicable law and the
rules of MasterCard and VISA are performed
by BKB (and, in certain circumstances, may
be performed by Harris) and, as described
below, would be assumed by the Bank (as
defined below) following its establishment;
(ii) credit processing, cardholder
communication, customer payment processing,
certain collection activities and certain
other account servicing functions are
performed by FDR; and (iii) the account
marketing and portfolio management
activities, including brand strategy,
development of credit policy and product
pricing are performed by Partners First,
which also proactively monitors and
supervises FDR's activities to ensure
compliance with performance standards
established by Partners First. See "Credit
Card Activities -- Development of the
Business Model of Partners First; The Role
of FAMIS."
Pursuant to separate Contribution
Agreements (each, a "Contribution
Agreement"), on January 29, 1998, the date
of issuance of the first Series of
Securities (the "Initial Series Issuance
Date") BankBoston (NH), National
Association ("BKB"), a national banking
association organized under the laws of the
United States, and Harris Trust and Savings
Bank, a bank chartered under the laws of
the State of Illinois ("Harris"), each
contributed to Partners First all of their
respective rights under specified consumer
revolving credit card accounts originated
by BKB or Harris, as applicable, except (i)
the related cardholder agreements, (ii) all
rights to create, enforce and collect
receivables and any other amounts owing
under the Partners First Portfolio (as
defined below) and (iii) all rights to
amend and modify the related cardholder
agreements (collectively, the "Retained
Rights"). As used herein "Partners First
Portfolio" means (i) the credit card
accounts originated or acquired by BKB and
Harris and contributed to Partners First
pursuant to the Contribution Agreements on
the Initial Series Issuance Date, (ii) any
other consumer revolving credit card
accounts originated by BKB or Harris, as
applicable, following the Initial Series
Issuance Date and transferred to Partners
First by BKB or Harris pursuant to the
Assistance Agreements and (iii) as
described in the following paragraph, any
other credit card accounts over which
Partners First has acquired the right to
designate the financial institution that
will exercise the Retained Rights with
respect to such credit card accounts.
Under the Contribution Agreements and the
Assistance Agreements, Partners First has
the right to designate the financial
institutions that will exercise the
Retained Rights with respect to the credit
card accounts in the Partners First
Portfolio. On the Initial Series Issuance
Date, Partners First designated each of BKB
and Harris as the Account Originator with
respect to specified credit card accounts
in the Partners First Portfolio. As used
herein, "Account Originator" means, as of
any date of determination, each financial
institution which (i) has been designated
by Partners First as the financial
institution that will exercise the Retained
Rights with respect to credit card accounts
in the Partners First Portfolio, (ii) if
such financial institution is not an
affiliate of Partners First, has entered
into a written agreement with Partners
First in the form of, or substantially
similar to, the Assistance Agreements (as
defined below) and (iii) has entered into a
receivables purchase agreement with PFR in,
or substantially in, the form of the PFR
Purchase Agreements (as defined below)
pursuant to which PFR purchases receivables
which are Eligible Receivables (as defined
below), including receivables which are
then sold to the Transferor pursuant to the
Transferor Purchase Agreement and then
transferred to the Trust pursuant to the
Pooling and Servicing Agreement.
On the Initial Series Issuance Date,
Partners First entered into separate
Assistance Agreements (each, an "Assistance
Agreement") with each of BKB and Harris,
pursuant to which each of BKB and Harris
appointed Partners First its sole and
exclusive agent to exercise all of its
rights and perform all of its obligations
with respect to the credit card accounts in
the Partners First Portfolio originated by
BKB and Harris, respectively, except for
the power to determine the terms under
which new credit card accounts will be
originated, whether to extend credit under
the credit card accounts, and to effect
Interchange (as defined below) settlement.
In connection with such appointment,
Partners First authorized each of BKB and
Harris to use, on a non-exclusive basis,
Partners First's rights under the credit
card accounts in the Partners First
Portfolio and related assets including
certain proprietary information related
thereto, to the extent necessary for each
of BKB and Harris to perform the forgoing
functions. In its capacity as agent under
the Assistance Agreements, Partners First
will perform certain functions including,
making recommendations with respect to the
Credit Card Guidelines (as defined below),
administering the Credit Card Guidelines,
managing the Partners First Portfolio,
arranging for the billing and collection of
any receivables arising thereunder, and
otherwise servicing and administering the
credit card accounts in the Partners First
Portfolio and the related receivables. As
used herein, "Credit Card Guidelines"
means, with respect to any credit card
account and the related receivables, the
respective policies and procedures of the
applicable Account Originator, relating to
(i) the determination of the
creditworthiness of cardholders and
potential cardholders, (ii) the extension
of credit under the credit card accounts,
and (iii) the maintenance and enforcement
of the credit card accounts and the
collection of the related receivables.
Until March 1998, each of BKB and Harris
remained Account Originators, originated
new credit card accounts into the Partners
First Portfolio and exercised the Retained
Rights with respect to the credit card
accounts originated by BKB and Harris,
respectively. In March 1998, Partners First
designated BKB as the Account Originator
with respect to the existing credit card
accounts in the Partners First Portfolio,
including the Accounts. Going forward,
Harris may continue to be an Account
Originator with respect to any new credit
card accounts, originated through Harris'
marketing efforts, including any New
Accounts. In addition, it is anticipated
that Partners First will establish a
federally insured financial institution as
a subsidiary (the "Bank"), which will
either be a newly chartered financial
institution formed by Partners First, or an
existing financial institution acquired by
Partners First. Upon its establishment
Partners First will designate the Bank as
the sole Account Originator with respect to
the credit card accounts in the Partners
First Portfolio, including the Accounts and
any New Accounts. Effective as of the date
of the Bank's appointment as Account
Originator, each of BKB and Harris will
cease to be an Account Originator.
It is anticipated that the Partners First
Portfolio may include credit card accounts
originated by financial institutions other
than BKB, Harris or the Bank. In addition,
prior to the establishment of the Bank,
Partners First may designate other
financial institutions as Account
Originators with respect to the Partners
First Portfolio, including the Accounts.
Any such financial institution would
originate credit card accounts. However,
any such credit card accounts and any
credit card accounts originated by the Bank
may only be designated as Accounts and the
related Receivables may only be included in
the Trust, if certain conditions, including
the Rating Agency Condition, are satisfied.
See "Risk Factors -- Addition of Trust
Assets" and "Description of the Pooling and
Servicing Agreement -- Addition of Accounts
or Participation Interests."
The Partners First Portfolio includes all
of the credit card accounts originated or
acquired by Harris except corporate
accounts and all of the credit card
accounts originated or acquired by BKB
except for (i) those accounts of
cardholders who reside in the primary
geographic market of BKB and its affiliates
(i.e., Massachusetts, Rhode Island,
Connecticut and New Hampshire), (ii) those
accounts of other cardholders having other
banking relationships with BKB or its
affiliates and (iii) student, VIP, foreign
accounts and accounts with employees of BKB
and its affiliates. In addition, any other
financial institution designated by
Partners First as an Account Originator may
choose not to include all of its credit
card accounts in the Partners First
Portfolio, particularly if, similar to BKB,
such financial institution chooses to
retain its regional or relationship
customers.
Transfer of Receivables....... Pursuant to separate PFR Purchase
Agreements entered into between PFR and
each of BKB and Harris on the Initial
Series Issuance Date, each of BKB and
Harris sold to PFR, all of their respective
right, title and interest in and to (i) the
receivables existing on the Initial Series
Issuance Date in designated credit card
accounts originated by BKB and Harris, as
applicable, (ii) all of the receivables
created in such credit card accounts
following the Initial Series Issuance Date
and (iii) the receivables in each new
designated credit card account originated
following the Initial Series Issuance Date
by BKB and Harris, as applicable, whether
such receivables are then existing or are
thereafter created. Pursuant to the PFR
Purchase Agreements, on the Initial Series
Issuance Date, PFR acquired approximately
$1,870,000,000 aggregate principal amount
of receivables of which approximately
$1,190,000,000 aggregate principal amount
of receivables were conveyed to PFR by BKB
and approximately $680,000,000 aggregate
principal amount of receivables were
conveyed to PFR by Harris. As used herein,
"PFR Purchase Agreement" means a
receivables purchase agreement entered into
between PFR and an Account Originator
providing for the sale by such Account
Originator to PFR of all of its right,
title and interest in and to receivables
created under specified credit card
accounts originated by such Account
Originator, and includes the Original PFR
Purchase Agreements (as defined below) and
any Additional PFR Purchase Agreements (as
defined below). See "Description of the
Purchase Agreements-- PFR Purchase
Agreements."
In connection with the anticipated
establishment by Partners First of the
Bank, PFR and the Bank will enter into one
or more receivables purchase agreements in,
or substantially in, the form of the PFR
Purchase Agreements entered into between
PFR and each of BKB and Harris.
Pursuant to the receivables purchase
agreement entered into between PFR and the
Transferor on the Initial Series Issuance
Date (as may be amended from time to time,
the "Transferor Purchase Agreement" and,
together with the PFR Purchase Agreements,
the "Purchase Agreements"), PFR sells to
the Transferor all of the Eligible
Receivables included in the receivables
purchased from BKB and Harris immediately
upon giving effect to any such purchase by
PFR. Subject to satisfaction of certain
conditions (including the Rating Agency
Condition), upon the execution of a PFR
Purchase Agreement between PFR and the Bank
or any other Account Originator, PFR will
sell to the Transferor all of the Eligible
Receivables included in the receivables
acquired by PFR pursuant to the PFR
Purchase Agreement with such other Account
Originator. Pursuant to the Transferor
Purchase Agreement, on the Initial Series
Issuance Date, PFR sold approximately
$1,846,000,000 aggregate principal amount
of Receivables (the "Initial Receivables")
to the Transferor. The Transferor in turn
transferred the Initial Receivables to the
Trust pursuant to the Pooling and Servicing
Agreement in exchange for the Transferor
Security and a Series of Investor
Securities which the Transferor sold
privately. The Initial Receivables
constituted all of the Eligible Receivables
acquired by PFR from BKB and Harris on the
Initial Series Issuance Date.
If so provided in a PFR Purchase Agreement,
the Account Originator will assign to PFR
the right to Recoveries (as defined herein)
and Interchange (as defined herein)
allocable to the receivables subject to
such PFR Purchase Agreement. Pursuant to
their respective PFR Purchase Agreements,
each of BKB and Harris assigns to PFR the
right to Recoveries and Interchange
allocable to the receivables conveyed by
BKB or Harris, as applicable, to PFR or its
approximate equivalent in the form of
Discount Option Receivables (as defined
herein) allocable to the Receivables. See
"Description of the Purchase Agreements."
Pursuant to the Transferor Purchase
Agreement, PFR assigns to the Transferor
all of its rights to Recoveries, if any,
and Interchange, if any, assigned to it
pursuant to the PFR Purchase Agreements.
See "Description of the Purchase Agreements
-- Transferor Purchase Agreement."
The Transferor in turn transfers the
Receivables and the rights to Recoveries
and Interchange acquired by it under the
Transferor Purchase Agreement to the Trust
pursuant to the Pooling and Servicing
Agreement. See "Description of the Pooling
and Servicing Agreement -- Conveyance of
Receivables."
Trust Assets.................. The assets of the Trust (the "Trust
Assets") include the receivables
("Receivables") arising under certain
VISA(R)and MasterCard(R)* revolving credit
card accounts (the "Accounts"), and the
proceeds thereof, including recoveries on
charged-off Receivables ("Recoveries"), and
any other fees, proceeds of credit
insurance policies relating to the
Receivables and may include the right to
receive Interchange (as defined herein), if
any, allocable to the Securities, funds on
deposit in certain accounts of the Trust
for the benefit of Securityholders,
Participation Interests (as defined
herein), if any, and any Credit Enhancement
(as defined herein) issued with respect to
a particular Series (the drawing on or
payment of any Series Enhancement for the
benefit of a Series or Class of
Securityholders will not be available to
the Securityholders of any other Series or
Class). "Interchange" consists of certain
fees received by Account Originators from
VISA and MasterCard as partial compensation
for taking credit risk, absorbing fraud
losses and funding receivables for a
limited period prior to initial billing.
"Series Enhancement" means, with respect to
any Series or Class of Securities, any
Credit Enhancement (as defined herein),
interest rate swap agreement, interest rate
cap agreement or other similar arrangement
for the benefit of Securityholders of such
Series or Class. The subordination of any
Series or Class of Securities to another
Series or Class of Securities shall be
deemed to be a Series Enhancement.
"Participation Interests" means
participations representing undivided
interests in a pool of assets primarily
consisting of revolving credit card
receivables, charge card receivables and
other self-liquidating financial assets.
See "Description of the Pooling and
Servicing Agreement -- Additions of
Accounts or Participation Interests."
- -----------------
* VISA and MasterCard are registered trademarks of VISA U.S.A. Inc.
("VISA") and MasterCard International Incorporated ("MasterCard"),
respectively.
To the extent provided in any Supplement
(as defined herein), or in an amendment to
the Pooling and Servicing Agreement, all or
a portion of the Receivables or
Participation Interests conveyed to the
Trust and all collections received with
respect thereto may be allocated to one or
more Series or groups of Series (each, a
"Group") as long as the Rating Agency
Condition (as defined herein) shall have
been satisfied with respect to such
allocation, and the Servicer shall have
delivered an officer's certificate to the
Trustee to the effect that the Servicer
reasonably believes such allocation will
not have an Adverse Effect (as defined
herein).
The Securities................ The Securities will be issued in Series,
each of which will consist of one or more
Classes. The specific terms of a Series or
Class will be established as described
herein under "Description of the Pooling
and Servicing Agreement-- New Issuances."
However, while the specific terms of any
Series or Class offered hereby will be
described in the related Prospectus
Supplement, the terms of such Series or
Class will not be subject to prior review
by, or consent of, the holders of the
Securities of any previously issued Series.
The Securities of a Series offered hereby
will generally be available for purchase in
minimum denominations of $1,000 and in
integral multiples thereof and will only be
available in book-entry form except in
certain limited circumstances as described
herein under "Description of the Securities
-- Definitive Securities" and in the
related Prospectus Supplement. Interests in
the Trust Assets will be allocated among
(a) the Securityholders, including Credit
Enhancers (as defined herein) holding
uncertificated subordinated interests
(each, an "Enhancement Invested Amount"),
of a particular Series (the
"Securityholders' Interest"), (b) the
Securityholders (including such holders of
Enhancement Invested Amounts) of other
Series, if any, (c) the holders of any
Participations and (d) the interest of the
Transferor and its permitted transferees
(the "Transferor's Interest"), as described
below. The Invested Amount of a Series
offered hereby will, except as otherwise
provided herein and except with respect to
Securities with a variable principal
amount, remain fixed at the aggregate
initial principal amount of the Securities
of such Series. The Securityholders'
Interest of a Series will include the right
to receive (but only to the extent needed
to make required payments under the Pooling
and Servicing Agreement, including the
related Supplement, and subject to any
reallocation of such amounts if the related
Supplement so provides) varying percentages
of collections of Finance Charge
Receivables and Principal Receivables and
will be allocated a varying percentage of
the Receivables in Defaulted Accounts with
respect to each calendar month (each, a
"Monthly Period"). See "Description of the
Securities -- Interest" and "-- Principal."
If the Securities of a Series offered
hereby include more than one Class of
Securities, the collections allocable to
the Invested Amount of such Series may be
further allocated among each Class in such
Series as described in the related
Prospectus Supplement.
The Transferor's Interest..... The Transferor's Interest at any time
represents the right to the Trust Assets in
excess of the Securityholders' Interest,
the interest of any holder of a
Participation and Enhancement Invested
Amounts of all Series then outstanding. The
principal amount of the Transferor's
Interest (the "Transferor Amount") will
fluctuate as the amount of the Principal
Receivables held by the Trust changes from
time to time. In addition, the Transferor
intends to cause the issuance of Series
from time to time and any such issuance
will have the effect of decreasing the
Transferor Amount to the extent of the
initial Invested Amount of such Series. See
"Risk Factors-- Issuance of New Series."
The level of the "Required Transferor
Amount," which equals the sum of the Series
Required Transferor Amounts for each
outstanding Series, is intended to enable
the Transferor's Interest to absorb
fluctuations in the amount of Principal
Receivables held by the Trust from time to
time (due to, among other things, seasonal
purchase and payment habits of cardholders
or adjustments in the amount of Principal
Receivables because of rebates, refunds,
fraudulent charges or otherwise). See "Risk
Factors -- Generation of Additional
Receivables; Dependency on Cardholder
Repayments" and "Description of the Pooling
and Servicing Agreement -- Defaulted
Receivables; Rebates and Fraudulent
Charges."
Issuance of New Series........ The Pooling and Servicing Agreement
authorizes the Trustee to issue four types
of securities: (a) one or more Series of
Securities, (b) Participations representing
participation interests in the Receivables,
as described below, (c) a security
evidencing the Transferor's Interest in the
Trust retained by the Transferor (the
"Transferor Security"), which Transferor
Security will be held by the Transferor,
and (d) securities ("Supplemental
Securities") held by transferees of a
portion of the Transferor Security. The
Transferor Security and any Supplemental
Securities are collectively referred to as
the "Transferor Securities." See
"Description of the Pooling and Servicing
Agreement -- Transferor Securities." On the
Initial Series Issuance Date, the
Transferor will issue a Supplemental
Security to an affiliate of the Transferor.
The Pooling and Servicing Agreement
provides that, pursuant to any one or more
supplements to the Pooling and Servicing
Agreement (each, as may be amended from
time to time, a "Supplement"), the
Transferor may cause the Trustee without
the consent of the Securityholders to issue
one or more new Series and accordingly
cause a reduction in the Transferor's
Interest represented by the Transferor
Securities. There can be no assurance that
the terms of any Series might not have an
impact on the timing or amount of payments
received by a Securityholder of another
Series. Under the Pooling and Servicing
Agreement, the Transferor may define, with
respect to any Series, the Principal Terms
of such Series. See "Description of the
Pooling and Servicing Agreement -- New
Issuances." The Transferor may offer any
Series to the public or other investors
under a disclosure document (a "Disclosure
Document"), which will consist of a
Prospectus Supplement in the case of a
Series offered hereby, in transactions
either registered under the Securities Act
or exempt from registration thereunder,
directly or through one or more
underwriters or placement agents, in
fixed-price offerings or in negotiated
transactions or otherwise. See "Plan of
Distribution."
A new Series may be issued only upon
satisfaction of the conditions described
herein under "Description of the Pooling
and Servicing Agreement -- New Issuances"
including, among others, that (a) such
issuance will satisfy the Rating Agency
Condition (as defined herein) and (b) the
Transferor shall have delivered to the
Trustee and certain providers of Series
Enhancement a certificate of an authorized
officer to the effect that, in the
reasonable belief of the Transferor, such
issuance will not, based on the facts known
to such representative at the time of such
certification, have an Adverse Effect.
The Pooling and Servicing Agreement
provides that, pursuant to any one or more
supplements to the Pooling and Servicing
Agreement (each, a "Participation
Supplement"), the Transferor may direct the
Trustee to issue on behalf of the Trust one
or more participations (each, a
"Participation"), to be delivered to or
upon the order of the Transferor upon the
satisfaction of certain conditions
described herein under "Description of the
Pooling and Servicing Agreement --New
Issuances."
In addition to the foregoing, it is a
condition to the issuance of each Series
offered hereby, that on the related Series
Issuance Date, the aggregate amount of
Receivables which are more than 30-days
past due, will not exceed 20% of the
aggregate amount of Receivables in the
Trust.
The Accounts.................. The Accounts generally consist of VISA and
MasterCard consumer revolving credit card
accounts included in the Partners First
Portfolio, which were designated from time
to time by the Transferor (or an affiliate
thereof), that, in each case, meet the
criteria provided in the Pooling and
Servicing Agreement for an Eligible Account
(as defined herein), but do not include any
Removed Accounts (as defined herein). The
Accounts are not being sold or transferred
to the Trust and will continue to be
controlled and held by the Account
Originators unless transferred as described
herein. See "Credit Card Activities" and
"Description of the Purchase Agreements."
The Transferor conveyed to the Trust
Receivables existing on the Initial Series
Issuance Date in certain VISA and
MasterCard consumer revolving credit card
accounts (the "Initial Accounts") that met
the criteria provided in the Pooling and
Servicing Agreement for an Eligible Account
as of the Initial Series Issuance Date and
will convey Receivables arising in the
Initial Accounts from time to time
thereafter until the termination of the
Trust. The Initial Accounts constituted all
of the Eligible Accounts in the Partners
First Portfolio on the Initial Series
Issuance Date. In addition, pursuant to the
Pooling and Servicing Agreement, the
Transferor expects (subject to certain
limitations and conditions), and in some
circumstances will be obligated, to have
Additional Accounts designated, the
Receivables of which will be included in
the Trust or, in lieu thereof or in
addition thereto, to include Participation
Interests in the Trust. Additional Accounts
include New Accounts and Aggregate Addition
Accounts (as defined herein). The
Transferor will convey to the Trust all
Receivables in Additional Accounts, whether
such Receivables are then existing or
thereafter created. The addition to the
Trust of Receivables in Aggregate Addition
Accounts or Participation Interests will be
subject to certain conditions, including,
among others, that (a) unless such addition
is a required addition or a designation of
New Accounts, such addition will satisfy
the Rating Agency Condition and (b) the
Transferor shall have delivered to the
Trustee a certificate of an authorized
officer to the effect that, in the
reasonable belief of the Transferor, such
addition will not have an Adverse Effect.
The Transferor will also have the right, in
certain circumstances, to remove from the
Trust all Receivables of certain designated
Accounts (the "Removed Accounts"). See
"Description of the Pooling and Servicing
Agreement -- Additions of Accounts or
Participation Interests;" "-- Removal of
Accounts" and "Risk Factors -- Addition of
Trust Assets."
The Receivables............... The Receivables include (a) periodic
finance charges, cash advance fees, late
charges, annual membership fees, returned
check fees, overlimit fees and other
miscellaneous fees and the interest portion
of any Participation Interests as
determined pursuant to the applicable
Supplement (the "Finance Charge
Receivables"), and (b) amounts charged by
cardholders for merchandise and services,
amounts advanced to cardholders as cash
advances and the principal portion of any
Participation Interests as determined
pursuant to the applicable Supplement (the
"Principal Receivables"). Recoveries
attributed to charged- off Receivables up
to the amount of Defaulted Receivables in
any Monthly Period will be treated as
collections of Principal Receivables. The
excess, if any, of Recoveries over
Defaulted Receivables will be treated as
collections of Finance Charge Receivables.
In addition, certain Interchange or its
equivalent in the form of Discount Option
Receivables attributed to cardholder
charges for merchandise and services in the
Accounts will be treated as collections of
Finance Charge Receivables. See "Credit
Card Activities-- Interchange."
All receivables arising in the Partners
First Portfolio will automatically be sold
to PFR. Pursuant to the Transferor Purchase
Agreement, all new Eligible Receivables
arising in the Accounts during the term of
the Trust will automatically be sold by PFR
to the Transferor and then transferred by
the Transferor to the Trust. Accordingly,
the amount of Receivables in the Trust will
fluctuate from day to day as new
Receivables are generated and as existing
Receivables are collected, charged-off as
uncollectible or otherwise adjusted.
If so specified in the related Prospectus
Supplement, the Servicer will establish and
maintain a yield supplement account for the
benefit of the Securityholders of such
Series (each, a "Yield Supplement
Account"). Amounts on deposit in the Yield
Supplement Account for any Series (together
with investment earnings thereon) will be
released and deposited into the Collection
Account in the amounts and at the times
specified in the Prospectus Supplement for
such Series. Each such deposit into the
Collection Account will be treated as
collections of Finance Charge Receivables
allocable to the Securities of the related
Series. The Yield Supplement Account for
any Series will be funded with proceeds
from the offering of the related Series of
Securities.
Clearance and Settlement...... Unless otherwise specified in the related
Prospectus Supplement, the Securities will
be available for purchase in minimum
denominations of $1,000 and integral
multiples thereof in book- entry form only.
Securityholders may elect to hold their
Securities through any of DTC (in the
United States) or Cedel Bank, societe
anonyme ("Cedel") or the Euroclear System
("Euroclear") (in Europe). See "Description
of the Securities-- Book-Entry
Registration."
Interest...................... Interest will accrue on the Invested Amount
or outstanding principal amount of the
Securities of a Series or Class offered
hereby at the per annum rate either
specified in or determined in the manner
specified in the related Prospectus
Supplement. Except as otherwise provided
herein, collections of Finance Charge
Receivables and certain other amounts
allocable to the Invested Amount of a
Series offered hereby will generally be
used to make interest payments to
Securityholders of such Series on each
Interest Payment Date with respect thereto;
provided that if an Early Amortization
Period commences with respect to such
Series, thereafter interest will be
distributed to such Securityholders monthly
on each Special Payment Date (defined
herein). If the Interest Payment Dates for
a Series or Class occur less frequently
than monthly, such collections or other
amounts (or the portion thereof allocable
to such Class) will be deposited in one or
more trust accounts (each, an "Interest
Funding Account") and used to make interest
payments to Securityholders of such Series
or Class on the following Interest Payment
Date with respect thereto. If a Series has
more than one Class of Securities, each
such Class may have a separate Interest
Funding Account. See "Description of the
Securities -- Interest."
Principal..................... The principal of the Securities of each
Series offered hereby will be scheduled to
be paid either (a) in full on an expected
date specified in the related Prospectus
Supplement (the "Expected Final Payment
Date"), in which case such Series will have
a Controlled Accumulation Period as
described below under "-- Controlled
Accumulation Period," or (b) in
installments commencing on a date specified
in the related Prospectus Supplement (the
"Principal Commencement Date"), in which
case such Series will have a Controlled
Amortization Period as described below
under "--Controlled Amortization Period."
If a Series has more than one Class of
Securities, each Class may have a different
method of paying principal, Expected Final
Payment Date or Principal Commencement
Date. The payment of principal with respect
to the Securities of a Series or Class may
commence earlier than the applicable
Expected Final Payment Date or Principal
Commencement Date, and the final principal
payment with respect to the Securities of a
Series or Class may be made later than the
applicable Expected Final Payment Date or
other expected date, if a Pay Out Event
occurs with respect to such Series or Class
or under certain other circumstances
described herein. See "Risk Factors --
Generation of Additional Receivables;
Dependency on Cardholder Repayments" for a
description of factors that may affect the
timing of principal payments on Securities.
See "Description of the Securities --
Principal."
Revolving Period.............. The Securities of each Series offered
hereby will have a revolving period (the
"Revolving Period") that will commence on
the date of issuance of the related Series
(the "Series Issuance Date") or on a date
prior thereto specified in the related
Supplement and, for a Series offered
hereby, the related Prospectus Supplement
(the "Series Cut-Off Date") and continue
until the earlier of (a) the commencement
of the Early Amortization Period or Early
Accumulation Period with respect to such
Series and (b) the date specified in the
related Prospectus Supplement as the end of
the Revolving Period with respect to such
Series. If the related Prospectus
Supplement provides that a Series is a
Principal Sharing Series (as defined
herein), during the Revolving Period with
respect to such Series, collections of
Principal Receivables and certain other
amounts otherwise allocable to the
Securityholders' Interest of such Series
will be treated as Shared Principal
Collections and will be distributed to, or
for the benefit of, the Securityholders of
other Principal Sharing Series or the
holders of the Transferor Securities or
deposited into the Special Funding Account,
as more fully described in the related
Prospectus Supplement. If the related
Prospectus Supplement provides that a
Series is not a Principal Sharing Series,
during the Revolving Period with respect to
such Series, collections of Principal
Receivables and certain other amounts
otherwise allocable to the Securityholders'
Interest of such Series will be paid to the
holders of the Transferor Securities or
deposited into the Special Funding Account,
as more fully described in the related
Prospectus Supplement. See "Description of
the Securities-- Principal," and "--Pay Out
Events and Reinvestment Events" for a
discussion of the events that might lead to
the termination of the Revolving Period
with respect to a Series prior to its
scheduled date.
Controlled Accumulation
Period........................ If the related Prospectus Supplement so
specifies, unless an Early Amortization
Period or, if so specified in the related
Prospectus Supplement, an Early
Accumulation Period commences with respect
to a Series offered hereby, the Securities
of such Series will have a scheduled
accumulation period (the "Controlled
Accumulation Period") that will commence at
the close of business on the date or dates
specified in or determined as specified in
such Prospectus Supplement and continue
until the earliest of (a) the commencement
of the Early Amortization Period or, if so
specified in the related Prospectus
Supplement, an Early Accumulation Period
with respect to such Series, (b) payment in
full of the Invested Amount, including the
Enhancement Invested Amount, if any, of the
Securities of such Series, and (c) the
series termination date with respect to
such Series (the "Series Termination
Date"). The Controlled Accumulation Period
may be postponed under the conditions set
forth in "Description of the Securities --
Principal." During the Controlled
Accumulation Period with respect to a
Series, collections of Principal
Receivables and, if so specified in the
related Prospectus Supplement, certain
other amounts allocable to the
Securityholders' Interest of such Series
(including Shared Principal Collections (as
defined herein), if any, allocable to such
Series) will be deposited on each
Distribution Date in a trust account
established for the benefit of the
Securityholders of such Series (each, a
"Principal Funding Account") and used to
make principal distributions to the
Securityholders of such Series or any Class
thereof when due. The amount to be
deposited in the Principal Funding Account
(the "Controlled Deposit Amount") for any
Series offered hereby on any Distribution
Date may, but will not necessarily, be
limited to an amount equal to an amount
specified in or determined as specified in
the related Prospectus Supplement (the
"Controlled Accumulation Amount") plus any
existing deficit controlled accumulation
amount arising from prior Distribution
Dates. If the Prospectus Supplement for a
Series so specifies, the amount to be
deposited in the Principal Funding Account
on a Distribution Date may be a variable
amount. If a Series has more than one Class
of Securities, each Class may have a
separate Principal Funding Account and
Controlled Accumulation Amount and the
Controlled Accumulation Period with respect
to each Class may commence on different
dates. In addition, the related Prospectus
Supplement may describe certain priorities
among such Classes with respect to deposits
of principal into such Principal Funding
Accounts.
Early Accumulation Period..... If so specified and under the conditions
set forth in the Prospectus Supplement
relating to a Series having a Controlled
Accumulation Period, during the period from
the day on which a Reinvestment Event (as
defined herein) has occurred, until the
earliest of (a) the commencement of the
Early Amortization Period (if any), (b)
payment in full of the Invested Amount,
including the Enhancement Invested Amount,
if any, of the Securities of such Series,
and (c) the Series Termination Date with
respect to such Series (the "Early
Accumulation Period"), collections of
Principal Receivables and, if so specified
in the related Prospectus Supplement,
certain other amounts allocable to the
Securityholders' Interest of such Series
(including Shared Principal Collections, if
any, allocable to such Series) will be
deposited on each Distribution Date in the
Principal Funding Account and used to make
distributions of principal to the
Securityholders of such Series or any Class
thereof on the Expected Final Payment Date.
The amount to be deposited in the Principal
Funding Account during the Early
Accumulation Period will not be limited to
any Controlled Deposit Amount. See
"Description of the Securities -- Pay Out
Events and Reinvestment Events" for a
discussion of the events which might lead
to commencement of an Early Accumulation
Period.
Controlled Amortization
Period........................ If the related Prospectus Supplement so
specifies, unless an Early Amortization
Period commences with respect to a Series
offered hereby, the Securities of such
Series will have an amortization period
(the "Controlled Amortization Period") that
will commence at the close of business on
the date specified in such Prospectus
Supplement and continue until the earliest
of (a) the commencement of the Early
Amortization Period with respect to such
Series, (b) payment in full of the Invested
Amount, including the Enhancement Invested
Amount, if any, of the Securities of such
Series and (c) the Series Termination Date
with respect to such Series. During the
Controlled Amortization Period with respect
to a Series, collections of Principal
Receivables and certain other amounts
allocable to the Securityholders' Interest
of such Series (including Shared Principal
Collections, if any, allocable to such
Series) will be used on each Distribution
Date to make principal distributions to
Securityholders of such Series or any Class
thereof then scheduled to receive such
distributions. The amount to be distributed
to Securityholders of any Series offered
hereby on any Distribution Date may, but
will not necessarily, be limited to an
amount (the "Controlled Distribution
Amount") equal to an amount (the
"Controlled Amortization Amount") specified
in the related Prospectus Supplement plus
any existing deficit controlled
amortization amount arising from prior
Distribution Dates. If a Series has more
than one Class of Securities, each Class
may have a different Controlled
Amortization Amount. In addition, the
related Prospectus Supplement may describe
certain priorities among such Classes with
respect to such distributions.
Early Amortization Period..... During the period from the day on which a
Pay Out Event has occurred with respect to
a Series to the date on which the Invested
Amount, including the Enhancement Invested
Amount, if any, of the Securities of such
Series has been paid in full or the related
Series Termination Date has occurred (the
"Early Amortization Period"), collections
of Principal Receivables and certain other
amounts allocable to the Securityholders'
Interest of such Series (including Shared
Principal Collections, if any, allocable to
such Series) will be distributed as
principal payments to the Securityholders
of such Series monthly on each Distribution
Date beginning with the first Special
Payment Date with respect to such Series.
During the Early Amortization Period with
respect to a Series, distributions of
principal to Securityholders will not be
subject to any Controlled Deposit Amount or
Controlled Distribution Amount. In
addition, upon the commencement of the
Early Amortization Period with respect to a
Series, any funds on deposit in a Principal
Funding Account with respect to such Series
will be paid to the Securityholders of the
relevant Class or Series on the first
Special Payment Date with respect to such
Series. See "Description of the Securities
-- Pay Out Events and Reinvestment Events"
for a discussion of the events that might
lead to the commencement of the Early
Amortization Period with respect to a
Series.
Allocations Among Series...... Pursuant to the Pooling and Servicing
Agreement, during each Monthly Period, the
Servicer is required to first allocate to
each Series collections of Principal
Receivables and Finance Charge Receivables
and the Defaulted Receivables with respect
to such Monthly Period based on the Series
Allocation Percentage (as defined herein).
See "Description of the Pooling and
Servicing Agreement-- Allocations." Subject
to reallocation among Series in a
Reallocation Group, such amounts allocated
to each Series are then further allocated
within each Series to the Securityholders,
any Series Enhancement and the holders of
the Transferor Securities pursuant to the
terms of the related Supplement.
Sharing of Excess Finance
Charge Collections Among
Excess Allocation Series...... If the Prospectus Supplement for a Series
so provides, any Series may be designated
as a Series that shares with other Series
similarly designated, subject to certain
limitations, certain Excess Finance Charge
Collections (as defined herein) allocable
to any such Series (an "Excess Allocation
Series"). Subject to certain limitations
described under "Description of the Pooling
and Servicing Agreement-- Sharing of Excess
Finance Charge Collections Among Excess
Allocation Series," collections of Finance
Charge Receivables and certain other
amounts allocable to the Securityholders'
Interest of any Series that is designated
as an Excess Allocation Series in excess of
the amounts necessary to make required
payments with respect to such Series
(including payments to the provider of any
related Series Enhancement) will be applied
to cover shortfalls with respect to amounts
payable from collections of Finance Charge
Receivables allocable to any other Series
designated as an Excess Allocation Series,
in each case pro rata based upon the amount
of the shortfall with respect to amounts
payable from Collections of Finance Charge
Receivables, if any, with respect to each
other Excess Allocation Series. See
"Description of the Pooling and Servicing
Agreement-- Sharing of Excess Finance
Charge Collections Among Excess Allocation
Series."
Shared Principal Collections.. If the Prospectus Supplement for a Series
so provides, any Series may be designated
as a Series that shares with other Series
similarly designated, subject to certain
limitations, certain excess collections of
Principal Receivables and certain other
amounts allocable to the Securityholders'
Interest of such Series (a "Principal
Sharing Series"). To the extent that
collections of Principal Receivables and
certain other amounts that are allocated to
the Securityholders' Interest of any
Principal Sharing Series are not needed to
make payments to the Securityholders of
such Series or required to be deposited in
a Principal Funding Account for such Series
and to the extent that any amounts are
specified in any Participation Supplement
to be treated as Shared Principal
Collections, such amounts may be applied to
cover principal payments due to or for the
benefit of Securityholders of another
Principal Sharing Series. Any such
reallocation will not result in a reduction
in the Invested Amount of the Series to
which such collections were initially
allocated. See "Description of the Pooling
and Servicing Agreement-- Shared Principal
Collections."
Reallocations Among Series
in a Reallocation Group....... If so provided in the related Prospectus
Supplement, the Securities of a Series may
be included in a Group that will be subject
to reallocations of collections of Finance
Charge Receivables and other amounts or
obligations among the Series in such Group
(a "Reallocation Group"). Collections of
Finance Charge Receivables allocable to
each Series in a Reallocation Group will be
aggregated and made available for certain
required payments for all Series in such
Group. Consequently, the issuance of new
Series in such Group may have the effect of
reducing or increasing the amount of
collections of Finance Charge Receivables
allocable to the Securities of other Series
in such Group. See "Risk Factors-- Issuance
of New Series."
Paired Series................. If so provided in the related Prospectus
Supplement, a Series of Securities may be
issued (a "Paired Series") that is paired
with one or more other Series or a portion
of one or more other Series previously
issued by the Trust (a "Prior Series"). A
Paired Series may be issued at or after the
commencement of a Controlled Accumulation
Period or Controlled Amortization Period
for a Prior Series. As the Invested Amount
of the Prior Series having a Paired Series
is reduced, the Invested Amount of the
Paired Series will increase by an equal
amount. Upon payment in full of such Prior
Series, the Invested Amount of the Paired
Series will be equal to the amount of the
Invested Amount paid to Securityholders of
such Prior Series. If a Pay Out Event or
Reinvestment Event occurs with respect to
the Prior Series having a Paired Series or
with respect to the Paired Series when such
Prior Series is in a Controlled
Amortization Period or Controlled
Accumulation Period, the percentage
specified in the applicable Prospectus
Supplement for the allocation of
collections of Principal Receivables to the
Securityholders' Interest of such Prior
Series (the "Principal Allocation
Percentage") and the Series Allocation
Percentage for the Prior Series and the
Principal Allocation Percentage and the
Series Allocation Percentage for the Paired
Series will be reset as specified in the
related Prospectus Supplement and the
Controlled Amortization Period, Controlled
Accumulation Period, Early Amortization
Period or Early Accumulation Period for
such Prior Series could be lengthened.
Special Funding Account....... If, on any date, the Transferor Amount is
less than or equal to the Required
Transferor Amount, the Servicer will not
distribute to the holders of the Transferor
Securities any collections of Principal
Receivables that otherwise would be
distributed to the holders of the
Transferor Securities, but shall deposit
such funds in the Special Funding Account.
Funds on deposit in the Special Funding
Account will be withdrawn and paid to the
holders of the Transferor Securities on any
Distribution Date to the extent that, after
giving effect to such payment, the
Transferor Amount exceeds the Required
Transferor Amount on such date; provided,
however, that if a Controlled Accumulation
Period, Early Accumulation Period,
Controlled Amortization Period or Early
Amortization Period commences with respect
to any Series, any funds on deposit in the
Special Funding Account will be released
and treated as collections of Principal
Receivables to the extent needed to cover
principal payments due to or for the
benefit of such Series. See "Description of
the Pooling and Servicing Agreement --
Special Funding Account."
Funding Period; Pre-Funding
Account....................... The Prospectus Supplement relating to a
Series of Securities may specify that for a
period beginning on the Series Issuance
Date and ending on a specified date before
the commencement of a Controlled
Amortization Period or Controlled
Accumulation Period with respect to such
Series (the "Funding Period"), the
aggregate amount of Principal Receivables
in the Trust allocable to such Series may
be less than the aggregate principal amount
of the Securities of such Series and an
amount equal to the amount of such
deficiency (the "Pre-Funding Amount") will
be held in a trust account established with
the Trustee for the benefit of
Securityholders of such Series (the
"Pre-Funding Account") pending the transfer
of additional Principal Receivables to the
Trust or pending the reduction of the
Invested Amounts of other Series issued by
the Trust. The related Prospectus
Supplement will specify the initial
Invested Amount on the Series Issuance Date
with respect to such Series, the aggregate
principal amount of the Securities of such
Series (the "Full Invested Amount") and the
date by which the Invested Amount is
expected to equal the Full Invested Amount.
The Invested Amount will increase as
Principal Receivables are delivered to the
Trust or as the Invested Amounts of other
Series of the Trust are reduced. The
Invested Amount may also decrease due to
the occurrence of a Pay Out Event as
specified in the related Prospectus
Supplement. See "Risk Factors -- Pre-
Funding Account."
During the Funding Period, funds on deposit
in the Pre-Funding Account for a Series of
Securities will be withdrawn and paid to
the Transferor to the extent of any
increases in the Invested Amount. In the
event that the Invested Amount does not for
any reason equal the Full Invested Amount
by the end of the Funding Period, any
amount remaining in the Pre-Funding Account
and any additional amounts specified in the
related Prospectus Supplement will be
payable to the Securityholders of such
Series in a manner and at such time as set
forth in the related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, funds in the Pre-Funding
Account with respect to any Series will be
invested by the Trustee in Eligible
Investments or will be subject to a
guaranteed rate or investment agreement or
other similar arrangement, and investment
earnings and any applicable payment under
any such investment arrangement will be
applied to pay interest on the Securities
of such Series.
Credit Enhancement............ The credit enhancement (the "Credit
Enhancement") with respect to a Series
offered hereby may include a letter of
credit, a cash collateral account or
guaranty, spread account, yield supplement
account, a collateral interest, a surety
bond, an insurance policy, guaranteed rate
agreement, maturity liquidity facility, tax
protection agreement or any other form of
credit enhancement described in the related
Prospectus Supplement. Credit Enhancement
may also be provided to a Class or Classes
of a Series or to a Series by subordination
provisions which require that distributions
of principal or interest be made with
respect to the Securities of such Class or
Classes or such Series before distributions
are made to one or more other Classes of
such Series or to another Series (if the
Supplement for such Series so provides).
The type, characteristics and amount of the
Credit Enhancement with respect to any
Series will be determined based on several
factors, including the characteristics of
the Receivables and Accounts underlying or
comprising the Trust Assets as of the
Series Issuance Date with respect thereto,
and will be established on the basis of
requirements of each applicable Rating
Agency. The terms of the Credit Enhancement
with respect to any Series offered hereby
will be described in the related Prospectus
Supplement. If so specified in the
Prospectus Supplement for a Series, the
level of Credit Enhancement for such Series
may be reduced if such reduction satisfies
the Rating Agency Condition. See
"Description of the Pooling and Servicing
Agreement -- Credit Enhancement" and "Risk
Factors -- Limited Nature of Rating."
Servicing..................... Partners First, in its capacity as Servicer
under the Pooling and Servicing Agreement,
is the initial Servicer for the Trust. The
Servicer is responsible for servicing,
managing and making collections on the
Receivables. Partners First has delegated
the majority of the credit card processing,
account servicing and collection functions
to FDR, following the business model
originally established by BankBoston and
FAMIS as described in "Credit Card
Activities-- Development of the Business
Model of Partners First; The Role of
FAMIS." See "Credit Card Activities--
Processing and Servicing of Credit Card
Accounts." The "Distribution Date" for a
Series will be the day occurring in each
month (or, if such day is not a business
day, the next business day) or such other
date specified in the Supplement for a
Series. The "Transfer Date" for a Series
will be the business day preceding each
Distribution Date or such other date
specified in the Supplement for a Series.
On the earlier of (a) the second business
day following the Date of Processing and
(b) the day on which the Servicer deposits
any collections into the Collection
Account, subject to certain exceptions
described herein, the Servicer will pay to
the holders of the Transferor Securities
and any Participations their allocable
portion of any collections then held by the
Servicer. The "Date of Processing" is the
business day on which a record of any
transaction is first recorded pursuant to
the Servicer's data processing procedures.
The "Determination Date" for a Series will
be the third business day preceding the
Distribution Date in each Monthly Period,
or such other date specified in the
Supplement for a Series. On each
Determination Date, the Servicer will
calculate the amounts to be allocated to
the Securityholders of each Class or
Series, the holders of any Participations
and the holders of the Transferor
Securities as described herein in respect
of collections of Receivables received with
respect to the preceding Monthly Period.
Income Tax Withholding........ Interest on the Securities will be subject
to United States withholding tax and backup
withholding unless the holder complies with
applicable IRS identification requirements.
Tax Status.................... Except to the extent otherwise specified in
the related Prospectus Supplement, it is
anticipated that special tax counsel will
be of the opinion that the Securities of
each Class offered hereby of each Series
will be characterized as indebtedness for
Federal income tax purposes. Except to the
extent otherwise specified in the related
Prospectus Supplement, the Security Owners
will agree to treat the Securities offered
hereby as debt for Federal income tax
purposes. See "U.S. Federal Income Tax
Consequences" for additional information
concerning the application of Federal
income tax laws.
ERISA Considerations.......... See "ERISA Considerations" herein and
"Summary of Series Terms -- ERISA
Considerations" in the applicable
Prospectus Supplement.
Security Rating............... It will be a condition to the issuance of
each Series of Securities or Class thereof
offered pursuant to this Prospectus and the
related Prospectus Supplement that they be
rated in one of the four highest applicable
rating categories by at least one
nationally recognized statistical rating
organization selected by the Transferor, as
specified in the applicable Supplement
(each rating agency rating any Series, a
"Rating Agency"). The rating or ratings
applicable to the Securities of each such
Series or Class thereof will be set forth
in the related Prospectus Supplement. A
security rating should be evaluated
independently of similar ratings of
different types of securities. A rating is
not a recommendation to buy, sell or hold
securities and may be subject to revision
or withdrawal at any time by the assigning
Rating Agency. Each rating should be
evaluated independently of any other
rating. See "Risk Factors-- Limited Nature
of Rating."
Listing....................... If so specified in the Prospectus
Supplement relating to a Series,
application will be made to list the
Securities of such Series, or all or a
portion of any Class thereof, on the
Luxembourg Stock Exchange or any other
specified exchange.
RISK FACTORS
Investors should consider the following risk factors in connection
with the purchase of the Securities.
Limited Liquidity. It is anticipated that, to the extent permitted,
the underwriters of any Series of Securities offered hereby will make a
market in such Securities, but in no event will any such underwriters be
under an obligation to do so. There can be no assurance that a secondary
market will develop or, if a secondary market does develop, that it will
provide Securityholders of any Series offered hereby with liquidity of
investment or that it will continue for the life of such Securities.
Limited Operating History. Partners First commenced operations in
January 1998 and has limited operating history, underwriting or servicing
experience, or delinquency, default and loss experience with respect to
credit card accounts, other than through BKB and Harris. Partners First
will delegate substantially all of its servicing functions to FDR, which
will service the credit card accounts in the Partners First Portfolio,
including the Accounts, following the business model originally established
by BankBoston and FAMIS. See "Credit Card Activities -- Development of the
Business Model of Partners First; The Role of FAMIS." BKB began originating
and servicing credit card accounts in September 1995 and therefore, has
limited underwriting and servicing experience, and limited delinquency,
default and loss experience with respect to the Accounts. As of the Initial
Series Issuance Date, approximately 63% of the Receivables designated to be
included in the Trust were originated or purchased by BKB. Until March
1998, each of BKB and Harris remained Account Originators and exercised the
Retained Rights with respect to the Accounts originated by BKB and Harris,
as applicable. In March 1998, Partners First designated BKB as the sole
Account Originator with respect to the existing credit card accounts in the
Partners First Portfolio, including the Accounts. Harris may continue to
act as an Account Originator with respect to new credit card accounts
originated by it, including New Accounts. In addition, it is anticipated
that Partners First will establish a federally insured financial
institution as a subsidiary (the "Bank"), which will either be a newly
chartered financial institution formed by Partners First, or an existing
financial institution acquired by Partners First. Partners First will
designate the Bank as the sole Account Originator with respect to the
credit card accounts in the Partners First Portfolio, including the
Accounts and any New Accounts. Effective as of the date of the Bank's
appointment as Account Originator, each of BKB and Harris will cease to be
an Account Originator. As an Account Originator, the Bank will also
originate credit card accounts; however, none of such credit card accounts
may be designated as Accounts and none of the related receivables may be
transferred to the Trust unless certain conditions, including the Rating
Agency Condition, are satisfied. The Bank will have little or no operating
history, underwriting or servicing experience, or delinquency, default or
loss experience with respect to credit card accounts, and will rely on the
experience of Partners First to assist the Bank in setting the Credit Card
Guidelines, including assisting the Bank in determining the underwriting
and origination policies with respect to the Accounts and will rely on FDR
for the implementation of such policies.
Limited Seasoning of Trust Portfolio. The average age of a credit
card issuer's portfolio of accounts is an indicator of the stability of
delinquency and loss levels of that portfolio. A portfolio of older
accounts generally behaves more predictably than a newly originated
portfolio. Approximately 95% of the Receivables transferred to the Trust
that were created under Accounts in the BKB Portfolio were generated under
Accounts which BKB originated within the 24-month period preceding the
Initial Series Issuance Date and over 48% of such Receivables were
generated under Accounts which BKB originated within the 12-month period
preceding the Initial Series Issuance Date. Approximately 12% of the
Receivables transferred to the Trust that were created under Accounts in
the Harris Portfolio were generated under Accounts which Harris originated
within the 24-month period preceding the Initial Series Issuance Date. The
Accounts originated or purchased by BKB represent a significant portion of
the Trust's initial portfolio. The levels of such delinquencies and losses
may increase as the average age of the Accounts increases, until the
Accounts become more seasoned.
Limited History of Trust and Transferor. The Transferor was formed in
January 1998, and the Trust was formed on the Initial Series Issuance Date.
The Transferor and the Trust have no substantial assets other than their
respective interests in the Receivables and the proceeds thereof as
described herein.
Reliance on First Data Resources Inc. Partners First has delegated
the majority of both the credit card processing and account servicing and
collection functions to FDR, a subsidiary of First Data Corp. ("FDC"),
pursuant to a seven-year contract, automatically renewable for an
additional two-year period, entered into on the Initial Series Issuance
Date. Under the terms of this contract, Partners First will be required to
obtain some of these services from FDR on an exclusive basis. If FDR should
fail to perform its functions or become insolvent or if the agreement is
terminated, a Pay Out Event could occur and delays in payments on the
Receivables and possible reductions in the dollar amounts thereof could
also occur. See "Credit Card Activities -- Processing and Servicing of
Credit Card Accounts."
Non-Recourse to the Account Originators, PFR, the Transferor or
Affiliates Thereof. No Securityholder will have recourse for payment of its
Securities to any assets of the Account Originators, PFR, the Transferor
(other than the Transferor Security, to the extent described herein), or
any affiliate thereof. Consequently, Securityholders must rely solely upon
payments on the Receivables for the payment of principal of and interest on
the Securities. Furthermore, under the Pooling and Servicing Agreement, the
Securityholders have an interest in the Receivables and collections thereon
only to the extent of the Securityholders' Interest and, to the limited
extent described herein, the Transferor's Interest. Should the Securities
not be paid in full on a timely basis, Securityholders may not look to any
assets of any of the Account Originators, PFR, the Transferor (other than
the Transferor Security, to the extent described herein), or any affiliate
thereof to satisfy their claims.
Characteristics as a Sale; Insolvency and Receivership Risks. Each
Account Originator and PFR represents and warrants in the applicable
Purchase Agreement that the transfer of all Receivables pursuant thereto to
the applicable purchaser is a valid sale and assignment of such Receivables
from such party to such purchaser, or if notwithstanding their intent, the
respective transfers of Receivables are not treated as sales, the
respective Purchase Agreements will be deemed to create a first priority
security interest in the Receivables.
With respect to Receivables conveyed by an Account Originator to PFR,
in a receivership or conservatorship of the Account Originator, if the
conveyance of Receivables by such Account Originator is not treated as a
sale, but is deemed to create a security interest in the Receivables
conveyed, PFR's interest in such Receivables may be subject to tax or other
governmental liens relating to the Account Originator arising before the
subject Receivables came into existence and to certain administrative
expenses of the receivership, conservatorship or bankruptcy proceeding.
Each of the Account Originators has taken or will take certain actions
required to perfect PFR's interest in the Receivables conveyed by such
Account Originator.
A conservator or receiver would have the power under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") to
repudiate contracts of, and to request a stay of up to 90 days of any
judicial action or proceeding involving, an Account Originator. However,
notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, an Account Originator, subject to certain qualifications,
a valid perfected security interest of PFR in the Receivables conveyed to
it by the Account Originator should be enforceable (to the extent of PFR's
"actual direct compensatory damages" (as described below)) and payments to
PFR with respect to the subject Receivables (up to the amount of such
damages) should not be subject to an automatic stay of payment or to
recovery by such a conservator or receiver. If, however, the conservator or
receiver were to assert that the security interest was unperfected or
unenforceable, or were to require PFR to establish its right to those
payments by submitting to and completing the administrative claims
procedure established under FIRREA, or the conservator or receiver were to
request a stay of proceedings with respect to the Account Originator, as
provided under FIRREA, delays in payments to the Trust and on the
Securities and possible reductions in the amount of those payments could
occur. In the event of a repudiation of obligations by a conservator or
receiver, FIRREA provides that a claim for the repudiated obligation is
limited to "actual direct compensatory damages" determined as of the date
of the appointment of the conservator or receiver (which in most cases are
expected to include the outstanding principal on the Securities plus
interest accrued thereon to the date of payment). The Federal Deposit
Insurance Corporation ("FDIC") has not adopted a formal policy statement on
payment of principal and interest on collateralized borrowings of banks
that are repudiated. On April 10, 1990, the Resolution Trust Corporation
(the "RTC"), formerly a sister agency of the FDIC, adopted a statement of
policy (the "RTC Policy Statement") 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 the 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 one case involving the repudiation by the RTC of certain secured
zero-coupon bonds issued by a savings association, a United States federal
district court held that "actual direct compensatory damage" in the case of
a marketable security meant the value of the repudiated bonds as of the
date of repudiation. If that court's view were applied to determine PFR's
"actual direct compensatory damages" in the event a conservator or receiver
of an Account Originator repudiated the Purchase Agreement pursuant to
which the subject Receivables were conveyed, the amount paid to
Securityholders could, depending upon circumstances existing on the date of
the repudiation, be less than the principal of the Securities and the
interest accrued thereon to the date of payment. See "Certain Legal Aspects
of the Receivables -- Certain Matters Relating to Insolvency."
With respect to Receivables conveyed by PFR to the Transferor, if PFR
were to become subject to a bankruptcy proceeding and the conveyance of
Receivables by PFR to the Transferor is not treated as a sale, but is
deemed to create a security interest in the Receivables conveyed, the
Transferor's interest in such Receivables may be subject to tax or other
governmental liens relating to PFR arising before the Receivables came into
existence and to certain administrative expenses of the bankruptcy
proceeding. PFR has taken or will take certain actions required to perfect
the Transferor's interest in the Receivables conveyed to it by the Account
Originators.
In a receivership or conservatorship of an Account Originator, or in
a bankruptcy proceeding involving PFR, if a receiver or conservator for the
Account Originator, or if a bankruptcy trustee for PFR, PFR as debtor in
possession, or a creditor of PFR were to take the view that the transfer of
the Receivables from PFR to the Transferor should be recharacterized as a
pledge of such Receivables, then delays in payments on the Securities or
(should the bankruptcy court rule in favor of any such trustee, debtor in
possession or creditor) reductions in such payments on such Securities
could result. In addition, in a bankruptcy proceeding involving Partners
First or PFR, if a bankruptcy trustee for Partners First, Partners First as
debtor in possession, or a creditor of Partners First, or if a bankruptcy
trustee for PFR, PFR as debtor in possession, or a creditor of PFR were to
take the view that any of Partners First, PFR or the Transferor should be
substantively consolidated, then delays in payments on the Securities or
(should the bankruptcy court rule in favor of any such trustee, debtor in
possession or creditor) reductions in such payments on such Securities
could result.
Although the Pooling and Servicing Agreement provides that the
Transferor will transfer all of its right, title, and interest in and to
the Receivables to the Trust, a court could treat such transactions as an
assignment of collateral as security for the benefit of holders of
Securities issued by the Trust. It is possible that the risk of such
treatment may be increased by the retention by the Transferor of the
Transferor Security and any other Class of Securities that may be issued
and retained by the Transferor or by the issuance of a Supplemental
Security to an Affiliate of the Transferor. The Transferor represents and
warrants in the Pooling and Servicing Agreement that the transfer of the
Receivables to the Trust is either a valid transfer and assignment of the
Receivables to the Trust or the grant to the Trust of a security interest
in the Receivables. The Transferor has taken and will take certain actions
required to perfect the Trust's interest in the Receivables and warrants
that if the transfer to the Trust is deemed to be a grant to the Trust of a
security interest in the Receivables, the Trustee will have a first
priority perfected security interest therein, subject only to tax or
government lien or other nonconsensual liens. If the transfer of the
Receivables to the Trust is deemed to create a security interest therein
under the Uniform Commercial Code ("UCC"), a tax or government lien or
other nonconsensual lien on property of the Transferor arising before
Receivables come into existence may have priority over the Trust's interest
in such Receivables. In the event of the insolvency of the Transferor,
certain administrative expenses may also have priority over the Trust's
interest in such Receivables. See "Certain Legal Aspects of the Receivables
- -- Transfer of Receivables."
To the extent that the Transferor is deemed to have granted a
security interest in the Receivables to the Trust and such security
interest was validly perfected before any insolvency of the Transferor and
was not granted or taken in contemplation of insolvency or with the intent
to hinder, delay, or defraud the Transferor or its creditors, such security
interest should not be subject to avoidance in the event of insolvency or
receivership of the Transferor, and payments to the Trust with respect to
the Receivables should not be subject to recovery by a bankruptcy trustee
or receiver of the Transferor. If, however, such a bankruptcy trustee or
receiver were to assert a contrary position, delays in payments on the
Securities and possible reductions in the amount of those payments could
occur.
In the event of a Servicer Default relating to the bankruptcy or
insolvency of the Servicer, and no Servicer Default other than such
bankruptcy or insolvency-related Servicer Default exists, the bankruptcy
trustee, conservator or receiver may have the power to prevent either the
Trustee or the Securityholders from appointing a successor Servicer. If the
Transferor consents or fails to object to the appointment of a bankruptcy
trustee or conservator, receiver or liquidator in any bankruptcy,
insolvency or similar proceedings of or relating to the Transferor, or the
commencement of an action for the appointment of a bankruptcy trustee or
conservator, receiver or liquidator in any insolvency or similar
proceedings, or for the winding-up, insolvency, bankruptcy, reorganization,
conservatorship, receivership or liquidation of the Transferor's affairs,
or notwithstanding an objection by the Transferor any such action remains
undischarged or unstayed for a period of 60 days; or the Transferor admits
in writing its inability to pay its debts generally as they become due,
files, or consents or fails to object (or objects without dismissal of any
such filing within 60 days of such filing) to the filing of, a petition to
take advantage of any applicable bankruptcy, insolvency or reorganization,
receivership or conservatorship statute, makes an assignment for the
benefit of its creditors or voluntarily suspends payment of its obligations
(any such event being an "Insolvency Event"), new Principal Receivables
would not be transferred by the Transferor to the Trust. In the event of an
Insolvency Event, the Trustee would sell the Receivables (unless Holders
(as defined herein) of Securities evidencing undivided interests
aggregating more than 50% of the aggregate unpaid principal amount of each
Series (or with respect to any Series with two or more Classes, 50% of the
unpaid principal amount of each Class) and certain other persons specified
in the Supplement for a Series instruct otherwise and provided that a
trustee for the Transferor does not order a sale despite such instructions
not to sell), thereby causing early termination of the Trust. The entire
proceeds of such sale or liquidation will be treated as collections of
Receivables and allocated accordingly among the Securityholders of each
Series, the holders of any Participations and the Transferor. Upon the
occurrence of a Pay Out Event, if a trustee, receiver or conservator is
appointed for the Transferor and no Pay Out Event other than such
insolvency of the Transferor exists, the trustee may have the power to
prevent the early sale, liquidation or disposition of the Receivables and
the commencement of the Early Amortization Period or Early Accumulation
Period and may be able to require that new Principal Receivables be
transferred to the Trust. In addition, the trustee, receiver or conservator
for the Transferor may have the power to cause early sale of the
Receivables and the early payment of the Securities or to prohibit the
continued transfer of Receivables to the Trust. See "Certain Legal Aspects
of the Receivables -- Certain Matters Relating to Insolvency."
While Partners First is the Servicer, cash collections held by
Partners First may, subject to certain conditions, be commingled and used
for the benefit of Partners First prior to each Transfer Date and, in the
event of the insolvency or bankruptcy of Partners First or, in certain
circumstances, the lapse of certain time periods, the Trust may not have a
perfected security interest in such collections and accordingly, be
entitled to such collections. Partners First will be allowed to make
monthly rather than daily deposits of collections to the Collection Account
if either (i) Partners First or an affiliate of Partners First which has
guaranteed the obligations of Partners First and is otherwise acceptable to
the Rating Agencies obtains a commercial paper rating of at least A-1 and
P-1 (or its equivalent) by the applicable Rating Agency or (ii) or Partners
First makes other arrangements that satisfy the Rating Agency Condition.
Unless otherwise provided in the related Prospectus Supplement, if either
of the foregoing conditions are not satisfied, then Partners First will,
within five business days, commence the deposit of collections directly
into the Collection Account within two business days of the Date of
Processing.
Consumer Protection Laws. The Accounts and Receivables are subject to
numerous federal and state consumer protection laws which impose
requirements on the solicitation, making, enforcement and collection of
consumer loans. Such laws, as well as any new laws or rulings which may be
adopted (including, but not limited to, federal or state interest rate caps
on credit cards), may adversely affect the Servicer's ability to collect on
the Receivables or maintain the required level of periodic finance charges,
annual membership fees and other fees. In addition, failure by the Servicer
or any subservicer to comply with such requirements could adversely affect
the ability of the Servicer, as agent for and on behalf of the related
Account Originator, to enforce the Accounts or Receivables.
Pursuant to the Pooling and Servicing Agreement, the Transferor makes
certain representations and warranties relating to the validity and
enforceability of the Accounts and the Receivables and pursuant to the
applicable Purchase Agreement the Account Originators and PFR make similar
representations and warranties with respect to the Receivables conveyed by
each such party. 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, compliance with
such representations and warranties, or for any other purpose. The sole
remedy if any such representation or warranty is not complied with and such
noncompliance continues beyond the applicable cure period, is that the
Receivables affected thereby will be reassigned to the Transferor (for
reassignment, in turn, to PFR). In addition, in the event of the breach of
certain representations and warranties, the Transferor may be obligated to
accept the reassignment of the entire Trust Portfolio. The proceeds of any
such reassignment will be deposited in the Collection Account and treated
as collections of Principal Receivables. If the proceeds from such
reassignment and any amounts on deposit in the Collection Account, the
Reserve Account and any amounts available from any Credit Enhancement are
not sufficient to pay any Securities in full, the amount of principal
returned to Securityholders will be reduced and some or all of the
Securityholders will incur a loss. In addition, because the proceeds of any
such reassignment will be distributed to Securityholders as principal prior
to the scheduled date of such repayment, Securityholders would not receive
the benefit of the interest rate on the Securities specified in the
applicable Prospectus Supplement for the period of time originally expected
on the amount of such early repayment, and accordingly, Securityholders
will bear the reinvestment risk resulting from faster payment of principal
of the Securities. There can be no assurance that a Securityholder would be
able to reinvest such early repayment amount at a similar rate of return.
See "Description of the Pooling and Servicing Agreement -- Representations
and Warranties" and "-- Servicer Covenants" and "Certain Legal Aspects of
the Receivables -- Consumer Protection Laws."
Application of federal and state bankruptcy and debtor relief laws
would affect the interests of Securityholders in the Receivables if such
laws result in any Receivables being written off as uncollectible when
there are no funds available pursuant to any applicable Credit Enhancement
or other sources. See "Description of the Pooling and Servicing Agreement
- -- Defaulted Receivables; Rebates and Fraudulent Charges."
Proposed Legislation -- Limitation on Finance Charges. Congress and
the states may enact new laws and amendments to existing laws to regulate
further the credit card industry or to reduce finance charges or other fees
or charges applicable to credit card accounts. The potential effect of any
such legislation could be to reduce the yield on the Accounts. If such
yield is reduced, a Pay Out Event or Reinvestment Event could occur, and
the Early Amortization Period or Early Accumulation Period would commence.
See "Description of the Securities -- Pay Out Events and Reinvestment
Events."
Generation of Additional Receivables; Dependency on Cardholder
Repayments. On the Initial Series Issuance Date, each of BKB and Harris
contributed to Partners First all of their respective rights under the
credit card accounts in the Partners First Portfolio, including the
Accounts, except (i) the related cardholder agreements, (ii) all rights to
create, enforce and collect receivables and any other amounts arising under
the credit card accounts in the Partners First Portfolio and (iii) all
rights to amend and modify the related cardholder agreements. Under the
Contribution Agreements and the Assistance Agreements, Partners First
designated each of BKB and Harris as the Account Originators with respect
to the credit card accounts in the Partners First Portfolio originated by
BKB and Harris, respectively. Since the March 1998 designation of BKB as
the Account Originator with respect to the credit card accounts in the
Partners First Portfolio, including the Accounts, BKB maintains the
cardholder relationships under such credit card accounts, including the
Accounts and any New Accounts originated by BKB. Upon the anticipated
establishment of the Bank, the Bank will maintain the cardholder
relationships under all of the Accounts originated by each of BKB and
Harris. There can be no assurance that holders of Harris credit cards whose
account relationships will be maintained by BKB, or that the holders of BKB
and Harris credit cards, whose account relationships will be maintained by
the Bank, will be willing to continue their credit card relationship with
BKB or the Bank, as applicable. The failure of BKB or the Bank to retain
sufficient numbers of these account relationships could have a material
adverse effect on the Trust. The Receivables may be paid at any time and
there is no assurance that there will be additional Receivables created in
the Accounts, that Receivables will be added to the Trust from Additional
Accounts designated to the Trust, or that any particular pattern of
cardholder repayments will occur. The commencement and continuation of a
Controlled Amortization Period or a Controlled Accumulation Period will be
dependent upon the continued generation of new Receivables to be conveyed
to the Trust. A significant decline in the amount of Receivables generated
could result in the occurrence of a Pay Out Event or Reinvestment Event and
the commencement of the Early Amortization Period or the Early Accumulation
Period. The full payment of the Invested Amount of a Series or Class is
dependent on cardholder repayments and will not be made if such repayment
amounts are insufficient to pay such Series or Class its Invested Amount in
full by the Series Termination Date. The Pooling and Servicing Agreement
provides that the Transferor will be required, and the Transferor Purchase
Agreement provides that PFR and the Transferor will be required (subject to
certain conditions), to designate Additional Accounts, the Receivables of
which will be added to the Trust in the event that the amount of the
Principal Receivables is not maintained at the Required Minimum Principal
Balance or if the Transferor Amount is less than the Required Transferor
Amount. Under the PFR Purchase Agreement, the receivables in each newly
originated credit card account are sold to PFR. However, if the Account
Originators fail to originate enough new credit card accounts and as a
result Additional Accounts are not designated by the Transferor and PFR
when required, a Pay Out Event or Reinvestment Event may occur and result
in the commencement of an Early Amortization Period or Early Accumulation
Period. In addition, a decrease in the effective yield on the Receivables
due to, among other things, a change in the annual percentage rates
applicable to the Accounts, an increase in the level of delinquencies or an
increase in convenience use (i.e., where cardholders pay their Receivables
early and thus avoid all finance charges on purchases) could cause the
commencement of an Early Amortization Period or Early Accumulation Period
as well as result in decreased protection to Securityholders against
defaults under the Accounts.
Non-relationship Accounts. For business reasons, BKB has excluded
from the BKB Portfolio accounts of cardholders with whom BKB had banking
relationships or potential banking relationships in addition to the credit
card relationship. Accordingly, the Receivables in the Trust which arise
under the Accounts included in the BKB Portfolio include only credit card
accounts with cardholders that do not have and are not expected to have any
other significant banking relationship with BKB. Additionally, the Harris
Portfolio includes all of its credit card accounts except corporate
accounts.
Limitations on Liability. In the event of a breach of a
representation or warranty by BKB or Harris under their respective Purchase
Agreements or Assignment and Assumption Agreements, BKB or Harris, as
applicable, will be liable to PFR for damages. Partners First has agreed to
indemnify BKB and Harris for any losses suffered by BKB or Harris, as
applicable, resulting from, among other things, damages payable to PFR in
respect of a breach by BKB or Harris of any of their respective
representations or warranties under the applicable Assignment and
Assumption Agreement, to the extent that BKB or Harris, as applicable,
would not have suffered such losses under the Initial Receivables Purchase
Agreements, and except for any such losses caused by the gross negligence
or willful misconduct of BKB or Harris, as applicable. In each of the
Assistance Agreements, Partners First agrees to indemnify BKB and Harris
for any losses suffered by BKB or Harris, as applicable, resulting from,
among other things, damages payable to PFR in respect of a breach by BKB or
Harris of any of their respective representations or warranties under the
Additional Receivables Purchase Agreements, except to the extent caused by
the gross negligence or willful misconduct of BKB or Harris, as applicable.
Under the Additional Receivables Purchase Agreements, the liability of BKB
and Harris for any breach of any representation or warranty is limited to
the amount of any recovery by BKB or Harris, as applicable, from Partners
First pursuant to Partners First's obligation to indemnify BKB and Harris.
Social, Legal,Technological, Economic and Other Factors. Changes in
card use and payment patterns by cardholders result from a variety of
social, legal, technological and economic factors. Social factors include
potential changes in consumers' attitudes towards financing purchases with
debt. Legal factors include changes in the laws affecting creditor's
rights. Technological factors include new methods of payment, such as debit
cards, electronic billing and payment services and personal computer
banking services. Economic factors include the rate of inflation,
unemployment levels, tax law changes, bankruptcy levels and relative
interest rates. The use of incentive programs (e.g., gift awards for card
usage) may also affect card use. The Transferor and Partners First are
unable to determine and have no basis to predict whether or to what extent
social, legal, technological or economic factors will affect card use or
repayment patterns. See "The Accounts."
Competition in the Credit Card Industry. The credit card industry is
highly competitive and operates in a legal and regulatory environment
increasingly focused on the cost of services charged for credit cards. As
new credit card issuers seek to enter the market and issuers seek to expand
their market share, there is increased use of advertising, target marketing
and pricing competition. Congress and the states may enact new laws and
amendments to existing laws to regulate further the credit card industry or
to reduce finance charges or other fees or charges applicable to credit
card accounts. In addition, certain credit card issuers assess annual
percentage rates or other fees or charges at rates lower than the rate
currently being assessed on most of the Accounts. If cardholders choose to
utilize competing sources of credit, the rate at which new Receivables are
generated in the Accounts may be reduced and certain purchase and payment
patterns with respect to Receivables may be affected. The Trust will be
dependent upon the continued ability of the Account Originators to generate
new Receivables. If the rate at which new Receivables are generated
declines significantly and the Transferor and PFR do not designate
Additional Accounts, a Pay Out Event or Reinvestment Event could occur, in
which event an Early Amortization Period or Early Accumulation Period would
commence.
In September 1994, the United States Court of Appeals for the Tenth
Circuit reversed a 1992 Utah federal court decision that the VISA
association violated antitrust laws when it denied membership in VISA to a
subsidiary of Sears, Roebuck & Co., on the basis that another former Sears
subsidiary at the time was the issuer of the Discover credit card, a
competitor of the VISA credit card. In June 1995, the United States Supreme
Court declined to review the decision of the court of appeals. MasterCard
has settled a similar lawsuit. This settlement by MasterCard or a similar
lawsuit against VISA could result in increased competition among issuers of
VISA and MasterCard credit cards and thereby have adverse consequences for
members of the MasterCard and VISA associations, such as the Account
Originators.
Ability of the Account Originators to Change Terms of the Accounts;
Decrease in Finance Charges. Pursuant to the Pooling and Servicing
Agreement, the Transferor is not transferring to the Trust the Accounts but
only the Receivables arising in the Accounts. The Account Originators and,
upon the anticipated establishment of the Bank, the Bank will have the
right to determine the annual percentage rates and the fees which are
applicable from time to time to the Accounts, to alter the Minimum Monthly
Payment required under the Accounts and to change various other terms with
respect to the Accounts. A decrease in the annual percentage rates or a
reduction in fees would decrease the effective yield on the Accounts and
could result in the occurrence of a Pay Out Event or Reinvestment Event and
the commencement of an Early Amortization Period or Early Accumulation
Period. An alteration of payment terms may result in fewer payments on
Receivables being made in any month. Under the applicable Purchase
Agreement, each Account Originator agrees that, unless required by law or
unless it deems it necessary to maintain on a competitive basis its credit
card business or a program operated by such credit card business based on a
good faith assessment by it of the nature of the competition with respect
to the credit card business or such program, it will not take any action
which would have the effect of reducing the Portfolio Yield (as defined
herein) to a level that could reasonably be expected to cause any Series to
experience a Pay Out Event or Reinvestment Event based on the insufficiency
of the Series Adjusted Portfolio Yield (as defined in the applicable
Prospectus Supplement) or any similar test or take any action that would
have the effect of reducing the Portfolio Yield to less than the highest
Average Rate (as defined herein) for any Group. "Portfolio Yield" means,
with respect to the Trust as a whole and, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction (a) the
numerator of which is the aggregate of the sum of the Series Allocable
Finance Charge Collections (as defined herein) for all Series during the
immediately preceding Monthly Period calculated on a cash basis after
subtracting therefrom the Series Allocable Defaulted Amount (as defined
herein) for all Series for such Monthly Period and (b) the denominator of
which is the total amount of Principal Receivables as of the last day of
such immediately preceding Monthly Period. Unless otherwise provided in the
Prospectus Supplement with respect to any Series, "Average Rate" means,
with respect to any Group, the percentage equivalent of a decimal equal to
the sum of the amounts for each outstanding Series (or each Class within a
Series consisting of more than one Class) within such Group obtained by
multiplying (a) the security rate for such Series or Class (adjusted to
take into account any payments made pursuant to any interest rate
agreements) and (b) a fraction, the numerator of which is the aggregate
unpaid principal amount of the Securities of such Series or Class and the
denominator of which is the aggregate unpaid principal amount of all
Securities within such Group. In addition, each Account Originator also
agrees that, unless required by law and except as provided above, such
Account Originator will take no action with respect to the applicable
credit card agreements or the applicable credit card guidelines that, at
the time of such action, such Account Originator reasonably believes will
have a material adverse effect on PFR and the Transferor and the
Securityholders, as assignees. In servicing the Accounts, each of the
Servicer and any successor Servicer will be required to exercise the same
care and apply the same policies that it exercises in handling similar
matters for its own or other comparable accounts. Except as specified
above, there are no restrictions specified in the Purchase Agreements on
the ability of an Account Originator to change the terms of its Accounts.
There can be no assurances that changes in applicable law, changes in
the marketplace or prudent business practice might not result in a
determination by an Account Originator to decrease customer finance
charges, fees or otherwise take actions which would change other Account
terms. Under certain circumstances, the Transferor will have the right and
the Transferor and PFR may be required from time to time to designate
Receivables existing in Additional Accounts or Participation Interests for
inclusion in the Trust. However, such Additional Accounts or Participation
Interests may not be of the same credit quality or have the same
characteristics as the Accounts, the Receivables of which have been
conveyed to the Trust. See "Description of the Pooling and Servicing
Agreement -- Additions of Accounts or Participation Interests."
Pre-Funding Account. With respect to any Series having a Pre-Funding
Account, in the event there is an insufficient amount of Principal
Receivables in the Trust at the end of the applicable Funding Period, the
Securityholders of such Series will be repaid principal from amounts on
deposit in the Pre-Funding Account (to the extent of such insufficiency)
following the end of such Funding Period, as described more fully in the
Prospectus Supplement. As a result of such repayment, Securityholders would
receive a principal payment earlier than they expected. In addition,
Securityholders would not receive the benefit of the interest rate on the
Securities specified in the applicable Prospectus Supplement for the period
of time originally expected on the amount of such early repayment and,
accordingly, Securityholders will bear the reinvestment risk resulting from
faster payment of principal of the Securities. There can be no assurance
that a Securityholder would be able to reinvest such early repayment amount
at a similar return.
Premium Option. Under the Pooling and Servicing Agreement the
Transferor may, by exercising the Premium Option, at any time or from time
to time designate a specified percentage of the amount of Receivables
arising in all or a specified portion of the Accounts that otherwise would
be treated as Finance Charge Receivables to be treated as Principal
Receivables. The Transferor might exercise the Premium Option because an
increase in the amount of collections of Principal Receivables could result
in a faster repayment of principal to Securityholders during an
Amortization Period or accumulation of principal during an Accumulation
Period. Exercise of the Premium Option by the Transferor could result in a
reduction of the portfolio yield with respect to collections of Finance
Charge Receivables thereby reducing amounts initially allocated to make
interest payments with respect to the Securities and cover losses allocated
to the Securities. See "Description of the Pooling and Servicing Agreement
- -- Premium Option."
Basis Risk. The Accounts generally have finance charges set at a
variable rate above the prime rate or another specified index. Any Class of
Securities offered hereby may bear interest at a floating rate based on a
different floating rate index. If there is a decline in the Prime Rate or
such other specified index, the amount of collections of Finance Charge
Receivables on the Accounts may be reduced, whereas the amounts payable as
interest with respect to the Securities and other amounts required to be
funded out of collections of Finance Charge Receivables may not be
similarly reduced.
Risks of Swaps. The Trustee on behalf of the Trust may enter into
interest rate swaps and related caps, floors and collars to minimize the
risk to Securityholders from adverse changes in interest rates. However,
such transactions will not eliminate fluctuations in the value of the
Receivables or prevent such losses if the value of the Receivables decline.
The Trust's ability to hedge all or a portion of its portfolio of
Receivables through transactions in Swaps (as defined herein) depends on
the degree to which interest rate movements in the market generally
correlate with interest rate movements in the Receivables.
The Trust's ability to engage in transactions involving Swaps will
depend on the degree to which the Trust can identify acceptable
counterparties (as defined herein). There can be no assurance that
acceptable counterparties will be available for a specific Swap at any
specific time.
The costs to the Trust of hedging transactions vary among the various
hedging techniques and also depend on such factors as market conditions and
the length of the contract. Furthermore, the Trust's ability to engage in
hedging transactions may be limited by tax considerations.
Swaps are not traded on markets regulated by the Commission or the
Commodity Futures Trading Commission, but are arranged through financial
institutions acting as principals or agents. In an over-the-counter
environment, many of the protections afforded to exchange participants are
not available. For example, there are no daily fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent
over a period of time. Because the performance of over-the-counter Swaps is
not guaranteed by any settlement agency, there is a risk of counterparty
default.
The Trust may consider taking advantage of investment opportunities
in Swaps that are not presently contemplated for use by the Trust or that
are not currently available but that may be developed, to the extent such
opportunities are both consistent with the Trust's objectives and legally
permissible investments for the Trust. Such opportunities, if they arise,
may involve risks that differ from or exceed those involved in the
activities described above and will be more fully described in the
applicable Prospectus Supplement. See "Description of the Pooling and
Servicing Agreement -- Interest Rate Swaps and Related Caps, Floors and
Collars."
Limited Nature of Rating. Any rating assigned to the Securities of a
Series or a Class by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Securityholders of such Series or Class
will receive the payments of interest and principal required to be made
under the Pooling and Servicing Agreement and the related Supplement and
will be based primarily on the value of the Receivables in the Trust and
the availability of any Credit Enhancement with respect to such Series or
Class. Any such rating will therefore generally address credit risk and
will not, unless otherwise specified in the related Prospectus Supplement
with respect to any Class or Series offered hereby, address the likelihood
that the principal of, or interest on, any Securities of such Class or
Series will be prepaid, paid on a scheduled date or paid on any particular
date before the applicable Series Termination Date. In addition, any such
rating will not address the possibility of the occurrence of a Pay Out
Event or Reinvestment Event with respect to such Class or Series or the
possibility of the imposition of United States withholding tax with respect
to non-U.S. Securityholders. Further, the available amount of any Credit
Enhancement with respect to any such Series or Class will be limited and
will be subject to reduction from time to time as described in the related
Prospectus Supplement. In addition, the rating of any Series or Class may
be dependent upon the rating of any provider of Series Enhancement for such
Series or Class. The rating of the Securities of a Class or Series will not
be a recommendation to purchase, hold or sell such Securities, and such
rating will not comment as to the marketability of such Securities, any
market price or suitability for a particular investor. There is no
assurance that any rating will remain for any given period of time or that
any rating will not be lowered or withdrawn entirely by a Rating Agency if
in such Rating Agency's judgment circumstances so warrant.
Issuance of New Series. The Trust, as a master trust, is expected to
issue new Series from time to time. While the terms of any Series will be
specified in a Supplement, the provisions of a Supplement and, therefore,
the terms of any new Series, will not be subject to the prior review or
consent of holders of the Securities of any previously issued Series. Such
terms may include methods for determining applicable investor percentages
and allocating collections, provisions creating different or additional
security or other Series Enhancements, provisions subordinating such Series
to other Series or subordinating other Series (if the Supplement relating
to such Series so permits) to such Series, and any other amendment or
supplement to the Pooling and Servicing Agreement which is made applicable
only to such Series. The obligation of the Trustee to issue any new Series
is subject to the following conditions, among others: (a) such issuance
will not result in any Rating Agency reducing or withdrawing its then
existing rating of the Securities of any outstanding Series or Class with
respect to which it is a Rating Agency (the notification in writing by each
Rating Agency to the Transferor, the Servicer and the Trustee that any
action will not result in such a reduction or withdrawal is referred to
herein as the "Rating Agency Condition") and (b) the Transferor shall have
delivered to the Trustee a certificate of an authorized officer to the
effect that, in the reasonable belief of the Transferor, such issuance will
not (i) result in the occurrence of a Pay Out Event or Reinvestment Event
or (ii) materially adversely affect the timing or amount of payments to the
Securityholders of any Series or Class (any of the conditions referred to
in the preceding clauses (i) and (ii) are referred to herein as an "Adverse
Effect"). There can be no assurance, however, that the issuance of any
other Series, including any Series issued from time to time hereafter,
might not have an impact on the timing or amount of payments received by a
Securityholder. In addition, the Supplements relating to Series which are
part of a Group as described herein may provide that collections of
Receivables allocable to such Series will be reallocated among all Series
in the Group. Consequently, the issuance of new Series in a Group may have
the effect of reducing the amount of collections of Receivables which are
reallocated to the Securities of existing Series in such Group. For
example, in a Reallocation Group, which will provide for the reallocation
of collections of Finance Charge Receivables allocable to a Series among
all Series in such Group, an additional Series which is issued with a
larger claim with respect to monthly interest than that of previously
issued Series in such Group (due to a higher security rate) will receive a
proportionately larger reallocation of collections of Finance Charge
Receivables. Such issuance will reduce the amount of collections of Finance
Charge Receivables which are reallocated to the existing Series in such
Group. Furthermore, there can be no assurance that, for any Series in a
Group, the Trust will issue any other Series in such Group. Accordingly,
the anticipated benefits of sharing or reallocation of collections of
Receivables may not be realized. See "Description of the Pooling and
Servicing Agreement -- New Issuances" and "-- Groups of Series."
Addition of Trust Assets. The Transferor may from time to time
designate Participation Interests to be conveyed to the Trust or may
designate Additional Accounts, the Receivables in which will be conveyed to
the Trust. In addition, under certain circumstances, the Transferor will be
obligated to designate Aggregate Addition Accounts or, at the Transferor's
option, Participation Interests for inclusion in the Trust. "Aggregate
Addition Accounts" means revolving credit card accounts established
pursuant to a credit card agreement between the Account Originators and the
person or persons obligated to make payments thereunder, excluding any
merchant, which is designated by the Transferor to be included as an
Account. Aggregate Addition Accounts may be subject to different
eligibility criteria than the Initial Accounts and may include accounts
originated using criteria different from those which were applied to the
Initial Accounts, because such accounts were originated at a later date or
were part of a portfolio of credit card accounts which were not part of the
Initial Accounts or which were acquired from another credit card issuer.
Moreover, Aggregate Addition Accounts may not be accounts of the same
credit quality as those previously included in the Trust. Consequently,
there can be no assurance that such Aggregate Addition Accounts will be of
the same credit quality as the Accounts, the Receivables of which were
initially included in the Trust. In addition, such Aggregate Addition
Accounts may consist of credit card accounts which have different terms
than the Accounts, the Receivables of which are now included in the Trust,
including lower periodic finance charges, which may have the effect of
reducing the average yield on the portfolio of Accounts. The designation of
Aggregate Addition Accounts will be subject to the satisfaction of certain
conditions, including that (a) such addition will satisfy the Rating Agency
Condition and (b) the Transferor shall have delivered to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Transferor, such addition will not have an Adverse Effect.
The Transferor expects to convey from time to time to the Trust the
Receivables arising in certain Aggregate Addition Accounts in accordance
with the provisions of the Pooling and Servicing Agreement.
After obtaining the consent of each Rating Agency, the Transferor may
also, from time to time, at its sole discretion, designate newly originated
Eligible Accounts to be included as Accounts ("New Accounts") subject to
the limitations and conditions specified in this paragraph. For purposes of
the definition of New Accounts, Eligible Accounts will be deemed to include
only types of revolving credit card accounts which are included as Initial
Accounts or which have previously been included in any Aggregate Addition
if the assignment related to such Aggregate Addition provides that such
type of revolving credit card account is permitted to be designated as a
New Account. Until such time as each applicable Rating Agency otherwise
consents, the number of New Accounts may be subject to certain
restrictions. To the extent New Accounts are designated for inclusion in
the Trust, the Transferor will deliver to the Trustee, at least
semi-annually, an opinion of counsel with respect to the New Accounts
included as Accounts confirming the validity and perfection of each
transfer of such New Accounts. If such opinion of counsel with respect to
any New Accounts is not so received, all Receivables arising in the New
Accounts to which such failure relates will be removed from the Trust. The
Transferor will designate New Accounts subject to the following conditions,
among others: (a) the New Accounts will all be Eligible Accounts; (b) such
conveyance will not result in the occurrence of a Pay Out Event or
Reinvestment Event; and (c) such conveyance will not have been made in
contemplation of an Insolvency Event with respect to the Transferor, PFR,
Partners First or any Account Originator. New Accounts and Aggregate
Addition Accounts are collectively referred to herein as "Additional
Accounts."
Any Participation Interests to be included as Trust Assets or any
Eligible Accounts, other than New Accounts, to be included as Accounts
after the Initial Series Issuance Date, are collectively referred to herein
as an "Aggregate Addition." See "Description of the Pooling and Servicing
Agreement -- Addition of Accounts or Participation Interests."
Allocations. To the extent provided in any Supplement, or any
amendment to the Pooling and Servicing Agreement, all or a portion of the
Receivables or Participation Interests conveyed to the Trust and all
collections received with respect thereto may be allocated to one or more
Series or Groups as long as the Rating Agency Condition shall have been
satisfied with respect to such allocation, and the Servicer shall have
delivered an officer's certificate to the Trustee to the effect that the
Servicer reasonably believes such allocation will not have an Adverse
Effect.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the
net proceeds from the sale of the Securities of any Series offered hereby,
before the deduction of expenses, will be paid to the Transferor. Unless
otherwise specified in the related Prospectus Supplement, the Transferor
will use such proceeds to pay PFR the purchase price of the Receivables,
which in turn will apply such amounts to pay the Account Originators the
purchase price of the Receivables acquired from such parties.
THE TRUST
The Trust has been formed pursuant to the Pooling and Servicing
Agreement. The Trust does not and will not engage in any business activity
other than acquiring and holding the Receivables and the other assets of
the Trust and proceeds therefrom, issuing Securities, the Transferor
Security, Participations and any Supplemental Security and making payments
thereon and on any Series Enhancements and related activities. As a
consequence, the Trust does not and is not expected to have any source of
capital other than the Trust Assets. The Trust is administered in
accordance with the laws of the State of Delaware.
The Transferor conveyed to the Trust, without recourse, its interests
in all Eligible Receivables existing in the Initial Accounts at the close
of business on the Initial Series Issuance Date, and will convey to the
Trust, without recourse, its interest in all Eligible Receivables arising
under such Accounts thereafter, in exchange for the net cash proceeds from
the sale of one or more Series of Securities plus the Transferor Security
representing the Transferor's Interest. In addition, the Transferor may
convey from time to time to the Trust, without recourse, except as provided
in the Pooling and Servicing Agreement, its interests in all Eligible
Receivables existing in certain Additional Accounts and Participation
Interests, if any, at the close of business on each applicable date of
designation thereof. The Trust Assets consist of the Eligible Receivables
arising under certain VISA(R) and MasterCard(R) revolving credit card
accounts (the "Accounts"), and the proceeds thereof, including recoveries
on charged-off Receivables, any other fees, proceeds of credit insurance
policies relating to the Receivables and may include the right to receive
Interchange, if any, allocable to the Securities, funds on deposit in
certain accounts of the Trust for the benefit of Securityholders,
Participation Interests, if any, and any Credit Enhancement issued with
respect to a particular Series (the drawing on or payment of any Series
Enhancement for the benefit of a Series or Class of Securityholders will
not be available to the Securityholders of any other Series or Class).
Pursuant to the Transferor Purchase Agreement, the Transferor has the right
(subject to certain limitations and conditions, including satisfaction of
the Rating Agency Condition) and in some circumstances under the Pooling
and Servicing Agreement is obligated, to require PFR to designate from time
to time Additional Accounts to be included as Accounts and the Transferor
will convey to the Trust, pursuant to the Pooling and Servicing Agreement,
its interests in all Eligible Receivables of such Additional Accounts or
Participation Interests. Under the Pooling and Servicing Agreement, the
Transferor may convey Participation Interests to the Trust. See
"Description of the Pooling and Servicing Agreement -- Additions of
Accounts or Participation Interests." In addition, the Transferor may, but
is not obligated to, designate from time to time Participation Interests or
Receivables from Accounts to be removed from the Trust. See "Description of
the Pooling and Servicing Agreement -- Removal of Accounts."
CREDIT CARD ACTIVITIES
GENERAL
The Receivables conveyed and to be conveyed to the Trust pursuant to
the Pooling and Servicing Agreement have been or will be generated from
transactions made by holders of certain credit card accounts (the "Trust
Portfolio") that have been selected from the Partners First Portfolio
including the total portfolio of VISA and MasterCard accounts originated or
acquired by BKB (the "BKB Portfolio") and Harris (the "Harris Portfolio").
The BKB Portfolio includes all credit card accounts originated or acquired
by it with the exception of (i) those accounts of cardholders who reside in
the primary geographic market of BKB and its affiliates (i.e.,
Massachusetts, Rhode Island, Connecticut and New Hampshire), (ii) those
accounts of other cardholders having other banking relationships with BKB
or its affiliates and (iii) student, VIP, foreign accounts and accounts
with employees of BKB and its affiliates. The Harris Portfolio includes all
of its credit card accounts except corporate accounts. Going forward, it is
anticipated that BKB and Harris (and, following its establishment, the
Bank) will originate new Accounts to be included in the Partners First
Portfolio. See "-- Account Origination." Such new Accounts will be
originated and serviced following the business model currently used in
originating and servicing the Partners First Portfolio. That business model
evolved from the business model originally developed by BKB and FAMIS. See
"-- Development of the Business Model of Partners First; The Role of
FAMIS."
The Partners First Portfolio may in the future also include accounts
originated by financial institutions other than BKB or Harris. Any such
other financial institutions may choose not to include all of their credit
card accounts in the Partners First Portfolio, particularly if, similar to
BKB, any such financial institution chooses to retain its regional or
relationship accounts. See "-- Account Origination." Following the
acquisition of any such new accounts, the receivables arising under such
Accounts will be originated and serviced following the business model
currently used in originating and servicing the Partners First Portfolio.
See "-- Development of the Business Model of Partners First; The Role of
FAMIS." Receivables originated by financial institutions other than BKB and
Harris may be included in the Trust Portfolio upon satisfaction of certain
conditions, including the Rating Agency Condition. It is anticipated that
Partners First will continue operating its business as described herein and
that the Account Originators will continue to originate new Accounts
regardless of whether the Bank is established or whether additional
portfolios of accounts are acquired.
The Accounts were generated under the VISA and MasterCard
associations of which BKB and Harris are members. The BKB Portfolio and the
Harris Portfolio include VISA Classic and MasterCard standard accounts,
which are standard accounts, and VISA Gold and Gold MasterCard accounts,
which are premium accounts. Premium accounts are generally subject to
stricter underwriting criteria than standard accounts, including higher
income requirements. Premium accounts generally have higher credit limits
and provide cardholders with services not available to cardholders of
standard accounts. For the BKB originated accounts, the same finance
charges are applied to its premium and standard accounts. In general, for
the Harris Portfolio, premium accounts are priced at a lower annual
percentage rate than standard accounts; however, there are exceptions based
on risk profile and cardholder behavior. With regard to both portfolios,
for accounts with an annual membership fee, premium accounts are assessed a
higher fee than standard accounts.
Cardholders may use their VISA and MasterCard credit cards for three
types of transactions: credit card purchases, cash advances and convenience
checks issued by the Account Originator. Cardholders obtain cash advances
when they use their VISA or MasterCard credit card to obtain cash from a
financial institution or via an automated teller machine. Cardholders may
also effect balance consolidations by transferring their balances from
credit card accounts at other financial institutions to their credit card
account at the Account Originator. The balances so transferred are then
consolidated with their account at the Account Originator. Balance
consolidations, which have been treated by BKB in the same manner as
purchases and by Harris as cash advances, may be done by cardholders either
at the time an account is originated or anytime thereafter. The Servicer
will treat balance consolidations for the BKB Portfolio in the same manner
as purchases and by the end of 1998, consistent with the conversion of the
Harris Portfolio to the FDR processing system, the Servicer will treat
balance consolidations for the Harris Portfolio in the same manner as
purchases. Cardholders also receive and may utilize special convenience
checks issued by an Account Originator. Convenience checks may be used by
cardholders to draw against their VISA and MasterCard credit card accounts
at any time. The Servicer treats such draws in the same manner as cash
advances. All amounts due with respect to purchases, cash advances and
convenience checks are included in the Receivables.
Each cardholder is subject to an agreement with the Account
Originator governing the terms and conditions of the related VISA or
MasterCard credit card account. Pursuant to each such agreement, except as
described herein, the Account Originator reserves the right, subject to
advance notice to the cardholder as may be required by law, to add to,
delete or change the terms and conditions of its VISA or MasterCard credit
card accounts at any time, including increasing or decreasing periodic
finance charges, fees, other charges or minimum monthly payment
requirements.
DEVELOPMENT OF THE BUSINESS MODEL OF PARTNERS FIRST; THE ROLE OF FAMIS
The Partners First Portfolio will be originated and serviced
following a business model originally established by BankBoston, N.A.
("BankBoston") and First Annapolis Marketing Information Services, Inc.
("FAMIS"), a subsidiary of First Annapolis Consulting, Inc. ("First
Annapolis"). Currently, under such business model: (i) the functions
required to be performed by an insured financial institution under
applicable law and the rules of MasterCard and VISA are performed by BKB
(and, in certain circumstances, may be performed by Harris) and, as
described herein, would be assumed by the Bank following its establishment;
(ii) credit processing, cardholder communication, customer payment
processing, certain collection activities and certain other account
servicing functions are performed by FDR; and (iii) the account marketing
and portfolio management activities, including brand strategy, development
of credit policy and product pricing are performed by Partners First, which
also proactively monitors and supervises FDR's activities to ensure
compliance with performance standards established by Partners First.
In 1995, BankBoston determined to enter the domestic credit card
business, and entered into a contract with FAMIS to facilitate the bank's
credit card activities. BankBoston began soliciting accounts in September
1995. Under its agreement with BankBoston, FAMIS utilized its database
management, data mining, and predictive modeling techniques to develop
credit card performance models. These models were used by BankBoston, in
connection with the origination of new credit card accounts, to provide a
statistical correlation of certain characteristics of potential cardholders
with credit risk and to formulate target cardholder profiles to be used in
monthly direct mailings. Under its agreement with BankBoston, FAMIS was
also responsible for performing most of BankBoston's account marketing and
portfolio management activities, including functions pertaining to brand
strategy and development of credit policy and product pricing. BankBoston
was responsible for the performance of functions required to be performed
by an insured financial institution under applicable law and the rules of
MasterCard and VISA, including entering into credit card agreements with
cardholders, issuing credit cards, making all final credit decisions and
providing certain settlement services.
Concurrent with the formation of its relationship with FAMIS,
BankBoston also entered into an agreement with FDR to provide support to
FAMIS primarily with respect to account servicing. Under the terms of its
agreement with BankBoston, FDR performed account servicing functions
including (i) processing credit requests in accordance with the credit
policies developed by FAMIS and adopted by BankBoston, (ii) communicating
with cardholders and potential cardholders, all final determinations with
respect to credit card applications, (iii) providing credit card "plastics"
to customers approved for accounts in accordance with the models developed
by FAMIS and adopted by BankBoston, (iv) handling customer inquiries and
similar customer service functions, (v) processing customer payments and
facilitating settlement of merchant payments and interchange, and (vi)
certain collection activities. FAMIS was responsible for supervising, on
behalf of BankBoston, all of FDR's activities and developed various systems
to perform these monitoring functions proactively. FAMIS also was
responsible for evaluating FDR's compliance with performance standards
established by FAMIS.
In order to consolidate its affiliates' credit card activities, in
April 1997, BankBoston formed and transferred all of its customer credit
card accounts to BKB and assigned to BKB its agreements with each of FAMIS
and FDR. Additional accounts generated by other bank affiliates of
BankBoston were also subsequently transferred to BKB.
By mid-1997, BKB and FAMIS had structured a unique business model
(substantially similar to the current model employed by Partners First and
FAMIS) for engaging in the consumer credit card business in which BKB
provided basic functions related to its status as an insured financial
institution while all other account servicing and management functions were
performed by unaffiliated third parties with expertise in those areas. As
of December 31, 1997, BKB had approximately $1.7 billion in outstanding
credit card receivables maintained under the business model developed with
FAMIS.
Pursuant to an agreement entered into on the Initial Series Issuance
Date, BKB and First Annapolis entered into a joint venture with Bankmont
pursuant to which Partners First was created. As part of this transaction,
Harris, a subsidiary bank of Bankmont, contributed to Partners First the
Harris Portfolio and $115 million in cash in exchange for a 69% equity
interest in Partners First. BKB contributed to Partners First the BKB
Portfolio in exchange for a 19% equity interest in Partners First. First
Annapolis contributed to Partners First substantially all of the assets and
liabilities of FAMIS (approximately 70 employees of FAMIS, including
management, are now employed by Partners First); its models, databases and
intellectual property; its equipment (including sophisticated hardware and
software); and all of its other intangible property (including its
marketing and analysis expertise), in exchange for a 12% equity interest in
Partners First. In exchange for such contributions, Partners First agreed
to provide essentially the same services with respect to the BKB Portfolio
and the Harris Portfolio as FAMIS provided to BankBoston and BKB with
respect to their credit card business, including marketing and account
solicitation and management services, and monitoring FDR's account
servicing functions.
Partners First concurrently entered into a services agreement with
FDR pursuant to which FDR performs substantially the same services with
respect to the accounts in the BKB and Harris Portfolios as it performed
with respect to the credit card business of BankBoston and BKB.
Partners First also entered into an Assistance Agreement with BKB
pursuant to which BKB provides similar services with respect to the BKB
Portfolio and Harris Portfolio as BKB had provided with respect to the
accounts originated under its agreement with FAMIS. Under the Assistance
Agreement, BKB, as an Account Originator, acts as the insured financial
institution party (either as the original issuer or by assignment) to the
cardholder agreements pertaining to the BKB Portfolio and the Harris
Portfolio. Similar to the prior agreement with FAMIS, while BKB has adopted
the credit policies devised by Partners First, BKB is responsible for all
final credit decisions, as well as providing certain settlement services
with respect to the accounts. Partners First may enter into an agreement
with Harris for the provision of substantially similar services by Harris
with respect to new accounts originated as a result of Harris' marketing
initiatives.
Partners First contemplates that, in the future, it will establish a
federally insured financial institution as a subsidiary (the "Bank"), which
will either be a newly chartered financial institution formed by Partners
First, or an existing financial institution acquired by Partners First and
that the Bank will replace BKB as the Account Originator with respect to
the BKB Portfolio and the Harris Portfolio and consistent therewith, will
perform BKB's issuing functions. At such time, the Purchase Agreements
pertaining to the BKB Portfolio and the Harris Portfolio will be assigned
to the Bank, and the Assistance Agreement with BKB and any similar
Assistance Agreement with Harris will be terminated. It is anticipated that
any such new relationship will be structured in a manner consistent with
the current BKB-Partners First arrangement, as well as the former
BankBoston-BKB-FAMIS arrangement, in that the Bank will adopt credit
policies devised by Partners First (in accordance with requirements of any
applicable federal regulatory agencies) and will only perform those limited
credit, issuing and settlement functions as had been performed by BKB, and
that the bulk of the credit card business will be conducted by Partners
First with the assistance of FDR.
BUSINESS STRATEGY
Following the business strategy and credit card performance models
established by FAMIS, Partners First will design and market its credit card
program based on an empirical analysis of the credit card business at the
level of the individual cardholder. Partners First will collect information
about credit card issuers, the consumer credit market, and current as well
as historical behavior of individual customers and prospective customers
from both internal and external sources. Factors which Partners First will
consider include credit scores, balance amounts, purchase types and
amounts, finance charges paid and other indicia of cardholder behavior over
time.
It is anticipated that following the establishment of the Bank, the
Bank may enter into alliances with credit card issuers who have concluded,
among other things, that their current size and operational capacities are
too limited to allow them to maintain successful credit card businesses on
a stand alone basis. It is anticipated that such arrangements may involve
the selling of such a credit card issuer's non-strategic accounts to the
Bank at fair market value and the retention by such credit card issuer of
those assets it considers strategic (e.g., relationship or regional
accounts). Any such non-strategic accounts acquired by the Bank would be
included as Accounts and the Receivables arising thereunder added to the
Trust only if certain conditions, including the Rating Agency Condition,
are satisfied.
Partners First may provide management and advisory services for the
strategic credit card accounts retained by any such credit card issuer in a
manner analogous to FAMIS's prior relationship with BKB; however, any such
retained strategic credit card accounts would not be included in the
Partners First Portfolio and the receivables arising in such credit card
accounts would not be included in the Trust.
PROCESSING AND SERVICING OF CREDIT CARD ACCOUNTS
Historically, following the business model developed with FAMIS, BKB
delegated the processing, servicing and collection of its accounts to FDR.
In addition, FAMIS performed the functions related to the development of
credit policy and risk management, marketing acquisition and account
management, data mining and FDR oversight as described above in "--
Development of the Business Model of Partners First; The Role of FAMIS."
Historically, the Harris Portfolio was serviced by Harris' employees
in Buffalo Grove, Illinois. As of the Initial Series Issuance Date, the
accounts in the Harris Portfolio were maintained on the system utilized by
Harris prior to the Initial Series Issuance Date, which is the CardPac
System. FDR has recently acquired the Buffalo Grove facility, has hired
certain of its employees and is servicing the Harris Portfolio. The Harris
Portfolio was converted to the FDR processing system in March 1998.
Continuing the practice established by FAMIS and BankBoston as
described above (see "-- Development of the Business Model of Partners
First; The Role of FAMIS"), Partners First has delegated the majority of
both the credit card processing and account servicing and collection
functions to FDR, a subsidiary of First Data Corp. ("FDC"), pursuant to a
seven-year contract, automatically renewable for an additional two-year
period, entered into on the Initial Series Issuance Date. Certain database
management, data mining and predictive model creating functions and all
daily oversight of FDR and FDR activities will be performed in-house by
employees of Partners First. The remainder of the processing and servicing
work will be performed by a combination of alternative vendors and in-house
staff. FDR facilities currently located in Omaha, Nebraska, Tulsa,
Oklahoma, Buffalo Grove, Illinois, Atlanta, Georgia, Matteson, Illinois and
Phoenix, Arizona are utilized to clear transactions through the VISA and
MasterCard systems, post transactions to cardholder accounts, create
billing statements, provide credit processing, operational support
(including customer service), and perform collections activity on
delinquent accounts according to the policies and procedures recommended by
Partners First. Transactions creating the Receivables flow through both the
VISA and MasterCard systems and the FDR processing system. If FDR should
fail to perform its functions or become insolvent, or should either the
VISA or MasterCard system materially curtail its activities, or should the
Account Originators cease to be members of either VISA or MasterCard
associations for any reason, a Pay Out Event could occur and delays in
payments on the Receivables and possible reductions in the dollar amounts
thereof could also occur.
ACCOUNT ORIGINATION
BankBoston began originating accounts in September 1995 through (i)
direct mail solicitations of individuals residing in the United States who
had been prescreened at credit bureaus on the basis of criteria furnished
by FAMIS; (ii) direct mail solicitations of individuals residing in the
United States without prescreening; (iii) outbound telemarketing programs;
and (iv) applicant initiated requests made at the BankBoston's branch
offices or by telephone or via written letter. Consistent with the
methodology formulated by FAMIS and BankBoston, BKB later applied the same
credit criteria without distinction among the foregoing sources of
applications, as described below in "-- Underwriting Procedures." In
addition, BKB purchased a credit card portfolio consisting of approximately
324,000 accounts with outstanding principal receivables of approximately
$311 million in July 1996 from BayBank, N.A., of which approximately $19
million of Receivables were transferred to the Trust on the Initial Series
Issuance Date.
In 1966, Harris began originating accounts through applicant
initiated requests. In 1983, Harris began soliciting new cardholders
through mass mailings from bureau extracts. Outbound telemarketing programs
conducted in 1994 and 1995 were an additional source of applications for
Harris. Credit policy, as described below in "Underwriting Procedures" does
not vary with application source; however, it has varied over time. In
September 1990, Harris purchased a portfolio of credit card accounts with
approximately $207 million of outstanding receivables from United Jersey
Bank ("UJB"). As of December 1997, the UJB portfolio comprised
approximately 36,830 active accounts and $80 million of receivables
outstanding.
In March 1998, Partners First designated BKB as the Account
Originator with respect to the credit card accounts in the Partners First
Portfolio, including the Accounts originated by Harris. Going forward, it
is anticipated that BKB and Harris (and, following its establishment, the
Bank) will originate new Accounts to be included in the Partners First
Portfolio. Prior to the establishment of the Bank, Partners First may also
designate other financial institutions as Account Originators and any such
Account Originator would originate credit card accounts into the Partner
First Portfolio. Any such new Accounts will be originated and serviced
following the business model currently used in originating and servicing
the Partners First Portfolio. See "-- Development of the Business Model of
Partners First; The Role of FAMIS." Following the establishment of the
Bank, the Bank will be the sole Account Originator with respect to the
Accounts and any New Accounts. In addition, it is anticipated that the Bank
or Partners First will acquire accounts through the selective acquisition
of portfolios. None of the credit card accounts originated by the Bank or
any Account Originator may be designated as Accounts and none of the
receivables arising under such credit card accounts may be transferred to
the Trust unless certain conditions, including the Rating Agency Condition,
are satisfied.
Going forward, the Account Originators will continue to originate
accounts through pre-approved and non-prescreened direct mail solicitations
to creditworthy consumers on a nationwide basis.
Partners First has developed and will undertake in connection with
any portfolio acquisitions a detailed due diligence process with respect to
the related accounts, including analyzing all available data and other
information pertaining to such accounts, and initiating direct dialogue
between Partners First management officials who are primarily responsible
for certain functions (particularly marketing and product management, risk,
collections, credit and legal and regulatory compliance) and their
counterparts at any such prospective account originator.
Partners First generally seeks to acquire accounts which will
complement its existing credit card management strategy. Partners First's
due diligence process focuses on credit quality, card utilization and
activation, pricing, and whether the anticipated revenue on the accounts in
the portfolio is sufficient to justify the acquisition thereof.
On April 3, 1998, Partners First purchased a credit card portfolio
consisting of approximately 101,000 Visa and MasterCard consumer revolving
credit card accounts with outstanding principal receivables of
approximately $188 million from Comerica Bank Midwest, N.A. ("Comerica").
Partners First determined to make this acquisition after concluding,
following a detailed due diligence review with respect to this portfolio,
that the acquisition was consistent with Partners First's portfolio
acquisition objectives, as described above. None of the accounts in the
Comerica portfolio has been designated as an Additional Account. While no
decision has been made as to whether receivables in these accounts
originated by Comerica will be added at any time to the Trust, such a
decision may be made in the future. Any such addition would be subject to
the restrictions on additions of Accounts in the Pooling and Servicing
Agreement, including the Rating Agency Condition. See "Description of the
Pooling and Servicing Agreement -- Additions of Accounts or Participation
Interests."
The accounts which Partners First purchased from Comerica have not
been included in the Trust. Such accounts are currently being financed with
borrowings under certain credit lines which are secured by the receivables
arising therein. Going forward, to the extent Partners First determines not
to include the receivables arising in any of such accounts in the Trust, it
is anticipated that such accounts will continue to be financed with
borrowings under such credit lines.
UNDERWRITING PROCEDURES
Historically, Harris, BankBoston and later BKB reviewed all
applications for credit card accounts for completeness and creditworthiness
based on credit underwriting criteria established by BKB and Harris, as
applicable. They used credit reports issued by independent credit reporting
agencies and, in the event of any discrepancies between the application and
the credit report and in certain other circumstances, they verified certain
information regarding applicants.
Going forward, the primary new account source for the Account
Originators will be prescreened direct mail solicitation of qualified
prospective cardholders. Following the model established by FAMIS with
respect to the credit card business of BankBoston and BKB, underwriting
criteria included in the Credit Card Guidelines recommended by Partners
First, will be utilized by the Account Originator at the credit bureaus to
generate a list of qualifying prospective cardholders. Account Originators
will also obtain credit scores using scoring models licensed by the credit
bureaus from Fair Isaac & Company ("FICO"), which specializes in developing
credit scoring models. The credit scoring models to be used by Account
Originators are intended to provide a general indication, based on the
information available, of the applicant's willingness and ability to repay
the applicant's obligations. Credit scoring will evaluate a potential
cardholder's credit profile and certain of the information provided by the
applicant in the credit application in order to statistically quantify
credit risk. Models for credit scoring, similar to those designed by FAMIS
as described above (see "-- Development of the Business Model of Partners
First; The Role of FAMIS"), will be developed by Partners First using
statistics to evaluate common characteristics and their correlation with
credit risk. The credit scoring models used will often be reviewed and
updated to reflect more current statistical data.
Partners First will also use information obtained on behalf of the
Account Originators from various third-party sources and Partners First's
internal database and then apply various predictive models to the list of
potential cardholders supplied by the credit bureaus to determine the most
creditworthy and more profitable prospects to solicit by mail. Potential
cardholders who receive direct mail solicitations will be required to
complete and return an acceptance certificate. The information supplied by
the potential cardholder on the acceptance certificate will be used by
Partners First to verify the potential cardholder's credit information. As
part of the verification process Partners First will review a new credit
bureau report and credit score which will be updated based on the
information supplied by the applicant and established lending criteria.
Credit lines will be established by the Account Originators after this
verification process has been completed and will be in an amount
commensurate with the new cardholder's updated credit profile, credit score
and income.
Non-prescreened applicants for credit cards will be reviewed for
completeness and accuracy. The Servicer will credit score all
non-prescreened applicants utilizing a FICO supplied credit scorecard.
Applicants who score above or below pre-set thresholds will be accepted or
rejected by the Account Originators accordingly. Applicants whose credit
score lies between these pre-set thresholds will be reviewed manually by a
credit analyst as part of the determination of the applicant's
creditworthiness. Account Originators have the ability to override
decisions made by the scorecard upon receipt of additional information from
the applicant. Credit lines will be assigned by the Account Originators
based upon the cardholder's credit score, income and credit profile.
Generally, the Account Originators will issue credit cards that
expire two years after issuance and will reissue credit cards with two-year
expiration dates, so long as the payment behavior and usage of the
cardholder satisfy certain criteria.
ADDITIONAL ACCOUNTS
Eligible Receivables from Additional Accounts, if needed, will be
added to the Trust from accounts originated or acquired by the Account
Originators through pre-approved applications and other sources, as
described above. It is expected that portfolios of credit card accounts
purchased by an Account Originator from other credit card issuers will be
added to the Trust from time to time. Any such addition would be subject to
the restrictions on additions of Accounts in the Pooling and Servicing
Agreement, including the Rating Agency Condition. See "Risk Factors --
Addition of Trust Assets."
BILLING AND PAYMENTS
The VISA and MasterCard credit card accounts of the BKB Portfolio
and, since the conversion of the Harris Portfolio to the FDR system in
March 1998, the Harris Portfolio are currently grouped into twenty-one
billing cycles (each, a "Billing Cycle") ending on various days throughout
each month. Each Billing Cycle has its own monthly billing date, at which
time the activity in the related accounts during the month ending on such
billing date is processed and mailed to such cardholders. FDR sends a
monthly billing statement to each BKB Portfolio cardholder with a debit or
credit balance of at least one dollar at the end of the Billing Cycle or
when a finance charge has been imposed. Monthly statements are sent to each
Harris Portfolio cardholder unless (i) the account has been charged off,
(ii) the account has a zero balance with no activity, (iii) the account is
coded as having a bankrupt or deceased cardholder, (iv) the account
activity has been confirmed as fraudulent or (v) the account has had a
credit balance for more than six months.
With respect to the BKB Portfolio, each month cardholders generally
are required to make at least a minimum payment (the "Minimum Monthly
Payment") equal to the sum of (i) the greater of 2.0% of the new balance
shown on the monthly statement or $15, or if the new balance is less than
$15, the amount of the new balance, (ii) any past due amount from prior
months, (iii) any amounts in excess of the credit limit, (iv) any assessed
fees, and (v) any credit insurance premiums.
With respect to the Harris Portfolio, the Minimum Monthly Payment
varies depending on the account and equals (i) for accounts where the
current balance is less than the credit limit, the greater of either 1/33rd
or 1/36th (depending on the account) of the current balance (not including
amounts in dispute) or an amount between $5.00 and $15.00 (depending on the
account) and (ii) for accounts that are overlimit, the amount the account
balance is above the credit limit.
Going forward, BKB's policy will generally continue to be applied to
new accounts in the Partners First Portfolio.
With regard to the BKB Portfolio, BKB reserves the option to allow
individual cardholders or groups of cardholders to skip their Minimum
Monthly Payments for one or more months. Finance charges in connection with
such skipped payments continue to accrue, and the amount of the next
Minimum Monthly Payment is determined as described above, based on the
account balance at the end of the next Billing Cycle. The effect of skipped
payments is to increase the amount of Finance Charge Receivables and to
decrease the rate of payments of Principal Receivables during the Billing
Cycles for which the offers apply. BKB's policy will continue to be applied
with respect to both new accounts originated by the Account Originators and
accounts from the Harris Portfolio.
Currently, for both the BKB Portfolio and the Harris Portfolio,
monthly periodic finance charges are calculated on both cash advances and
purchases by multiplying the average daily cash advance balance or average
daily purchase balance, as applicable, by the applicable monthly periodic
rate. Monthly periodic finance charges are currently calculated on cash
advances and purchases (including certain fees and unpaid finance charges)
from the later of (i) the date of the transaction or (ii) the first day of
the Billing Cycle in which the transaction is posted to the account, for
both the BKB Portfolio and, since the conversion of the Harris Portfolio to
the FDR processing system in March 1998, the Harris Portfolio. The monthly
periodic finance charges in new accounts originated by the Account
Originators will also be calculated in a manner consistent with this
policy. Monthly periodic finance charges are not assessed in most
circumstances on purchases if the purchases new balance shown in the
billing statement is paid by the due date specified in the monthly billing
statement, or if the purchases previous balance is zero. The next statement
closing date is on average 25-28 days after the billing date. The average
annual percentage rates for purchases and cash advances for virtually every
account are variable rates. For the BKB Portfolio, the current annual
percentage rate for purchases is a variable rate based on The Wall Street
Journal prime rate plus a spread generally ranging from 3.75% to 7.90%. The
current annual percentage rate for cash advances is a variable rate based
on The Wall Street Journal prime rate plus a spread generally ranging from
5.75% to 9.90%. Spreads in the BKB Portfolio vary depending on risk profile
and cardholder behavior. For the Harris Portfolio, the current annual
percentage rate for both purchases and cash advances is a variable rate
based on The Wall Street Journal prime rate plus a spread generally ranging
from 5.90% to 7.90%. Spreads vary depending on account type (premium or
standard), risk profile and behavior.
For the BKB Portfolio, for accounts with an annual membership fee,
generally the annual membership fee is $18.00 for standard accounts and
$28.00 for premium accounts. Approximately 83% of BKB Portfolio Accounts
are assessed an annual fee. BKB reserves the right to waive the annual
membership fee, or a portion thereof, at its discretion, in connection with
solicitations for new accounts, or when BKB determines a waiver to be
necessary to operate its credit card business on a competitive basis. For
the Harris Portfolio accounts with an annual membership fee, generally the
annual membership fee is $20.00 for standard accounts and $35.00 for
premium accounts. Approximately 13% of the Harris Portfolio accounts are
assessed an annual fee. Harris reserved the right to waive the annual
membership fee, or a portion thereof, at its discretion, in connection with
solicitations for new accounts, or when Harris determined a waiver to be
necessary to operate its credit card business on a competitive basis. In
general for the Harris Portfolio, membership fees have not been waived. If
a fee is billed and is not paid, the account becomes delinquent and will be
processed by a collection representative. Generally, an account is closed
upon determining that the related cardholder is unwilling to pay the fee.
The annual membership fee for both the BKB and the Harris Portfolio
accounts is non-refundable. The annual fee policy for new accounts will
mirror the previous BKB policy of pricing cardholders according to their
behavior and risk profile. Harris Portfolio accounts will be repriced
gradually over time to achieve consistency with this policy. However,
certain Harris relationship accounts may be given a more favorable
structure.
With reference to the BKB Portfolio, in addition to the annual
membership fee, accounts are charged certain other fees including: (i) a
late fee, generally in the amount of $25.00 with respect to any monthly
payment if the required minimum monthly payment is not received by the
payment due date shown on the monthly billing statement; (ii) a cash
advance fee of 2.5% of the amount of the advance subject to a minimum fee
of $3.50 per transaction, (iii) a returned check charge, generally in the
amount of $25.00 and (iv) an over-the-limit fee, generally in the amount of
$25.00 with respect to any account more than a specified amount over its
credit limit at the time the monthly billing statement is created. With
reference to the Harris Portfolio, in addition to the annual membership
fee, accounts are charged certain other fees including: (i) a late fee,
generally in the amount of $25.00 with respect to any monthly payment if
the required minimum monthly payment is not received by the payment due
date shown on the monthly billing statement; (ii) a cash advance fee of
2.0% of the amount of the advance subject to a minimum fee of $3.50, (iii)
a returned check charge, generally in the amount of $25.00 and (iv) an
over-the-limit fee, generally in the amount of $25.00 with respect to any
account more than a specified amount over its credit limit at the time the
monthly billing statement is created. Finance charge policies for new
accounts will mirror the previous BKB policy of pricing cardholders
according to their behavior and risk profile. Harris accounts will be
repriced gradually over time to achieve consistency with this policy.
With regard to the BKB Portfolio, payments by cardholders are
processed and applied first to annual membership fees, next to billed and
unpaid finance charges, next to any billed fees and other amounts not
subject to finance charges and then to billed and unpaid transactions. Any
excess is applied to unbilled transactions in the order determined by BKB
and then to unbilled finance charges. Since the conversion of the Harris
Portfolio to the FDR processing system in March 1998, Harris Portfolio
cardholder payments are processed and applied in the same manner that the
BKB Portfolio is processed and applied.
With respect to pricing, the accounts in the Harris Portfolio will
gradually be repriced according to the policy established and utilized in
connection with the BKB Portfolio. Annual fees and annual percentage rates
will be assigned to accounts based on risk profile and cardholder behavior.
It is expected that, eventually, most accounts will be subject to the same
late, overlimit, cash advance and returned check fees. There can be no
assurance that monthly periodic finance charges, fees and other charges
imposed by the Account Originators will remain at current levels in the
future.
INTERCHANGE
Members participating in the VISA and MasterCard associations receive
certain fees ("Interchange") as partial compensation for taking credit
risk, absorbing fraud losses, and funding receivables for a limited period
prior to initial billing. Under the VISA and MasterCard systems, a portion
of this Interchange in connection with cardholder charges for merchandise
and services is passed from banks which clear the transactions for
merchants to credit card-issuing banks. Interchange ranges from
approximately 1% to 2% of the transaction amount, although VISA and
MasterCard associations may from time to time change the amount of
Interchange reimbursed to banks issuing their credit cards. Interchange
with respect to each Account Originator will be allocated to PFR in an
amount equal to the product of (i) the total Interchange with respect to
the Account Originator's entire portfolio of credit card accounts and (ii)
a fraction, the numerator of which is the total credit card sales charges
arising in the credit card accounts included in the Partner First Portfolio
originated by such Account Originator, and the denominator of which is the
total credit card sales charges arising in the Account Originator's entire
portfolio of credit card accounts. Interchange received by PFR will be
allocated to the Trust in an amount equal to the product of (i) the
aggregate Interchange received by PFR from the Account Originators and (ii)
a fraction, the numerator of which is the total amount of Receivables
arising in the Accounts in the Trust Portfolio and the denominator of which
is the total credit card sales charges arising in all of the credit card
accounts in the Partners First Portfolio. Such amount is an estimate of the
actual Interchange and may be greater or less than the actual amount of the
Interchange relating to the Accounts from time to time. Unless otherwise
stated in the related Prospectus Supplement, Interchange will be included
in collections of Finance Charge Receivables for purposes of calculating
the Portfolio Yield for a Series.
COLLECTION OF DELINQUENT ACCOUNTS
With regard to both the Harris Portfolio and the BKB Portfolio, an
account is delinquent if a minimum payment due thereunder is not received
by the Servicer by the time the cardholder's next billing statement is
generated, which is generally within five days after the due date printed
in the previous statement. Delinquent accounts are routed to the
pre-collections system at FDR where they are prioritized and early stage
collection efforts are initiated. These early efforts include the printing
of the overdue amount on the next billing statement and either a telephone
call or letter requesting payment of the past due amount. If these early
stage collection efforts are ineffective, contact by telephone and/or mail
is escalated and efforts to collect past due amounts are made more
frequently subject to all applicable legal requirements.
In general, an account is restricted and charging privileges are
suspended when the account becomes fifteen (15) to thirty (30) days past
due, or when a cardholder exceeds the account's credit limit within pre-set
parameters. At sixty (60) days past due, no additional extensions of credit
would be authorized for any reason. Account Originators generally reserve
the right to enter into agreements with delinquent cardholders to extend or
otherwise change an account's payment schedule. A delinquent account could
be re-aged once in any twelve (12) month period if the delinquent
cardholder makes a payment equal to three minimum payments over a ninety
(90) day period.
The policy for both portfolios is to charge-off as uncollectible any
account which is six billing cycles past due (i.e., 180 days delinquent).
If notice is received that a cardholder has filed for bankruptcy then the
account is charged-off as soon as is practicable in the month following
confirmation of bankruptcy. Credit evaluation, servicing and charge-off
policies and collection practices may change over time in accordance with
the business judgment of the applicable Account Originator, applicable law,
guidelines established by applicable regulatory authorities and market
conditions.
RECOVERIES
The Transferor and the Servicer will be required, pursuant to the
terms of the Pooling and Servicing Agreement, to transfer to the Trust all
amounts received by the Servicer (net of out-of-pocket costs of collecting
such amounts, which the Transferor believes represents an immaterial
portion of the total collections with respect to the Receivables),
including insurance proceeds, with respect to Defaulted Receivables,
including amounts received by the Transferor or the Servicer from the
purchaser or transferee with respect to the sale or other disposition of
Defaulted Receivables ("Recoveries"). In the event of any such sale or
other disposition of Receivables, Recoveries will not include amounts
received by the purchaser or transferee of such Receivables but will be
limited to amounts received by the Transferor or the Servicer from the
purchaser or transferee. Collections of Recoveries will be treated as
collections of Principal Receivables; provided, however, that to the extent
the aggregate amount of Recoveries received with respect to any monthly
period exceeds the aggregate amount of Principal Receivables (other than
Ineligible Receivables) on the day such Receivables became Defaulted
Receivables for each day in such monthly period, the amount of such excess
will be treated as collections of Finance Charge Receivables.
For the BKB Portfolio, the Servicer utilizes FDR's facilities to
administer the recovery of defaulted receivables. The Servicer will
prioritize defaulted receivables according to the likelihood of successful
recovery and selects a collection method based on the information supplied
by FDC. Included among the collection methods utilized by the Servicer are
primary and secondary third-party collection agencies, which are retained
to recover the defaulted receivables. As compensation for their services,
the collection agencies receive a percentage of the amounts they collect.
For the Harris portfolio, Harris utilized internal facilities to administer
the recovery of defaulted receivables. Since the conversion of the Harris
Portfolio to the FDR processing system in March 1998, FDR administers the
recovery of defaulted receivables in a manner consistent with BKB
originated accounts.
FRAUD PREVENTION
Historically, for both the BKB and Harris Portfolios, each
organization reviewed all applications for potential fraud by comparing the
information on the credit card application against the information supplied
by the credit bureaus. In addition, all applications were checked against
information supplied by the Issuers' Clearinghouse, a national fraud
database maintained jointly by VISA and MasterCard. For the BKB Portfolio,
once an account is approved, transactions are monitored by FDR which scores
each transaction based upon its likelihood of being fraudulent. For the
Harris Portfolio, the majority of fraud functions were performed
internally; however, both FDR and VISA monitored transactions and attempted
to identify potential fraudulent activity. Potential fraudulent activity
was researched by investigators and, dependent upon their findings,
accounts may be blocked or closed. Going forward, Partners First's
recommended fraud policy will follow that of BKB.
PARTNERS FIRST HOLDINGS, LLC
Partners First Holdings, LLC is a limited liability company organized
in the State of Delaware on December 17, 1997. Its principal executive
office is located at 900 Elkridge Landing Road, Suite 300, Linthicum, MD
21090-2925, and its telephone number is (410) 865-8700. The Prospectus
Supplement for each Series will provide additional information relating to
the Servicer.
Partners First was formed in December 1997 pursuant to a Master
Agreement for the Formation of a Limited Liability Company, dated as of
September 2, 1997 (the "Master Formation Agreement"), among BankBoston
Corporation, a Massachusetts corporation, of which BKB is an indirect
subsidiary, Bankmont Financial Corp., a Delaware corporation ("Bankmont"),
Harris, which is an indirect subsidiary of Bankmont, and First Annapolis
Consulting, Inc., a Maryland corporation ("First Annapolis"). The owners of
Partners First are BKB, EFS (U.S.), Inc., a Delaware corporation and
subsidiary of Bankmont, and First Annapolis Marketing Information Services,
Inc. ("FAMIS"), a Maryland corporation and wholly-owned subsidiary of First
Annapolis. EFS (U.S.), Inc., BKB and FAMIS have a 69%, 19% and 12% interest
respectively, in the common equity of Partners First. Partners First has
been appointed as Servicer with respect to the Accounts and the related
Receivables. Partners First has delegated substantially all of its
servicing duties to FDR.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
PFRF was organized under the laws of the State of Delaware on January
26, 1998 and is a special purpose wholly owned subsidiary of PFR. PFRF's
principal office is currently located at 900 Elkridge Landing Road, Suite
301, Linthicum, MD 21090-2925, and its telephone number is (410) 855-8600.
The Transferor was organized for the limited purposes of facilitating the
type of transactions described herein, purchasing, holding, owning and
selling receivables, and any activities incidental to and necessary or
convenient for the accomplishment of such purposes. Neither PFR, as the
sole member of the Transferor, nor the Transferor's board of managers
intends to change the business purpose of the Transferor.
THE ACCOUNTS
The Receivables arise in certain credit card accounts that have been
selected from the total portfolio of MasterCard and VISA accounts in the
Partners First Portfolio on the basis of criteria set forth in the Pooling
and Servicing Agreement. An account must be an Eligible Account to be
included in the Trust Portfolio. On the Initial Series Issuance Date, the
Trust Portfolio represented approximately 97% of the credit card accounts
in the Partners First Portfolio.
Pursuant to the Transferor Purchase Agreement and the Pooling and
Servicing Agreement, the Transferor has the right or may be obligated
(subject to certain limitations and conditions) to require PFR to
designate, from time to time, additional qualifying VISA and MasterCard
consumer revolving credit card accounts to be included as Accounts and to
convey to the Transferor for ultimate conveyance to the Trust all
Receivables of such Additional Accounts, whether such Receivables are then
existing or thereafter created. Those Accounts must meet the eligibility
criteria set forth in the Pooling and Servicing Agreement as of the date
the Transferor designates such Accounts as Additional Accounts. PFR will
convey the Receivables then existing or thereafter created under such
Additional Accounts to the Transferor, which in turn will convey such
Receivables to the Trust. Under the Pooling and Servicing Agreement, the
Transferor also has the right to convey Participation Interests to the
Trust subject to the conditions described in the Pooling and Servicing
Agreement. See "Description of the Pooling and Servicing Agreement --
Additions of Accounts or Participation Interests."
As of each date with respect to which Additional Accounts are
designated, PFR will represent and warrant to the Transferor that the
Receivables generated under the Additional Accounts meet the eligibility
requirements set forth in the Transferor Purchase Agreement and the
Transferor will represent and warrant to the Trust that such Receivables or
Participation Interests, if any, meet the eligibility requirements set
forth in the Pooling and Servicing Agreement. See "Description of the
Pooling and Servicing Agreement -- Conveyance of Receivables." Because the
Initial Accounts were designated as of the Initial Series Issuance Date and
subsequent Aggregate Addition Accounts may be designated from time to time,
there can be no assurance that all of such Accounts will continue to meet
the eligibility requirements as of any Series Issuance Date. In the Pooling
and Servicing Agreement the Transferor is required to make certain
representations and warranties with respect to the Accounts and the
Receivables as of each Series Issuance Date (or as of the related addition
date with respect to Additional Accounts). In the event of a breach of any
such representation or warranty by the Transferor, the Transferor may be
required to accept reassignment of the related Receivables and, to the
extent such breach relates to an Account, such Account will no longer be
included as an Account. See "Description of the Pooling and Servicing
Agreement -- Representations and Warranties."
Subject to certain limitations and restrictions, the Transferor may
also designate certain Accounts or Participation Interests, if any, for
removal from the Trust, in which case such Participation Interests or the
Receivables of the Removed Accounts will be reassigned to the Transferor.
Throughout the term of the Trust, the Receivables in the Trust will consist
of Receivables generated under the Accounts, Participation Interests, if
any, and the Receivables generated under Additional Accounts, but will not
include the Receivables generated under Removed Accounts or removed
Participation Interests.
The Prospectus Supplement relating to a Series will provide certain
information about the Trust Portfolio as of the date specified. Such
information will include the amount of Principal Receivables, the amount of
Finance Charge Receivables, the range of principal balances of the Accounts
and the average thereof, the range of credit lines of the Accounts and the
average thereof, the range of ages of the Accounts and the average thereof,
information with respect to the geographic distribution of the Accounts,
the types of Accounts and delinquency statistics relating to the Accounts.
DESCRIPTION OF THE SECURITIES
GENERAL
The Securities will be issued pursuant to the Pooling and Servicing
Agreement and the related Supplement substantially in the forms filed as
exhibits to the Registration Statement of which this Prospectus is a part.
The following summary describes certain terms of the Pooling and Servicing
Agreement and the related Supplement and is qualified in its entirety by
reference to the Pooling and Servicing Agreement and the related
Supplement.
The Securities will evidence undivided beneficial interests in the
Trust Assets allocated to such Securities, representing the right to
receive from such Trust Assets funds up to (but not in excess of) the
amounts required to make payments of interest and principal in the manner
described below.
The Securities will initially be represented by one or more
Securities 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 stated in the related Prospectus
Supplement, the Securities 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 & Co. ("Cede"). Accordingly, Cede is expected to be the holder of
record of the Securities. Except under the limited circumstances described
herein, no Securityholder will be entitled to receive Securities in fully
registered, certificated form ("Definitive Securities") representing such
person's interest in the Securities. Unless and until Definitive Securities
are issued under the limited circumstances described herein, all references
herein to actions by Securityholders shall refer to actions taken by DTC
upon instructions from its Participants (as defined herein), and all
references herein to distributions, notices, reports and statements to
Securityholders shall refer to distributions, notices, reports and
statements to Cede, as the registered holder of the Securities, for
distribution to the beneficial owners of the Securities in accordance with
DTC procedures. See "-- Book-Entry Registration" and "-- Definitive
Securities."
Payments of interest and principal will be made on each related
Interest Payment Date to the Securityholders in whose names the Securities
were registered on the last day of the calendar month preceding such
Interest Payment Date, unless otherwise specified in the related Prospectus
Supplement (each, a "Record Date").
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
Securityholders may hold their Securities through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations which are participants in such
systems.
Cede, as nominee for DTC, will hold the global Security or
Securities. Cedel and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in Cedel's and
Euroclear's names on the books of their respective Depositaries (as defined
herein) which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC. Citibank, N.A.
will act as depositary for Cedel and Morgan Guaranty Trust Company of New
York will act as depositary for Euroclear (in such capacities, the
"Depositaries").
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 UCC and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act.
DTC was created to hold securities for its participating organizations
("Participants") and facilitate the settlement of securities transactions
between Participants through electronic book-entry changes in accounts of
its Participants, thereby eliminating the need for physical movement of
securities. Participants include underwriters, securities brokers and
dealers, 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 ("Indirect Participants").
Transfers between Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants (as defined herein) and
Euroclear Participants (as defined
herein) will occur in accordance with their respective rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, 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 DTC rules on behalf of the relevant European
international clearing systems by its Depositary. 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 of securities received in
Cedel or Euroclear as a result of a transaction with a Participant will be
made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear or Cedel Participants 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
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.
Securityholders that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Securities may do so only through Participants and Indirect
Participants. In addition, Securityholders will receive all distributions
of principal and interest on the Securities from the Trustee through DTC
and its Participants. Under a book-entry format, Securityholders will
receive payments after the related Distribution Date, as the case may be,
because, while payments are required to be forwarded to Cede, as nominee
for DTC, on each such date, DTC will forward such payments to its
Participants, which thereafter will be required to forward them to Indirect
Participants or holders of beneficial interests in the Securities. It is
anticipated that the only Securityholder will be Cede, as nominee of DTC,
and that holders of beneficial interests in the Securities will not be
recognized by the Trustee as Securityholders under the Pooling and
Servicing Agreement. Holders of beneficial interests in the Securities will
only be permitted to exercise the rights of Securityholders under the
Pooling and Servicing Agreement indirectly through DTC and its Participants
who in turn will exercise their rights through DTC. The Trustee, the
Transferor, the Servicer and any paying agent, transfer agent or registrar
may treat the registered holder in whose name any Security is registered
(expected to be Cede) as the absolute owner thereof (whether or not such
Security shall be overdue and notwithstanding any notice of ownership or
writing thereon or any notice to the contrary) for the purpose of making
payment and for all other purposes.
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 Securities and is
required to receive and transmit distributions of principal of and interest
on the Securities. Participants and Indirect Participants with which
holders of beneficial interests in the Securities have accounts similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of these respective holders.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of
holders of beneficial interests in the Securities to pledge Securities to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such Securities, may be limited due to the lack
of a Definitive Security for such Securities.
DTC has advised the Transferor that it will take any action permitted
to be taken by a Securityholder under the Pooling and Servicing Agreement
and the related Supplement only at the direction of one or more
Participants to whose account with DTC the Securities are credited.
Additionally, DTC has advised the Transferor that it may take actions with
respect to the Securityholders' Interest that conflict with other of its
actions with respect thereto.
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 securities. Transactions may be settled
in Cedel in any of 36 currencies, including United States dollars. Cedel
provides to 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 regulation 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. 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.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ("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 securities 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. Euroclear 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. Euroclear
is operated by the Brussels, Belgium office of Morgan Guaranty Trust
Company of New York (the "Euroclear Operator"), under contract with
Euroclear Clearance Systems 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 Euroclear on behalf of Euroclear Participants.
Euroclear Participants include banks (including central banks),
underwriters, securities brokers and dealers and other professional
financial intermediaries. Indirect access to Euroclear 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 "Euroclear Provisions"). The
Euroclear Provisions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts
of payments with respect to securities in Euroclear. All securities in
Euroclear are held on a fungible basis without attribution of specific
securities to specific securities clearance accounts. The Euroclear
Operator acts under the Euroclear Provisions only on behalf of Euroclear
Participants, and has no record of or relationship with persons holding
through Euroclear Participants.
Distributions with respect to Securities 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. See "U.S. Federal Income Tax Consequences --
Foreign Investors." Cedel or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a Securityholder under
the Pooling and Servicing Agreement and the related Supplement on behalf of
a Cedel Participant or 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 Securities 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.
DEFINITIVE SECURITIES
Unless otherwise specified in the related Prospectus Supplement, the
Securities of each Series will be issued as Definitive Securities in fully
registered, certificated form to Security Owners or their nominees 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 Securities,
and the Trustee or the Transferor is unable to locate a qualified
successor, (ii) the Transferor, at its option, elects to terminate the
book-entry system through DTC or (iii) after the occurrence of a Servicer
Default, Security Owners evidencing not less than 50% of the aggregate
unpaid principal amount of the Securities, 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
interests of the Security 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 Securities. Upon surrender by DTC of
the definitive securities representing the Securities and instructions for
re-registration, the Trustee will issue the Securities in the form of
Definitive Securities, and thereafter the Trustee will recognize the
holders of such Definitive Securities as Securityholders under the Pooling
and Servicing Agreement and the related Supplement ("Holders").
Distribution of principal and interest on the Securities will be made
by the Trustee directly to Holders in accordance with the procedures set
forth herein and in the Pooling and Servicing Agreement and the related
Prospectus Supplement. Interest payments and principal payments will be
made to Holders in whose names the Definitive Securities were registered at
the close of business on the related Record Date. Distributions will be
made by check mailed to the address of such Holder as it appears on the
register maintained by the Trustee. The final payment on any Security
(whether Definitive Securities or Securities registered in the name of
Cede), however, will be made only upon presentation and surrender of such
Security on the final payment date at such office or agency as is specified
in the notice of final distribution to Securityholders. The Trustee will
provide such notice to registered Securityholders not later than the fifth
day of the month of the final distribution.
Definitive Securities will be transferable and exchangeable at the
offices of the transfer agent and registrar, which will initially be the
Trustee. No service charge will be imposed for any registration of transfer
or exchange, but the transfer agent and registrar may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
INTEREST
Interest will accrue on the Invested Amount or outstanding principal
amount of the Securities of a Series or Class offered hereby at the per
annum rate either specified in or determined in the manner specified in the
related Prospectus Supplement. Except as otherwise provided herein,
collections of Finance Charge Receivables and certain other amounts
allocable to the Securityholders' Interest of a Series or Class offered
hereby will generally be used to make interest payments to Securityholders
of such Series or Class on each Interest Payment Date specified in the
related Prospectus Supplement; provided that after the commencement of an
Early Amortization Period with respect to such Series, interest will be
distributed to such Securityholders monthly on each Special Payment Date.
If the Interest Payment Dates for a Series or Class occur less frequently
than monthly, such collections or other amounts (or the portion thereof
allocable to such Class) will be deposited in one or more Interest Funding
Accounts and used to make interest payments to Securityholders of such
Series or Class on the following Interest Payment Date. If a Series has
more than one Class of Securities, each such Class may have a separate
Interest Funding Account. Funds on deposit in an Interest Funding Account
will be invested in Eligible Investments. Any earnings (net of losses and
investment expenses) on funds in an Interest Funding Account will be paid
to, or at the direction of, the Transferor except as otherwise specified in
any Supplement. Interest with respect to the Securities of each Series
offered hereby will accrue and be calculated on the basis described in the
related Prospectus Supplement.
PRINCIPAL
The Securities of each Series will have a Revolving Period during
which collections of Principal Receivables and certain other amounts
otherwise allocable to the Invested Amount of such Series will, (x) if such
Series is a Principal Sharing Series, be treated as Shared Principal
Collections and will be distributed to, or for the benefit of, the
Securityholders of other Series in such Group or, if not required for such
purpose, the holders of the Transferor Securities or deposited into the
Special Funding Account or (y) if such Series is not a Principal Sharing
Series, paid to the holders of the Transferor Securities or deposited into
the Special Funding Account, as more fully described in the related
Prospectus Supplement. Unless an Early Amortization Period or Early
Accumulation Period commences with respect to a Series, following the
Revolving Period with respect to such Series, such Series will have either
a Controlled Accumulation Period or a Controlled Amortization Period.
During the Controlled Accumulation Period, if any, with respect to a
Series, collections of Principal Receivables and, if so specified in the
related Prospectus Supplement, certain other amounts allocable to the
Securityholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be deposited on each
Distribution Date in a Principal Funding Account and used to make principal
distributions to the Securityholders of such Series or any Class thereof
when due. If so specified in the related Prospectus Supplement, the amount
to be deposited in a Principal Funding Account for any Series offered
hereby on any Distribution Date may, but will not necessarily, be limited
to an amount equal to a Controlled Accumulation Amount specified in such
Prospectus Supplement plus any existing deficit controlled accumulation
amount arising from prior Distribution Dates. If the Prospectus Supplement
for a Series so specifies, the amount to be deposited in the Principal
Funding Account on a Distribution Date may be a variable amount. If a
Series has more than one Class of Securities, each Class may have a
separate Principal Funding Account and Controlled Accumulation Amount and
the Controlled Accumulation Period with respect to each Class may commence
on different dates. In addition, the related Prospectus Supplement may
describe certain priorities among such Classes with respect to deposits of
principal into such Principal Funding Accounts.
Subject to certain conditions including those set forth below, upon
written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Accumulation Period with respect to a Series, and to
extend the length of the Revolving Period of such Series. The Servicer may
make such election only if the Accumulation Period Length (determined as
described below) is less than the number of months specified in the
Prospectus Supplement for such Series. 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 fully fund the Principal Funding Account no later than the
Scheduled Payment Date (as defined in the applicable Prospectus Supplement)
for such Series, based on (a) the expected monthly collections of Principal
Receivables expected to be distributable to the Securityholders of all
Series (unless such Series is not a Principal Sharing Series), assuming a
principal payment rate no greater than the lowest monthly principal payment
rate on the Receivables for the preceding twelve months and (b) the amount
of principal expected to be distributable to Securityholders of Series
(which may exclude certain other Series) which are not expected to be in
their Revolving Periods during the Accumulation Period of the Series in
respect of which the Accumulation Period Length is being determined. If the
Accumulation Period Length is less than the number of months specified in
the Prospectus Supplement for such Series, the Servicer 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 of a
Series based on the Invested Amounts of certain other Series which are
scheduled to be in their Revolving Periods during the Accumulation Period
for such Series and on increases in the principal payment rate occurring
after the Series Issuance Date for such Series. The length of the
Accumulation Period for any Series will not be less than one month. If the
Accumulation Period of a Series is postponed in accordance with the
foregoing, and if a Pay Out Event occurs after the date originally
scheduled as the commencement of the Accumulation Period, it is probable
that Securityholders would receive some of their principal later than if
the Accumulation Period had not been so postponed.
During the Controlled Amortization Period, if any, with respect to a
Series, collections of Principal Receivables and certain other amounts
allocable to the Securityholders' Interest of such Series (including Shared
Principal Collections, if any, allocable to such Series) will be used on
each Distribution Date to make principal distributions to any Class of
Securityholders then scheduled to receive such distributions. If so
specified in the related Prospectus Supplement, the amount to be
distributed to Securityholders of any Series offered hereby on any
Distribution Date may, but will not necessarily, be limited to an amount
equal to the Controlled Amortization Amount specified in such Prospectus
Supplement plus any existing deficit controlled amortization amount arising
from prior Distribution Dates. If a Series has more than one Class of
Securities, each Class may have a different Controlled Amortization Amount.
In addition, the related Prospectus Supplement may describe certain
priorities among such Classes with respect to such distributions.
During the Early Accumulation Period, if any, with respect to a
Series, collections of Principal Receivables and certain other amounts
allocable to the Securityholders' Interest of such Series (including Shared
Principal Collections, if any, allocated to such Series) will be deposited
on each Distribution Date in a Principal Funding Account and used to make
distributions of principal to the Securityholders of such Series or Class
on the Expected Final Payment Date. The amount to be deposited in the
Principal Funding Account will not be limited to any Controlled Deposit
Amount.
During the Early Amortization Period with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to
the Securityholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be distributed as
principal payments to the applicable Securityholders monthly on each
Distribution Date beginning with the first Special Payment Date. During the
Early Amortization Period with respect to a Series, distributions of
principal to Securityholders of such Series will not be subject to any
Controlled Deposit Amount or Controlled Distribution Amount. In addition,
upon the commencement of the Early Amortization Period, any funds on
deposit in a Principal Funding Account with respect to such Series will be
paid to the Securityholders of the relevant Class or Series on the first
Special Payment Date.
Funds on deposit in any Principal Funding Account established with
respect to a Class or Series offered hereby will be invested in Eligible
Investments and may be subject to a guarantee or guaranteed investment
contract or a deposit account or other mechanism specified in the related
Prospectus Supplement intended to assure a minimum rate of return on the
investment of such funds. In order to enhance the likelihood of the payment
in full of the principal amount of a Class of Securities offered hereby at
the end of a Controlled Accumulation Period or Early Accumulation Period
with respect thereto, such Class may be subject to a maturity liquidity
facility or a deposit account or other similar mechanism specified in the
relevant Prospectus Supplement.
PAY OUT EVENTS AND REINVESTMENT EVENTS
The Revolving Period with respect to a Series will continue through
the date specified in the applicable Prospectus Supplement and the
Controlled Amortization Period or Controlled Accumulation Period will begin
at such time, unless a Pay Out Event or Reinvestment Event occurs. The
Early Amortization Period with respect to such Series will commence when a
Pay Out Event occurs or is deemed to occur and the Early Accumulation
Period will occur when a Reinvestment Event occurs or is deemed to occur. A
"Pay Out Event" will occur with respect to all Series upon the occurrence
of an Insolvency Event with respect to the Transferor. A Pay Out Event may
occur with respect to any specific Series upon the occurrence of any event
specified in the related Prospectus Supplement. Such events may include (i)
the Trust becoming subject to regulation as an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, (ii) the
failure by the Transferor to make any payment or deposit required under the
Pooling and Servicing Agreement within a specified period of the date such
payment or deposit is required to be made, (iii) the breach of specified
covenants, representations or warranties contained in the Pooling and
Servicing Agreement, after any applicable notice and cure period (and, if
so specified in the related Prospectus Supplement, only to the extent such
breach has a material adverse effect on the related Securityholders), (iv)
the failure by the Transferor to make a required designation of Additional
Accounts for the Trust within a specified time after the date such addition
is required to be made, (v) a reduction in the Series Adjusted Portfolio
Yield (as defined in the applicable Prospectus Supplement) below the rates,
and for the period, specified in the related Prospectus Supplement and (vi)
the occurrence of a Servicer Default. The Early Amortization Period with
respect to a Series will commence on the day on which a Pay Out Event
occurs or is deemed to occur with respect thereto. If an Early Amortization
Period commences, monthly distributions of principal to the Securityholders
of such Series will begin on the Distribution Date in the Monthly Period
following the Monthly Period in which such Pay Out Event occurs (such
Distribution Date and each following Distribution Date with respect to such
Series, a "Special Payment Date"). Any amounts on deposit in a Principal
Funding Account or an Interest Funding Account with respect to such Series
at such time will be distributed on such first Special Payment Date to the
Securityholders of such Series. If, because of the occurrence of a Pay Out
Event, the Early Amortization Period begins earlier than the scheduled
commencement of a Controlled Amortization Period or prior to an Expected
Final Payment Date, Securityholders will begin receiving distributions of
principal earlier than they otherwise would have and such distributions
will not be subject to the Controlled Deposit Amount or the Controlled
Distribution Amount. As a result, the average life of the Securities may be
reduced or increased. If a Series has more than one Class of Securities,
each Class may have different Pay Out Events which, in the case of any
Series of Securities offered hereby, will be described in the related
Prospectus Supplement.
A particular Series may have no Pay Out Events or only limited Pay
Out Events, but may have in lieu thereof specified events ("Reinvestment
Events") that end the reinvestment of the Trust in new Receivables and
apply available collections of Principal Receivables to the purchase of
Eligible Investments. A Reinvestment Event may include all or some of the
events that constitute Pay Out Events for other Series. The Early
Accumulation Period with respect to a Series will commence on the day on
which a Reinvestment Event occurs or is deemed to occur with respect
thereto. If a Series has more than one Class of Securities, each Class may
have different Reinvestment Events (or may have only Pay Out Events) which,
in the case of any Series of Securities offered hereby, will be described
in the related Prospectus Supplement.
In addition to the consequences of a Pay Out Event or Reinvestment
Event discussed above, if an Insolvency Event shall occur, immediately on
the day of such event the Transferor will cease to transfer Principal
Receivables to the Trust and promptly give notice to the Trustee of such
event. Under the terms of the Pooling and Servicing Agreement, as soon as
possible but in any event within 15 days, the Trustee will publish a notice
of the occurrence of the Insolvency Event stating that the Trustee intends
to sell, dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms unless
instructions otherwise are received within a specified period from
Securityholders holding Securities evidencing more than 50% of the Invested
Amount of each Series of Securities issued and outstanding (or, with
respect to any Series with two or more Classes, 50% of the Invested Amount
of each Class) and each Enhancement Invested Amount and possibly the vote
of other persons specified in the Supplement for a Series and, for a Series
offered hereby, the related Prospectus Supplement to the effect that such
Securityholders disapprove of the liquidation of Receivables and wish to
continue having Principal Receivables transferred to the Trust as before
such Insolvency Event. The Trustee will sell, dispose of, or otherwise
liquidate the Receivables 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 on the
Receivables and applied as provided above and in each Prospectus
Supplement.
If the only Pay Out Event or Reinvestment Event to occur with respect
to any Series is the bankruptcy of the Transferor, the Trustee may not be
permitted to suspend transfers of Receivables to the Trust, and the
instructions to sell the Receivables may not be given effect.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and
reimbursement for its expenses is a monthly servicing fee (the "Servicing
Fee"). The Servicing Fee will be allocated among the Transferor's Interest
(the "Transferor Servicing Fee"), the holders of any Participations and
Securityholders of each Series. The portion of the Servicing Fee allocable
to each Series of Securities on any Distribution Date (the "Monthly
Servicing Fee") will generally be equal to one-twelfth of the product of
(a) the applicable servicing fee percentage with respect to such Series and
(b) the Invested Amount (as it may be adjusted in accordance with the
related Supplement) of such Series with respect to the related Monthly
Period. A portion of the Monthly Servicing Fee with respect to a particular
Series may be payable from Interchange allocated to such Series as
specified in the related Supplement and, for a Series offered hereby, the
related Prospectus Supplement. For any Monthly Period, the portion of the
Monthly Servicing Fee payable from Interchange with respect to any Series
will be an amount equal to the portion of collections of Finance Charge
Receivables allocated to the Securityholders' Interest of such Series with
respect to such Monthly Period that is attributable to Interchange (the
"Servicer Interchange"); provided, however, that Servicer Interchange for a
Monthly Period may not exceed one-twelfth of the product of (i) the Series
Adjusted Invested Amount, as of the last day of such Monthly Period and
(ii) a percentage specified in the Prospectus Supplement for such Series.
In the case of any insufficiency of Servicer Interchange with respect to
any Monthly Period, a portion of the Monthly Servicing Fee with respect to
such Monthly Period will not be paid to the extent of such insufficiency
and in no event shall the Trust, the Trustee, the holders of any
Participations or the Securityholders be liable for the share of the
Servicing Fee to be paid out of Servicer Interchange.
The Servicer will pay from its servicing compensation certain
expenses incurred in connection with servicing the Receivables including,
without limitation, payment of the fees and disbursements of the Trustee,
paying agent, transfer agent and registrar and independent accountants and
other fees which are not expressly stated in the Pooling and Servicing
Agreement to be payable by the Trust or the Transferor other than federal,
state and local income and franchise taxes, if any, of the Trust.
TERMINATION OF THE TRUST
The Trust and the respective obligations and responsibilities of the
Transferor, the Servicer and the Trustee created pursuant to the Pooling
and Servicing Agreement (other than the obligation of the Trustee to make
payments to Investor Securityholders as hereinafter set forth) shall
terminate upon the earliest to occur of (i) December 31, 2029, (ii) at the
option of the Transferor, the day following the Distribution Date on which
the Invested Amount for each Series is zero and (iii) the day an Insolvency
Event has occurred.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT
CONVEYANCE OF RECEIVABLES
On the Initial Series Issuance Date, PFR acquired approximately
$1,870,000,000 aggregate principal amount of Receivables, of which
approximately $1,190,000,000 aggregate principal amount of receivables were
conveyed to PFR by BKB and approximately $680,000,000 aggregate principal
amount of receivables were conveyed to PFR by Harris. Immediately upon
giving effect to such transactions, PFR conveyed approximately
$1,846,000,000 aggregate principal amount of Receivables (the "Initial
Receivables") to the Transferor, which in turn transferred the Initial
Receivables to the Trust. The Initial Receivables constituted all of the
Eligible Receivables acquired by PFR from BKB and Harris on the Initial
Series Issuance Date. Pursuant to the Transferor Purchase Agreement, PFR
will sell and assign to the Transferor for assignment to the Trust all of
its interests in the Receivables then existing under the Accounts and all
Receivables thereafter created under the Accounts, all Recoveries and
Interchange allocable to the Trust, and the proceeds of all of the
foregoing. PFR may also sell and assign from time to time to the Transferor
for conveyance to the Trust Receivables in designated Additional Accounts,
and the Transferor may from time to time sell and assign to the Trust its
interest in Participation Interests, all Recoveries and Interchange
allocable to the Trust and the proceeds of all of the foregoing.
On each Series Issuance Date, the Trustee will authenticate and
deliver one or more securities representing the Series or Class of
Securities, in each case against payment to the Transferor of the net
proceeds of the sale of the Securities. In the case of the Initial Series
Issuance Date, the Trustee will deliver to the Transferor the Transferor
Security, representing the Transferor's Interest.
In connection with the transfers of the Receivables, each Account
Originator will indicate in its respective computer records that the
applicable Receivables have been conveyed from such party to PFR. PFR will
indicate in its computer records that the Receivables have been conveyed
from PFR to the Transferor and the Transferor will indicate in its records
that the Receivables have been conveyed from the Transferor to the Trust.
In addition, the Transferor will provide or cause to be provided to the
Trustee a computer file or a microfiche list containing a true and complete
list showing for each Account, as of the applicable date of designation,
(i) its account number, (ii) the aggregate amount outstanding in such
Account and (iii) except in the case of New Accounts, the aggregate amount
of Principal Receivables in such Account. The Transferor will retain and
will not deliver to the Trustee any other records or agreements relating to
the Accounts or the Receivables. Except as set forth above, the records and
agreements relating to the Accounts and the Receivables 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 Transferor or the Trust. The Transferor will file UCC
financing statements with respect to the transfer of the Receivables from
the Transferor to the Trust meeting the requirements of applicable state
law. See "Risk Factors" and "Certain Legal Aspects of the Receivables."
As described below under "-- Additions of Accounts or Participation
Interests," the Transferor has the right (subject to certain limitations
and conditions), and in some circumstances is obligated, to require PFR to
designate from time to time Additional Accounts to be included as Accounts
and to convey to the Transferor (for conveyance by the Transferor to the
Trust) all Receivables in such Additional Accounts, whether such
Receivables are then existing or thereafter created. Each such Additional
Account must be an Eligible Account. In respect of any designation of
Additional Accounts, the Transferor will follow the procedures set forth in
the preceding paragraph, except the list will show information for such
Additional Accounts as of the date such Additional Accounts are identified
and selected. Aggregate Addition Accounts will be selected by the
Transferor in a manner which it reasonably believes will not be materially
adverse to the Securityholders. The Transferor has the right (subject to
certain conditions described below under "-- Additions of Accounts or
Participation Interests") to convey Participation Interests to the Trust.
In addition, the Transferor may (under certain circumstances and subject to
certain limitations and conditions) remove the Participation Interests and
the Receivables in certain Accounts as described below under "-- Removal of
Accounts."
ELIGIBLE ACCOUNTS AND RECEIVABLES
"Eligible Account" means a revolving credit card account owned by the
applicable Account Originator which, as of the respective date of
designation, (a) is a revolving credit card account in existence and
maintained by the applicable Account Originator, (b) is payable in United
States dollars, (c) has a cardholder whose address is in the United States
or its territories or possessions or a military address, (d) except as
provided below has a cardholder who has not been identified by the Servicer
in its computer files as being involved in any voluntary or involuntary
bankruptcy proceeding, (e) has not been identified as an account with
respect to which the related card has been lost or stolen, (f) is not sold
or pledged to any other party except for any sale by the applicable Account
Originator to PFR, (g) does not have receivables which have been sold or
pledged by the applicable Account Originator to any other party other than
PFR, (h) except as provided below, does not have receivables that are
Defaulted Receivables, (i) does not have any receivables that have been
identified by the Servicer or the related cardholder as having been
incurred as a result of fraudulent use of any related credit card, (j) was
created in accordance with the credit card guidelines of the applicable
Account Originator, and (k) with respect to Additional Accounts and certain
other accounts, shall have satisfied the Rating Agency Condition. Accounts
which relate to bankrupt obligors or certain charged-off receivables may be
designated as Accounts provided that the amount of Principal Receivables in
any such Account is deemed to be zero for purposes of all allocations under
the Pooling and Servicing Agreement.
"Eligible Receivable" means each receivable, or interest therein as
contemplated by each Purchase Agreement, (a) which has arisen under an
Eligible Account, (b) which was created in compliance in all material
respects with all requirements of law applicable to the related Account
Originator at the time of the creation of such Receivable and which was
created pursuant to a credit card agreement which complies in all material
respects with all requirements of law applicable to the related Account
Originator at the time of the creation of such receivable and the
requirements of law applicable to Partners First with respect to such
Receivable, (c) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with, any
governmental authority required to be obtained, effected or given in
connection with the creation of such Receivable or the execution, delivery,
creation and performance by the related Account Originator of the related
credit card agreements pursuant to which such Receivable was created have
been duly obtained or given and are in full force and effect, (d) as to
which at the time of its transfer to the Trust, the Transferor or the Trust
will have good and marketable title, free and clear of all liens,
encumbrances, charges and security interests (other than any lien for
municipal or other local taxes if such taxes are not then due and payable
or if the Transferor is then contesting the validity thereof in good faith
by appropriate proceedings and has set aside on its books adequate reserves
with respect thereto), (e) which is the legal, valid and binding payment
obligation of the related cardholder enforceable against such cardholder in
accordance with its terms, subject to certain bankruptcy or insolvency
related exceptions, (f) which is not at the time of its transfer to the
Trust subject to any right of rescission, setoff, counterclaim or defense
(including the defense of usury), other than certain bankruptcy and
insolvency related defenses, and (g) which constitutes either an "account"
or a "general intangible" under the applicable UCC as then in effect.
REPRESENTATIONS AND WARRANTIES
The Transferor makes representations and warranties to the Trust in
the Pooling and Servicing Agreement relating to the Accounts and the
Receivables as of each Series Issuance Date (or as of the related addition
date with respect to Additional Accounts) to the effect, among other
things, that as of each applicable date of designation, (a) each Account
was an Eligible Account, (b) each of the Receivables then existing in the
Initial Accounts or in the Additional Accounts, as applicable, is an
Eligible Receivable and (c) thereafter, on the date of creation of any new
Receivable, such Receivable is an Eligible Receivable. If the Transferor
breaches any representation and warranty described in this paragraph in any
material respect and such breach remains uncured for 60 days, or such
longer period as may be agreed to by the Trustee and the Servicer, after
the earlier to occur of the discovery of such breach by the Transferor or
receipt of written notice of such breach by the Transferor and such breach
has a material adverse effect on the Securityholders' Interest in such
Receivable, all Receivables with respect to the Account affected
("Ineligible Receivables") will be reassigned to the Transferor on the
terms and conditions set forth below and such Account shall no longer be
included as an Account.
An Ineligible Receivable will be reassigned to the Transferor on or
before the end of the Monthly Period in which such reassignment obligation
arises by the Transferor directing the Servicer to deduct the portion of
such Ineligible Receivable which is a Principal Receivable from the
aggregate amount of the Principal Receivables used to calculate the
Transferor Amount. In the event that the exclusion of the principal portion
of an Ineligible Receivable from the calculation of the Transferor Amount
would cause the Transferor Amount to be less than the Required Transferor
Amount, on the Distribution Date following the Monthly Period in which such
reassignment obligation arises the Transferor will make a deposit into the
Special Funding Account in immediately available funds in an amount equal
to the amount by which the Transferor Amount would be reduced below the
Required Transferor Amount. The reassignment of any Ineligible Receivable
to the Transferor, and the obligation of the Transferor to make any
deposits into the Special Funding Account as described in this paragraph,
is the sole remedy respecting any breach of the representations and
warranties described in the preceding paragraph with respect to such
Receivable available to the Securityholders or the Trustee on behalf of
Securityholders. PFR will agree, in the Transferor Purchase Agreement, to
repurchase from the Transferor any Ineligible Receivables which shall be
reassigned to the Transferor and to provide the Transferor any amounts
necessary to enable the Transferor to make the deposit referred to above.
The term "Transferor Amount" means at any time of determination, an amount
equal to the sum of (i) total aggregate amount of Principal Receivables in
the Trust plus (ii) the amount on deposit in the Special Funding Account at
such time plus (iii) the aggregate principal amount on deposit in the
Principal Funding Account and the Pre-Funding Account for each Series minus
(iv) the aggregate Invested Amounts for all outstanding Series at such
time.
The Transferor also makes representations and warranties to the Trust
to the effect, among other things, that as of each Series Issuance Date it
is a corporation validly existing under the laws of the State of Delaware,
it has the authority to consummate the transactions contemplated by the
Pooling and Servicing Agreement and each Supplement and will further
represent to the Trust on each Series Issuance Date and, with respect to
the Additional Accounts, as of each addition date (a) the Pooling and
Servicing Agreement and each Supplement constitutes a valid, binding and
enforceable agreement of the Transferor and (b) the Pooling and Servicing
Agreement and each Supplement constitutes either a valid sale, transfer and
assignment to the Trust of all right, title and interest of the Transferor
in the Receivables, whether then existing or thereafter created and the
proceeds thereof (including proceeds in any of the accounts established for
the benefit of the Securityholders) and in Recoveries and Interchange
allocable to the Trust or the grant of a first priority perfected security
interest under the applicable UCC in such Receivables and the proceeds
thereof (including proceeds in any of the accounts established for the
benefit of the Securityholders) and in Recoveries and Interchange allocable
to the Trust, which is effective as to each Receivable then existing on
such date. In the event of a material breach of any of the representations
and warranties described in this paragraph that has a material adverse
effect on the Securityholders' Interest in the Receivables or the
availability of the proceeds thereof to the Trust (which determination will
be made without regard to whether funds are then available pursuant to any
Series Enhancement), either the Trustee or Securityholders holding
Securities evidencing not less than 50% of the aggregate unpaid principal
amount of all outstanding Securities, by written notice to the Transferor
and the Servicer (and to the Trustee if given by the Securityholders), may
direct the Transferor to accept the reassignment of the Receivables in the
Trust within 60 days of such notice, or within such longer period specified
in such notice. The Transferor will be obligated to accept the reassignment
of such Receivables on the Distribution Date following the Monthly Period
in which such reassignment obligation arises. Such reassignment will not be
required to be made, however, if at the end of such applicable period, the
representations and warranties shall then be true and correct in all
material respects and any material adverse effect caused by such breach
shall have been cured. The price for such reassignment will be an amount
equal to the sum of the amounts specified therefor with respect to each
Series in the related Supplement. The payment of such reassignment price,
in immediately available funds, will be considered a payment in full of the
Securityholders' Interest and such funds will be distributed upon
presentation and surrender of the Securities. If the Trustee or
Securityholders give a notice as provided above, the obligation of the
Transferor to make any such deposit will constitute the sole remedy
respecting a breach of the representations and warranties available to
Securityholders or the Trustee on behalf of Securityholders. See
"Description of the Purchase Agreements -- Transferor Purchase Agreement."
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 each of the Transferor's
representations and warranties or for any other purpose. In addition, it is
not anticipated or required that the Trustee will make any initial or
periodic general examination of the Servicer for the purpose of
establishing the compliance by the Servicer with its representations or
warranties or the performance by the Servicer of its obligations under the
Pooling and Servicing Agreement, any Supplement or for any other purpose.
The Servicer, however, will deliver to the Trustee on or before March 31 of
each calendar year an opinion of counsel with respect to the validity of
the interest of the Trust in and to the Receivables and certain other
components of the Trust.
TRANSFEROR SECURITIES
The Transferor Security represents the undivided interest in the
Trust not represented by the Securities or any Participation issued and
outstanding under the Trust or the rights, if any, of any providers of
enhancement to receive payments from the Trust. The Transferor will
initially own the Transferor Security. The Transferor's Interest at any
time represents the right to the Trust Assets in excess of the
Securityholders' Interest, the interest of any holder of a Participation
and Enhancement Invested Amounts of all Series then outstanding. The
Transferor Amount will fluctuate as the amount of the Principal Receivables
held by the Trust changes from time to time. In addition, the Transferor
intends to cause the issuance of Series from time to time and any such
issuance will have the effect of decreasing the Transferor Amount to the
extent of the initial Invested Amount of such Series. The Pooling and
Servicing Agreement provides that the Transferor may exchange a portion of
the Transferor Security for one or more additional securities (each, a
"Supplemental Security") for transfer or assignment to a person designated
by the Transferor upon the execution and delivery of a Supplement to the
Pooling and Servicing Agreement (which Supplement shall be subject to the
amendment section of the Pooling and Servicing Agreement to the extent that
it amends any of the terms of the Pooling and Servicing Agreement; see "--
Amendments"); provided, that (a) the Rating Agency Condition is satisfied
for such exchange, (b) such exchange will not result in any Adverse Effect
and the Transferor shall have delivered to the Trustee an officer's
certificate to the effect that the Transferor reasonably believes that such
exchange will not, based on the facts known to such officer at the time of
such certification, have an Adverse Effect, (c) the Transferor shall have
delivered to the Trustee a Tax Opinion (as defined herein) with respect to
such exchange and (d) the aggregate amount of Principal Receivables in the
Trust as of the date of such exchange will be greater than the Required
Minimum Principal Balance as of such date. Any subsequent transfer or
assignment of a Supplemental Security by a person other than the Transferor
will be subject to the condition set forth in clause (c) above. On the
Initial Series Issuance Date, the Transferor issued to one of its
affiliates a Supplemental Security representing the excess of the
Transferor Amount over a minimum retained Transferor Amount representing at
least 2.0% of the aggregate Invested Amount of all Series.
ADDITIONS OF ACCOUNTS OR PARTICIPATION INTERESTS
The Transferor has the right under the Transferor Purchase Agreement
to require PFR to designate from time to time Additional Accounts to be
included as Accounts. PFR will convey to the Transferor, which in turn will
convey to the Trust, its interest in all Receivables arising from the
Additional Accounts, whether such Receivables are then existing or
thereafter created, subject to the following conditions, among others: (i)
each such Additional Account must be an Eligible Account; and (ii) except
for the addition of New Accounts (a) the selection of the Aggregate
Addition Accounts is done in a manner which it reasonably believes will not
result in an Adverse Effect; and (b) except for the addition of New
Accounts, the Rating Agency Condition shall have been satisfied. "Adverse
Effect" means any action that will result in the occurrence of a Pay Out
Event or Reinvestment Event or materially adversely affect the timing or
amount of payments to the Securityholders of any Series or Class. The
Transferor will be obligated to require PFR to designate Additional
Accounts (to the extent available) if (a) the aggregate amount of Principal
Receivables in the Trust on the last business day of any calendar month is
less than the Required Minimum Principal Balance as of such last day or (b)
the Transferor Amount on the last business day of any calendar month is
less than the Required Transferor Amount as of such last day. In lieu of
adding Additional Accounts, the Transferor may convey Participation
Interests to the Trust. Participation Interests may, for example, include
rights in transferors' interests in, or certain credit card backed
securities issued by, other trusts which have as their primary assets
revolving credit card receivables originated or purchased by an Account
Originator. There are currently no Participation Interests held by the
Trust and Participation Interests may be added to the Trust only if the
requirements of the Securities Act applicable thereto have been satisfied
including, that such Participation Interests either have been registered
under the Securities Act and, if purchased from an affiliate of an
underwriter in the original distribution, the Participation Interests are
purchased in the secondary market at least three months after the sale of
any unsold allotments from the original distribution, or that such
Participation Interests are entitled to an exemption from the registration
requirements of the Securities Act and have been acquired by the Registrant
following the expiration of any holding period applicable thereto under the
Securities Act. In addition, Participation Interests may be added to the
Trust only if the Rating Agency Condition has been satisfied, such addition
will not result in an Adverse Effect and such addition will not cause an
Insolvency Event to occur. "Required Minimum Principal Balance" as of any
date of determination means the sum of the numerators used in the Principal
Allocation Percentage for each Series outstanding on such date minus the
amount on deposit in the Special Funding Account minus the amount on
deposit in the Principal Funding Account for each Series outstanding on
such date minus the amount on deposit in the Pre-Funding Account for each
Series outstanding on such date. The "Series Invested Amount" for a Series
will be the amount set forth in the related Supplement and, for each Series
offered hereby, in the related Prospectus Supplement for such Series, but
will generally equal the initial Invested Amount for a Series.
Each Additional Account must be an Eligible Account at the time of
its designation. However, since Additional Accounts or Participation
Interests created after the Initial Series Issuance Date may not have been
a part of the portfolio of accounts of PFR as of the Initial Series
Issuance Date, they may not be of the same credit quality as the Initial
Accounts because such Additional Accounts or Participation Interests may
have been originated at a later date using credit criteria different from
those which were applied to the Initial Accounts or may have been acquired
from another credit card issuer or entity who had different credit
criteria. Consequently, the performance of such Additional Accounts or
Participation Interests may be better or worse than the performance of the
Initial Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding sentence,
the Transferor may on any day of any Monthly Period, but shall not be
obligated to, acquire all Receivables and proceeds thereof with respect to
Removed Accounts and Participation Interests. The Transferor is permitted
to designate and require reassignment to it of the Receivables from Removed
Accounts and Participation Interests only upon satisfaction of the
following conditions: (i) the Transferor shall have delivered to the
Trustee a computer file or microfiche list containing a true and complete
list of all Removed Accounts, such Accounts to be identified by, among
other things, account number and their aggregate amount of Principal
Receivables; (ii) the Transferor shall have delivered an officer's
certificate to the Trustee (with a copy to each Rating Agency) to the
effect that the Transferor reasonably believes that (a) such removal will
not have an Adverse Effect; (b) either (x) no selection procedure
reasonably believed by the Transferor to be materially adverse to the
interests of the Securityholders or the Transferor was utilized in removing
the Removed Accounts from among any pool of Accounts of a similar type or
(y) a random selection procedure was used by the Transferor in selecting
the accounts to be removed; and (c) the Transferor Amount as of the Removal
Date (determined after giving effect to such removal and to the Principal
Receivables or Participation Interests transferred to the Trust on such
date) is greater than or equal to the Required Transferor Amount; and (iii)
the Transferor shall have delivered prior written notice of the removal to
each Rating Agency, the Trustee and the Servicer and, prior to the date on
which such Receivables are to be removed, the Rating Agency Condition shall
have been satisfied with respect to such removal. If on the applicable
Removal Date, the long-term unsecured debt obligations of Partners First or
PFR are not rated at least in the third highest rating category by the
Rating Agency, the Transferor will be required to deliver to the Trustee,
with a copy to the Rating Agency, an officer's certificate which shall have
attached to it the relevant fraudulent conveyance statute, if any, and set
forth the factual basis for a conclusion that such Removal would not
constitute a fraudulent conveyance of the Transferor. The foregoing
conditions may be amended with the consent of each Rating Agency but
without the consent of Securityholders if such amendment is required to
comply with any accounting or regulatory restrictions to which the Trust,
the Transferor, Partners First PFR or any Account Originator may become
subject.
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Transferor may
at any time and from time to time, but without any obligation to do so,
designate a specified fixed or variable percentage based on a formula (the
"Discount Percentage") of the amount of Receivables arising in all or any
specified portion of the Accounts on and after the date such designation
becomes effective that otherwise would have been treated as Principal
Receivables to be treated as Finance Charge Receivables (the "Discount
Option Receivables"). Although there can be no assurance that the
Transferor will do so, such designation may occur because the Transferor
determines that the exercise of the discount option is needed to provide a
sufficient yield on the Receivables to cover interest and other amounts due
and payable from collections of Finance Charge Receivables or to avoid the
occurrence of a Pay Out Event or Reinvestment Event relating to the
reduction of the average yield on the portfolio of Accounts in the Trust,
if the related Supplement provides for such a Pay Out Event or Reinvestment
Event. After any such designation, pursuant to the Pooling and Servicing
Agreement, the Transferor may, without notice to or consent of the
Securityholders, from time to time reduce or withdraw the Discount
Percentage; provided, however, that such reduction or withdrawal will occur
only if the Transferor delivers to the Trustee and, in connection with
certain Series, providers of Series Enhancement a certificate of an
authorized representative to the effect that, in the reasonable belief of
the Transferor, such reduction or withdrawal would not have adverse
regulatory or other accounting implications for the Transferor. The
Transferor must provide 30 days' prior written notice to the Servicer, the
Trustee, each Rating Agency and, in connection with certain Series,
providers of Series Enhancement of any such designation or reduction or
withdrawal, and such designation or reduction or withdrawal will become
effective on the date specified therein only if (a) the Transferor has
delivered to the Trustee and any such providers of Series Enhancement a
certificate of an authorized representative to the effect that, based on
the facts known to such representative at the time, the Transferor
reasonably believes that such designation or reduction or withdrawal will
not at the time of its occurrence cause a Pay Out Event or Reinvestment
Event or an event that, with notice or the lapse of time or both, would
constitute a Pay Out Event or Reinvestment Event, to occur with respect to
any Series and (b) the Transferor has received written notice from each
Rating Agency that such designation or reduction or withdrawal will satisfy
the Rating Agency Condition. On the Date of Processing of any collections
on or after the date the exercise of the discount option takes effect, the
product of (i) a fraction, the numerator of which is the amount of Discount
Option Receivables and the denominator of which is the amount of all of the
Principal Receivables (including Discount Option Receivables) at the end of
the prior Monthly Period and (ii) collections of Receivables that arise in
the Accounts on such day on or after the date such option is exercised that
otherwise would be Principal Receivables will be deemed collections of
Finance Charge Receivables and will be applied accordingly, unless
otherwise provided in the related Prospectus Supplement. Any such
designation would result in an increase in the amount of collections of
Finance Charge Receivables, a reduction in the balance of Principal
Receivables and a reduction in the Transferor Amount.
YIELD SUPPLEMENT ACCOUNT
If so specified in the Prospectus Supplement for any Series the
Servicer will establish and maintain an account in the name of the Trustee,
on behalf of the Trust, with an Eligible Institution for the benefit of the
Securityholders of such Series. Amounts on deposit in the Yield Supplement
Account (together with investment earnings thereon) will be released and
deposited into the Collection Account in the amounts and at the times
specified in the Prospectus Supplement for such Series. Each such deposit
into the Collection Account will be treated as collections of Finance
Charge Receivables allocable to the Securities of the related Series. The
Yield Supplement Account for any Series will be funded with proceeds from
the offering of the Securities of the related Series.
PREMIUM OPTION
The Pooling and Servicing Agreement provides that the Transferor may
at any time and from time to time, but without any obligation to do so,
designate a specified fixed or variable percentage based on a formula as
specified in the related Prospectus Supplement (the "Premium Percentage")
of the amount of Receivables arising in all or any specified portion of the
Accounts on and after the date such designation becomes effective that
otherwise would have been treated as Finance Charge Receivables to be
treated as Principal Receivables (the "Premium Option Receivables"). After
any such designation, pursuant to the Pooling and Servicing Agreement, the
Transferor may, without notice to or consent of the Securityholders, from
time to time reduce or withdraw the Premium Percentage; provided, however,
that such reduction or withdrawal will occur only if the Transferor
delivers to the Trustee and, in connection with certain Series, providers
of Series Enhancement a certificate of an authorized representative to the
effect that, in the reasonable belief of the Transferor, such reduction or
withdrawal would not have adverse regulatory or other accounting
implications for the Transferor. The Transferor must provide 30 days' prior
written notice to the Servicer, the Trustee, each Rating Agency and any
such provider of Series Enhancement of any such designation or reduction or
withdrawal, and such designation or reduction or withdrawal will become
effective on the date specified therein only if (a) the Transferor has
delivered to the Trustee and any such providers of Series Enhancement a
certificate of an authorized representative to the effect that, based on
the facts known to such representative at the time, the Transferor
reasonably believes that such designation or reduction or withdrawal will
not at the time of its occurrence cause a Pay Out Event or Reinvestment
Event or an event that, with notice or the lapse of time or both, would
constitute a Pay Out Event or Reinvestment Event, to occur with respect to
any Series and (b) the Transferor has received written notice from each
Rating Agency that such designation or reduction or withdrawal will satisfy
the Rating Agency Condition. On the Date of Processing of any collections
on or after the date the exercise of the premium option takes effect, the
product of (i) a fraction the numerator of which is the amount of Premium
Option Receivables and the denominator of which is the amount of all of the
Finance Charge Receivables (including Premium Option Receivables) at the
end of the prior Monthly Period and (ii) collections of Receivables that
arise in the Accounts on such day on or after the date such option is
exercised that otherwise would be Finance Charge Receivables will be deemed
collections of Principal Receivables and will be applied accordingly,
unless otherwise provided in the related Prospectus Supplement. Any such
designation would result in an increase in the amount of collections of
Principal Receivables and a lower portfolio yield with respect to
collections of Finance Charge Receivables than would otherwise occur. The
Transferor might exercise this option because an increase in the amount of
collections of Principal Receivables could result in a faster repayment of
principal to Securityholders during an Amortization Period or accumulation
of principal during an Accumulation Period.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that the Servicer will
indemnify the Trust and the Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained arising out of certain of
the Servicer's actions or omissions with respect to the Trust pursuant to
the Pooling and Servicing Agreement.
Except as provided in the preceding paragraph, the Pooling and
Servicing Agreement provides that neither the Transferor nor the Servicer
nor any of their respective directors, officers, employees or agents will
be under any other liability to the Trust, the Trustee, the
Securityholders, any Credit Enhancer or any other person for any action
taken, or for refraining from taking any action, in good faith pursuant to
the Pooling and Servicing Agreement. However, neither the Transferor nor
the Servicer will be protected against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or gross negligence
of the Transferor, the Servicer or any such person in the performance of
their duties or by reason of reckless disregard of their obligations and
duties thereunder.
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. The Servicer may, in its sole
discretion, undertake any such legal action which it may deem necessary or
desirable for the benefit of Securityholders with respect to the Pooling
and Servicing Agreement and the rights and duties of the parties thereto
and the interests of the Securityholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with customary and usual procedures for servicing
credit card receivables, but in any event at least comparable with the
policies and procedures and the degree of skill and care applied or
exercised with respect to any other credit card receivables it, or its
affiliates, service.
Pursuant to the Additional Receivables Purchase Agreements, except as
otherwise required by any requirement of law or as is deemed by the related
Account Originator (or any successor thereto under such agreement) to be
necessary in order for it to maintain its credit card business or a program
operated by such credit card business on a competitive basis based on a
good faith assessment by it of the nature of the competition in the credit
card business or such program, an Account Originator will not take any
action that will have the effect of reducing the Portfolio Yield to a level
that could reasonably be expected to cause any Series to experience a Pay
Out Event or Reinvestment Event based on the insufficiency of the Series
Adjusted Portfolio Yield or take any action that would have the effect of
reducing the Portfolio Yield to less than the highest Average Rate for any
Group. The related Account Originator also covenants that unless required
by law and except as provided above, such Account Originator will take no
action with respect to the applicable credit card agreements or the
applicable credit card guidelines that, at the time of such action, such
Account Originator reasonably believes will have a material adverse effect
on the Transferor or the Securityholders.
Servicing activities to be performed by the Servicer include
collecting and recording payments, communicating with cardholders,
investigating payment delinquencies, evaluating the increase of credit
limits and the issuance of credit cards, providing billing and tax records
to cardholders and maintaining internal records with respect to each
Account. Managerial and custodial services performed by the Servicer on
behalf of the Trust include providing assistance in any inspections of the
documents and records relating to the Accounts and Receivables by the
Trustee pursuant to the Pooling and Servicing Agreement, maintaining the
agreements, documents and files relating to the Accounts and Receivables as
custodian for the Trust and providing related data processing and reporting
services for Securityholders and on behalf of the Trustee.
The Pooling and Servicing Agreement provides that the Servicer may
delegate its duties under that agreement to any entity that agrees to
conduct such duties in accordance with the Pooling and Servicing Agreement
and the Credit Card Guidelines. Notwithstanding any such delegation the
Servicer will continue to be liable for all of its obligations under the
Pooling and Servicing Agreement.
NEW ISSUANCES
The Pooling and Servicing Agreement provides that, pursuant to any
one or more Supplements, the Transferor may direct the Trustee to
authenticate from time to time new Series subject to the conditions
described below (each such issuance, a "New Issuance"). Each New Issuance
will have the effect of decreasing the Transferor Amount to the extent of
the initial Invested Amount of such new Series. Under the Pooling and
Servicing Agreement, the Transferor may designate, with respect to any
newly issued Series: (a) its name or designation; (b) its initial principal
amount (or method for calculating such amount) and its invested amount in
the Trust (the "Invested Amount"), which is generally based on the
aggregate amount of Principal Receivables in the Trust allocated to such
Series, and its Series Invested Amount; (c) its security rate (or formula
for the determination thereof); (d) the interest payment date or dates
(each, an "Interest Payment Date") and the date or dates from which
interest shall accrue; (e) the method for allocating collections to
Securityholders of such Series; (f) any bank accounts to be used by such
Series and the terms governing the operation of any such bank accounts; (g)
the percentage used to calculate the Monthly Servicing Fees; (h) the
provider and terms of any form of Series Enhancement with respect thereto;
(i) the terms on which the Securities of such Series may be repurchased;
(j) the Series Termination Date; (k) the number of Classes of Securities of
such Series, and if such Series consists of more than one Class, the rights
and priorities of each such Class; (l) the extent to which the Securities
of such Series will be issuable in temporary or permanent global form (and,
in such case, the depositary for such global security or securities, the
terms and conditions, if any, upon which such global security or securities
may be exchanged, in whole or in part, for definitive securities, and the
manner in which any interest payable on such global security or securities
will be paid); (m) whether the Securities of such Series may be issued in
bearer form and any limitations imposed thereon; (n) the priority of such
Series with respect to any other Series; (o) the Group, if any, in which
such Series will be included; and (p) any other relevant terms (all such
terms, the "Principal Terms" of such Series). None of the Transferor, the
Servicer, the Trustee or the Trust is required or intends to obtain the
consent of any Securityholder of any outstanding Series to issue any
additional Series. The Transferor may offer any Series to the public under
a Prospectus Supplement or other Disclosure Document in transactions either
registered under the Securities 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. See "Plan
of Distribution." Any such Series may be issued in fully registered or
book-entry form in minimum denominations determined by the Transferor. The
Transferor intends to offer, from time to time, additional Series.
In addition to the foregoing, it is a condition to the issuance of
each Series offered hereby, that on the related Series Issuance Date, the
aggregate amount of Receivables which are more than 30-days past due, will
not exceed 20% of the aggregate amount of Receivables in the Trust.
The Pooling and Servicing Agreement provides that the Transferor may
designate Principal Terms such that each Series has a Controlled
Accumulation Period or a Controlled Amortization Period that may have a
different length and begin on a different date than such periods for any
other Series. Further, one or more Series may be in their Controlled
Accumulation Period or Controlled Amortization Period while other Series
are not. Moreover, each Series may have the benefits of Series Enhancement
issued by enhancement providers different from the providers of Series
Enhancement with respect to any other Series. Under the Pooling and
Servicing Agreement, the Trustee shall hold any such Series Enhancement
only on behalf of the Securityholders of the Series to which such Series
Enhancement relates. With respect to each such Series Enhancement, the
Transferor may deliver a different form of Series Enhancement agreement.
The Transferor also has the option under the Pooling and Servicing
Agreement to vary among Series the terms upon which a Series may be
repurchased by the Transferor. There is no limit to the number of New
Issuances the Transferor may cause under the Pooling and Servicing
Agreement. The Trust will terminate only as provided in the Pooling and
Servicing Agreement. There can be no assurance that the terms of any Series
might not have an impact on the timing and amount of payments received by a
Securityholder of another Series.
Under the Pooling and Servicing Agreement and pursuant to a
Supplement, a New Issuance may only occur upon the satisfaction of certain
conditions provided in the Pooling and Servicing Agreement. The obligation
of the Trustee to authenticate the Securities of such new Series and to
execute and deliver the related Supplement is subject to the satisfaction
of the following conditions: (a) on or before the fifth day immediately
preceding the date upon which the New Issuance is to occur, the Transferor
shall have given the Trustee, the Servicer and each Rating Agency written
notice of such New Issuance and the date upon which the New Issuance is to
occur; (b) the Transferor shall have delivered to the Trustee the related
Supplement, in form satisfactory to the Trustee, executed by each party to
the Pooling and Servicing Agreement other than the Trustee; (c) the
Transferor shall have delivered to the Trustee any related Series
Enhancement agreement executed by each of the parties to such agreement;
(d) the Trustee shall have received confirmation from each Rating Agency
that such New Issuance will satisfy the Rating Agency Condition; (e) the
Transferor shall have delivered to the Trustee and certain providers of
Series Enhancement a certificate of an authorized officer, dated the date
upon which the New Issuance is to occur, to the effect that the Transferor
reasonably believes that such issuance will not, based on the facts known
to such representative at the time of such certification, have an Adverse
Effect; (f) the Transferor shall have delivered to the Trustee, each Rating
Agency and certain providers of Series Enhancement an opinion of counsel
acceptable to the Trustee that for Federal income tax purposes: (i)
following such New Issuance the Trust will not be deemed to be an
association (or publicly traded partnership) taxable as a corporation; (ii)
such New Issuance will not adversely affect the tax characterization as
debt of Securities of any outstanding Series or Class that were
characterized as debt at the time of their issuance; (iii) such New
Issuance will not cause or constitute an event in which gain or loss would
be recognized by any Securityholders; and (iv) except as is otherwise
provided in a Supplement with respect to any Series or Class thereof, the
Securities of such Series or the specified Classes thereof will be properly
characterized as debt (an opinion of counsel to the effect referred to in
clauses (i), (ii) (iii) and (iv) with respect to any action is referred to
herein as a "Tax Opinion"); (g) the aggregate amount of Principal
Receivables plus the principal amount of any Participation Interest shall
be greater than the Required Minimum Principal Balance as of the date upon
which the New Issuance is to occur after giving effect to such issuance;
and (h) any other conditions specified in any Supplement. Upon satisfaction
of the above conditions, the Trustee shall execute the Supplement and issue
to the Transferor the Securities of such new Series for execution and
redelivery to the Trustee for authentication.
The Pooling and Servicing Agreement provides that, pursuant to any
one or more supplements to the Pooling and Servicing Agreement (each, a
"Participation Supplement"), the Transferor may direct the Trustee to issue
on behalf of the Trust one or more participations (each, a
"Participation"), to be delivered to or upon the order of the Transferor;
provided that (a) the Rating Agency Condition shall have been satisfied
with respect thereto, (b) the Transferor Amount (excluding the interest
represented by any Supplemental Security) shall not be less than the
Required Transferor Amount as of the date of, and after giving effect to,
such issuance and (c) the Transferor shall have delivered to the Trustee
and each Rating Agency a Tax Opinion, dated the date of such issuance, with
respect to such issuance. Any Participation may be transferred or exchanged
only upon satisfaction of the conditions described in clauses (a) and (c)
above. Each Participation will entitle its holder to a specified percentage
(the "Participation Percentage") of all collections of Principal
Receivables and Finance Charge Receivables and any other Trust Assets to
the extent specified in the Participation Supplement.
COLLECTION ACCOUNT
The Servicer has established and maintains, or has caused to be
established and maintains, for the benefit of the Securityholders in the
name of the Trustee, on behalf of the Trust, an account (the "Collection
Account") with an Eligible Institution. "Eligible Institution" means any
depository institution (which may be the Trustee) organized under the laws
of the United States or any one of the states thereof, including the
District of Columbia (or any domestic branch of a foreign bank) which
depository institution at all times is a member of the FDIC and (i) whose
short-term unsecured debt obligations are acceptable to each Rating Agency
or (ii) which has a certificate of deposit rating acceptable to each Rating
Agency, except that no such rating will be required of an institution which
maintains a trust fund in a fully segregated trust account with the
corporate trust department of such institution as long as such institution
maintains the credit rating of the applicable Rating Agency in one of its
generic credit rating categories which signifies investment grade and is a
member of the FDIC. Notwithstanding the preceding sentence, any institution
the appointment of which satisfies the Rating Agency Condition will be an
Eligible Institution. Funds in the Collection Account generally will be
invested in (i) obligations issued or fully guaranteed by the United States
of America or any instrumentality or agency thereof when such obligations
are backed by the full faith and credit of 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 and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided that at the time of the Trust's
investment or contractual commitment to invest therein, the short-term debt
rating of such depository institution or trust company shall be in the
highest rating category of the applicable Rating Agency, (iii) commercial
paper or other short-term obligations having, at the time of the Trust's
investment or a contractual commitment to invest, a rating in the highest
rating category of the applicable Rating Agency, (iv) demand deposits, time
deposits or certificates of deposit which are fully insured by the FDIC
having, at the time of the Trust's investment therein, a rating in the
highest rating category of the applicable Rating Agency, (v) bankers'
acceptances issued by any depository institution or trust company described
in (ii) above, (vi) money market funds having, at the time of the Trust's
investment therein, a rating in the highest rating category of the
applicable Rating Agency, (vii) time deposits, other than as referred to in
(iv) above, with an entity, the commercial paper of such entity having a
credit rating in the highest rating category of the applicable Rating
Agency, (viii) certain repurchase agreements meeting the requirements set
forth in the Pooling and Servicing Agreement, and (ix) any other investment
if the Rating Agency Condition has been satisfied (collectively, "Eligible
Investments"). Any earnings (net of losses and investment expenses) on
funds in the Collection Account will be paid to the Transferor. The
Servicer has the revocable power to withdraw funds from the Collection
Account and to instruct the Trustee to make withdrawals and payments from
the Collection Account for the purpose of carrying out its duties under the
Pooling and Servicing Agreement and any Supplement.
ALLOCATIONS
Pursuant to the Pooling and Servicing Agreement, during each Monthly
Period the Servicer will allocate to each outstanding Series its Series
Allocable Finance Charge Collections, Series Allocable Principal
Collections and Series Allocable Defaulted Amount.
"Series Adjusted Invested Amount" means, with respect to any Series
and for any Monthly Period, the Series Invested Amount for such Series for
such Monthly Period, less the excess, if any, of the cumulative amount
(calculated in accordance with the terms of the related Supplement and,
with respect to any Series offered hereby, the related Prospectus
Supplement) of investor charge-offs allocable to the Invested Amount for
such Series as of the last day of the immediately preceding Monthly Period
over the aggregate reimbursement of such investor charge-offs as of such
last day, or such lesser amount as may be provided in the Supplement for
such Series and, with respect to any Series offered hereby, the related
Prospectus Supplement.
"Series Allocable Finance Charge Collections," "Series Allocable
Principal Collections" and "Series Allocable Defaulted Amount" mean, with
respect to any Series and for any Monthly Period, the product of (a) the
Series Allocation Percentage and (b) the amount of collections of Finance
Charge Receivables deposited in the Collection Account, the amount of
collections of Principal Receivables deposited in the Collection Account
and the amount of all Defaulted Amounts with respect to such Monthly
Period, respectively.
"Series Allocation Percentage" means, with respect to any Series and
for any Monthly Period, the percentage equivalent of a fraction, the
numerator of which is the Series Adjusted Invested Amount as of the last
day of the immediately preceding Monthly Period plus the Series Required
Transferor Amount as of the last day of the immediately preceding Monthly
Period and the denominator of which is the Trust Adjusted Invested Amount
plus the sum of all Series Required Transferor Amounts as of such last day.
"Series Required Transferor Amount" means for any Series an amount
specified in the Supplement for such Series and, for any Series offered
hereby, the related Prospectus Supplement.
"Trust Adjusted Invested Amount" means, with respect to any Monthly
Period, the sum of the Series Adjusted Invested Amounts (as adjusted in any
Supplement) for all outstanding Series plus the principal amount of any
Participation then outstanding.
The Servicer will then allocate amounts initially allocated to a
particular Series between the Securityholders' Interest and the
Transferor's Interest for such Monthly Period as follows:
(i) the Series Allocable Finance Charge Collections and the Series
Allocable Defaulted Amount will at all times be allocated to the
Invested Amount of a Series based on the Floating Allocation
Percentage of such Series; and
(ii) the Series Allocable Principal Collections will at all times be
allocated to the Invested Amount of such Series based on the
Principal Allocation Percentage of such Series.
The "Floating Allocation Percentage" and the "Principal Allocation
Percentage" with respect to any Series will be determined as set forth in
the related Supplement and, with respect to each Series offered hereby, in
the related Prospectus Supplement. Amounts not allocated to the Invested
Amount of any Series as described above will be allocated to the
Transferor's Interest.
GROUPS OF SERIES
If so specified in the related Prospectus Supplement, the Securities
of a Series may be included in a Reallocation Group, which is a Group of
Series subject to reallocations of collections of Finance Charge
Receivables and other amounts or obligations among Series in such Group in
the manner described below under "-- Reallocations Among Securities of
Different Series within a Reallocation Group." Collections of Finance
Charge Receivables allocable to each Series in a Reallocation Group will be
aggregated and made available for certain required payments for all Series
in such Group. Consequently, the issuance of new Series in such Group may
have the effect of reducing or increasing the amount of collections of
Finance Charge Receivables allocable to the Securities of other Series in
such Group. See "Risk Factors -- Issuance of New Series." The Prospectus
Supplement with respect to a Series offered hereby will specify whether
such Series will be included in a Reallocation Group or another type of
Group, whether any previously issued Series have been included in such a
Group and whether any such Series or any previously issued Series may be
removed from such a Group.
REALLOCATIONS AMONG SECURITIES OF DIFFERENT SERIES WITHIN A REALLOCATION
GROUP
Group Investor Finance Charge Collections. Any Series offered hereby
may, if so specified in the related Prospectus Supplement, be included in a
Reallocation Group. Other Series issued in the future may also be included
in such Group.
The Servicer will calculate for each Monthly Period Group Investor
Finance Charge Collections (as defined below) for a particular Reallocation
Group and on the following Distribution Date will allocate such amount
among the Securityholders' Interest (including any Enhancement Invested
Amount) for all Series in such Group in the following priority:
(i) Group Investor Monthly Interest (as defined below);
(ii) Group Investor Default Amounts (as defined below);
(iii) Group Investor Monthly Fees (as defined below);
(iv) Group Investor Additional Amounts (as defined below); and
(v) the balance pro rata among each Series in such Group based
on the current Invested Amount of each such Series.
In the case of clauses (i), (ii), (iii) and (iv), if the amount of
Group Investor Finance Charge Collections is not sufficient to cover each
such amount in full, the amount available will be allocated among the
Series in such Group pro rata, based on the claim that each Series has
under the applicable clause. This means, for example, that if the amount of
Group Investor Finance Charge Collections is not sufficient to cover Group
Investor Monthly Interest, each Series in such Group will share such amount
pro rata, and any Series in such Group with a claim with respect to monthly
interest, overdue monthly interest and interest on such overdue monthly
interest, if applicable, which is larger than the claim for such amounts
for any other Series in such Group (due to a higher security rate) will
receive a proportionately larger allocation than such other Series.
The amount of Group Investor Finance Charge Collections allocated to
the Securityholders' Interest (including any Enhancement Invested Amount)
for a particular Series offered hereby as described above is referred to
herein as "Redirected Investor Finance Charge Collections."
"Group Investor Additional Amounts" means for any Distribution Date
the sum of the amounts determined with respect to each Series in such Group
equal to (a) an amount equal to the amount by which the Invested Amount of
any Class of Securities or any Enhancement Invested Amounts have been
reduced as a result of investor charge-offs, subordination of principal
collections and funding the investor default amount for any other Class of
Securities or Enhancement Invested Amounts of such Series and (b) if the
related Supplement so provides, the amount of interest at the applicable
security rate that has accrued on the amount described in the preceding
clause (a).
"Group Investor Default Amount" means for any Distribution Date the
sum of the amounts determined with respect to each Series in such Group
equal to the product of the Series Allocable Defaulted Amount for such
Distribution Date and the applicable Floating Allocation Percentage for
such Distribution Date.
"Group Investor Finance Charge Collections" means for any
Distribution Date the aggregate amount of Investor Finance Charge
Collections for such Distribution Date for all Series in such Group.
"Group Investor Monthly Fees" means for any Distribution Date the
Monthly Servicing Fee for each Series in such Group, any Series Enhancement
fees and any other similar fees which are paid out of Redirected Investor
Finance Charge Collections for such Series pursuant to the applicable
Supplement.
"Group Investor Monthly Interest" means for any Distribution Date the
sum of the aggregate amount of monthly interest, including overdue monthly
interest and interest on such overdue monthly interest, if applicable, for
all Series in such Group for such Distribution Date.
Finance Charge Receivables may be allocated and reallocated among
Series in a Group as described below.
Step 1 - total collections of Finance Charge Receivables are
allocated among Series based on the Series Allocation Percentage for each
Series. The amounts allocated to each Series pursuant to this Step 1 are
referred to as "Series Allocable Finance Charge Collections." See "--
Allocations" above.
Step 2 - the amount of collections of Finance Charge Receivables
allocable to the Invested Amount (including any Enhancement Invested
Amount) of a Series (the "Investor Finance Charge Collections") is
determined by multiplying Series Allocable Finance Charge Collections for
each Series by the applicable Floating Allocation Percentages. See "--
Allocations" above.
Step 3 - Investor Finance Charge Collections for all Series in a
particular Reallocation Group (or Group Investor Finance Charge
Collections) are pooled for reallocation to each such Series.
Step 4 - Group Investor Finance Charge Collections are reallocated to
each Series in such Group based on the Series' respective claim with
respect to interest payable on the Securities or Enhancement Invested
Amount (if any) of such Series, the Defaulted Amount allocable to the
Securityholders' Interest of such Series and the Monthly Servicing Fee and
certain other amounts in respect to such Series. The excess is allocated
pro rata among the Series in such Group based on their respective Invested
Amounts.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS AMONG EXCESS ALLOCATION SERIES
Any Series offered hereby may be designated as an Excess Allocation
Series (including a Series in a Reallocation Group or other type of Group).
Collections of Finance Charge Receivables and certain other amounts
allocable to the Securityholders' Interest of any Excess Allocation Series
in excess of the amounts necessary to make required payments with respect
to such Series (including payments to the provider of any related Series
Enhancement) that are payable out of collections of Finance Charge
Receivables (any such excess, the "Excess Finance Charge Collections") may
be applied to cover any shortfalls with respect to amounts payable from
collections of Finance Charge Receivables allocable to any other Excess
Allocation Series, pro rata based upon the amount of the shortfall with
respect to amounts payable from collections of Finance Charge Receivables,
if any, with respect to each other Excess Allocation Series; provided,
however, that the sharing of Excess Finance Charge Collections among Excess
Allocation Series will cease if the Transferor shall deliver to the Trustee
a certificate of an authorized representative to the effect that, in the
reasonable belief of the Transferor, the continued sharing of Excess
Finance Charge Collections among Excess Allocation Series would have
adverse regulatory implications with respect to the Transferor, Partners
First or PFR. Following the delivery by the Transferor of any such
certificate to the Trustee there will not be any further sharing of Excess
Finance Charge Collections among such Series in any such Group. In all
cases, any Excess Finance Charge Collections remaining after covering
shortfalls with respect to all outstanding Excess Allocation Series will be
paid to the holders of the Transferor Securities. While any Series offered
hereby may be designated as an Excess Allocation Series, there can be no
assurance that (a) any other Series will be designated as an Excess
Allocation Series, (b) there will be any Excess Finance Charge Collections
with respect to any such other Series for any Monthly Period, (c) any
agreement relating to any Series Enhancement will not be amended in such a
manner as to increase payments to the providers of Series Enhancement and
thereby decrease the amount of Excess Finance Charge Collections available
from such Series or (d) the Transferor will not at any time deliver a
certificate as described above. While the Transferor believes that, based
upon applicable rules and regulations as currently in effect, the sharing
of Excess Finance Charge Collections among Excess Allocation Series will
not have adverse regulatory implications for it, Partners First, or PFR,
there can be no assurance that this will continue to be true in the future.
SHARED PRINCIPAL COLLECTIONS
If the Prospectus Supplement for the related Series provides that
such Series is a Principal Sharing Series, collections of Principal
Receivables for any Monthly Period allocated to the Securityholders'
Interest of any such Series will first be used to cover certain amounts
described in the related Prospectus Supplement (including any required
deposits into a Principal Funding Account or required distributions to
Securityholders of such Series in respect of principal). The Servicer will
determine the amount of collections of Principal Receivables for any
Monthly Period (plus certain other amounts described in the related
Prospectus Supplement) allocated to such Series remaining after covering
such required deposits and distributions and any similar amount remaining
for any other Principal Sharing Series plus amounts specified in any
Participation Supplement with respect to any Participation to be treated as
shared principal collections (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal Collections
to cover any principal distributions to Securityholders and deposits to
Principal Funding Accounts for any Principal Sharing Series that are either
scheduled or permitted and that have not been covered out of collections of
Principal Receivables and certain other amounts allocable to the
Securityholders' Interest of such Series (collectively, "Principal
Shortfalls"). If Principal Shortfalls exceed Shared Principal Collections
for any Monthly Period, Shared Principal Collections will be allocated pro
rata among the applicable Series based on the respective Principal
Shortfalls of such Series. To the extent that Shared Principal Collections
exceed Principal Shortfalls, the balance will be allocated to the holders
of the Transferor Securities, provided that (a) such Shared Principal
Collections will be distributed to the holders of the Transferor Securities
only to the extent that the Transferor Amount is greater than the Required
Transferor Amount and (b) in certain circumstances described below under
"-- Special Funding Account," such Shared Principal Collections will be
deposited in the Special Funding Account. Any such reallocation of
collections of Principal Receivables will not result in a reduction in the
Invested Amount of the Series to which such collections were initially
allocated. There can be no assurance that there will be any Shared
Principal Collections with respect to any Monthly Period or that any Series
will be designated as Principal Sharing Series.
PAIRED SERIES
If so provided in the related Supplement, a Prior Series may be
paired with a Paired Series issued by the Trust at or after the
commencement of the Controlled Amortization Period or Controlled
Accumulation Period for such Prior Series. As the Invested Amount of the
Prior Series is reduced, the Invested Amount in the Trust of the Paired
Series will increase by an equal amount. Upon payment in full of the Prior
Series, the Invested Amount of such Paired Series will be equal to the
Invested Amount paid to Securityholders of such Prior Series. If a Pay Out
Event or Reinvestment Event occurs with respect to the Prior Series or with
respect to the Paired Series when the Prior Series is in a Controlled
Amortization Period or Controlled Accumulation Period, the Series
Allocation Percentage and the Principal Allocation Percentage for the Prior
Series and the Series Allocation Percentage and the Principal Allocation
Percentage for the Paired Series will be reset as provided in the related
Prospectus Supplement and the Controlled Amortization Period, Controlled
Accumulation Period, Early Amortization Period or Early Accumulation Period
for such Series could be lengthened.
SPECIAL FUNDING ACCOUNT
If, on any date, the Transferor Amount is less than or equal to the
Required Transferor Amount, the Servicer shall not distribute to the
holders of the Transferor Securities any collections of Principal
Receivables allocable to a Series or a Group that otherwise would be
distributed to such holders, but shall deposit such funds in an account
with an Eligible Institution established and maintained by the Servicer for
the benefit of the Securityholders of each Series, in the name of the
Trustee, on behalf of the Trust, and bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Securityholders of each Series (the "Special Funding Account"). Funds on
deposit in the Special Funding Account will be withdrawn and paid to the
holders of the Transferor Securities on any Distribution Date to the extent
that, after giving effect to such payment, the Transferor Amount exceeds
the Required Transferor Amount on such date; provided, however, that if a
Controlled Accumulation Period, Early Accumulation Period, Controlled
Amortization Period or Early Amortization Period commences with respect to
any Series, any funds on deposit in the Special Funding Account will be
released from the Special Funding Account, deposited in the Collection
Account and treated as collections of Principal Receivables to the extent
needed to make principal payments due to or for the benefit of the
Securityholders of such Series.
Funds on deposit in the Special Funding Account will be invested by
the Trustee, at the direction of the Servicer, in Eligible Investments. Any
earnings (net of losses and investment expenses) earned on amounts on
deposit in the Special Funding Account during any Monthly Period will be
withdrawn from the Special Funding Account and treated as collections of
Finance Charge Receivables with respect to such Monthly Period.
FUNDING PERIOD; PRE-FUNDING ACCOUNT
For any Series of Securities, the related Prospectus Supplement may
specify that during a Funding Period, the Pre-Funding Amount will be held
in a Pre-Funding Account pending the transfer of additional Receivables to
the Trust or pending the reduction of the Invested Amounts of other Series
issued by the Trust. The related Prospectus Supplement will specify the
initial Invested Amount with respect to such Series, the Full Invested
Amount and the date by which the Invested Amount is expected to equal the
Full Invested Amount. The Invested Amount will increase as Receivables are
delivered to the Trust or as the Invested Amounts of other Series of the
Trust are reduced. The Invested Amount may also decrease due to the
occurrence of a Pay Out Event with respect to such Series as provided in
the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding
Account for a Series of Securities will be withdrawn and paid to the
Transferor to the extent of any increases in the Invested Amount. If the
Invested Amount does not for any reason equal the Full Invested Amount by
the end of the Funding Period, any amount remaining in the Pre-Funding
Account and any additional amounts specified in the related Prospectus
Supplement will be payable to the Securityholders of such Series in the
manner and at such time as set forth in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, funds in the
Pre-Funding Account will be invested by the Trustee in Eligible Investments
or will be subject to a guaranteed rate or investment agreement or other
similar arrangement, and, in connection with 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
Securities of the related Series in the manner specified in the related
Prospectus Supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
"Defaulted Receivables" for any Monthly Period are Principal
Receivables that were charged-off as uncollectible in such Monthly Period.
The "Defaulted Amount" for any Monthly Period will be an amount (not less
than zero) equal to (a) the excess, if any, of the amount of Defaulted
Receivables for such Monthly Period over the Recoveries for such Monthly
Period, minus (b) the amount of any Defaulted Receivables the assignment or
reassignment of which the Transferor or the Servicer becomes obligated to
accept during such Monthly Period (unless an event relating to bankruptcy,
receivership or insolvency has occurred with respect to the Transferor or
the Servicer, in which event the amount of such Defaulted Receivables will
not be added to the sum so subtracted). Receivables in any Account will be
charged-off as uncollectible in accordance with the Credit Card Guidelines
and the Servicer's customary and usual policies and procedures for
servicing revolving credit card and other revolving credit account
receivables comparable to the Receivables. The current policy of Partners
First is to charge-off the receivables in an account when that account
becomes 181 days delinquent (or sooner in the event of receipt of notice of
death or bankruptcy of the cardholder), but such policy may change in the
future to conform with regulatory requirements and applicable law.
If the Servicer adjusts downward the amount of any Principal
Receivable (other than Ineligible Receivables that have been, or are to be,
reassigned to the Transferor) because of a rebate, refund, counterclaim,
defense, error, fraudulent charge or counterfeit charge to a cardholder, or
such Principal Receivable was created in respect of merchandise that was
refused or returned by a cardholder or if the Servicer otherwise adjusts
downward the amount of any Principal Receivable without receiving
collections therefor or charging off such amount as uncollectible (any such
downward adjustment, a "Dilution"), the amount of the Principal Receivables
in the Trust with respect to the Monthly Period in which such adjustment
takes place will be reduced by the amount of the adjustment. Furthermore,
in the event that the exclusion of any such Receivables would cause the
Transferor Amount at such time to be less than the Required Transferor
Amount, the Transferor will be required to pay an amount equal to such
deficiency into the Special Funding Account (any such payment, an
"Adjustment Payment").
CREDIT ENHANCEMENT
General. For any Series, Credit Enhancement may be provided with
respect to one or more Classes thereof. Credit Enhancement with respect to
one or more Classes of a Series offered hereby may include a letter of
credit, a cash collateral account or guaranty, a spread account, a yield
supplement account, a collateral interest, a surety bond, an insurance
policy or any other form of credit enhancement described in the related
Prospectus Supplement, or any combination of the foregoing. Credit
Enhancement may also be provided to a Class or Classes of a Series or to a
Series by subordination provisions which require distributions of principal
or interest be made with respect to the Securities of such Class or Classes
or such Series before distributions are made to one or more Classes of such
Series or to another Series (if the Supplement for such Series so
provides). If so specified in the related Prospectus Supplement, any form
of Credit Enhancement may be available to more than one Class or Series to
the extent described therein.
The presence of Credit Enhancement with respect to a Class is
intended to enhance the likelihood of receipt by Securityholders of such
Class of the full amount of principal and interest with respect thereto and
to decrease the likelihood that such Securityholders will experience
losses. However, unless otherwise specified in the related Prospectus
Supplement, the Credit Enhancement, if any, with respect thereto will not
provide protection against all risks of loss and will not guarantee
repayment of the entire principal balance of the Securities and interest
thereon. If losses occur that exceed the amount covered by the Credit
Enhancement or that are not covered by the Credit Enhancement,
Securityholders will bear their allocable share of such losses. In
addition, if specific Credit Enhancement is provided for the benefit of
more than one Class or Series, Securityholders of any such Class or Series
will be subject to the risk that such Credit Enhancement will be exhausted
by the claims of Securityholders of other Classes or Series.
If Credit Enhancement is provided with respect to a Series offered
hereby, the related Prospectus Supplement will include a description of (a)
the amount payable under such Credit Enhancement, (b) any conditions to
payment thereunder not otherwise described herein, (c) the conditions (if
any) under which the amount payable under such Credit Enhancement may be
reduced and under which such Credit Enhancement may be terminated or
replaced and (d) any provisions of any agreement relating to such Credit
Enhancement material to the Securityholders of such Series. Additionally,
in certain cases, the related Prospectus Supplement may set forth certain
information with respect to the provider of any third-party Credit
Enhancement (the "Credit Enhancer"), including (i) a brief description of
its principal business activities, (ii) its principal place of business,
place of incorporation or the jurisdiction under which it is chartered or
licensed to do business, (iii) if applicable, the identity of regulatory
agencies that exercise primary jurisdiction over the conduct of its
business and (iv) its total assets, and its stockholders' or policyholders'
surplus, if applicable, as of a date specified in the Prospectus
Supplement. If so described in the related Prospectus Supplement, Credit
Enhancement with respect to a Series offered hereby may be available to pay
principal of the Securities of such Series following the occurrence of
certain Pay Out Events or Reinvestment Events with respect to such Series.
In such event, the Credit Enhancer will have an interest in certain cash
flows in respect of the Receivables to the extent described in such
Prospectus Supplement (an "Enhancement Invested Amount") and may be
entitled to the benefit of the Trustee's security interest in the
Receivables, in each case subordinated to the interest of the
Securityholders of such Series.
Subordination. If so specified in the related Prospectus Supplement,
one or more Classes of a Series offered hereby may be subordinated to one
or more other Classes of such Series or a Series may be subordinated to
another Series. If so specified in the related Prospectus Supplement, the
rights of the holders of the subordinated Securities to receive
distributions of principal or interest on any payment date will be
subordinated to such rights of the holders of the Securities that are
senior to such subordinated Securities to the extent set forth in the
related Prospectus Supplement. The related Prospectus Supplement will also
set forth information concerning the amount of subordination of a Class or
Classes of subordinated Securities in a Series or of the subordinated
Securities of another 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 Securities will be distributed to holders of Securities
that are senior to such subordinated Securities. The amount of
subordination will decrease whenever amounts otherwise payable to the
holders of subordinated Securities are paid to the holders of the
Securities that are senior to such subordinated Securities.
Letter of Credit. If so specified in the related Prospectus
Supplement, a letter of credit with respect to a Series or Class of
Securities offered hereby may be issued by a bank or financial institution
specified in the related Prospectus Supplement (the "L/C Issuer"). Subject
to the terms and conditions specified in the related Prospectus Supplement,
the L/C Issuer will be obligated to honor drawings under a letter of credit
in an aggregate dollar amount (which may be fixed or may be reduced as
described in the related Prospectus Supplement), net of unreimbursed
payments thereunder, equal to the amount described in the related
Prospectus Supplement. The amount available under a letter of credit will
be reduced to the extent of the unreimbursed payments thereunder.
Cash Collateral Account. If so specified in the related Prospectus
Supplement, support for a Series or one or more Classes thereof will be
provided by a guaranty (the "Cash Collateral Guaranty") secured by the
deposit of cash or certain Eligible 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 on deposit in the Cash Collateral Account and
an amount specified in the related Prospectus Supplement. The related
Prospectus Supplement will set forth the circumstances under which payments
are made to beneficiaries of the Cash Collateral Guaranty from the Cash
Collateral Account or from the Cash Collateral Account directly.
Reserve Account. If so specified in the related Prospectus
Supplement, support for a Series or one or more Classes thereof will be
provided by the establishment of a reserve account (the "Reserve Account").
The Reserve Account may be funded, to the extent provided in the related
Prospectus Supplement, by an initial cash deposit, the retention of certain
periodic distributions of principal or interest otherwise payable to one or
more Classes of Securities, including the subordinated Securities, or both,
or the provision of a letter of credit, guarantee insurance policy other
form of credit or any combination thereof. The Reserve Account will be
established to assure the subsequent distribution of principal or interest
on the Securities of such Series or Class thereof in the manner provided in
the related Prospectus Supplement.
Yield Supplement Account. If so specified in the related Prospectus
Supplement the Servicer will establish and maintain a Yield Supplement
Account for the benefit of the Securityholders of such Series. Amounts on
deposit in the Yield Supplement Account (together with investment earnings
thereon) will be released and deposited into the Collection Account in the
amounts and at the times specified in the Prospectus Supplement for such
Series. Each such deposit into the Collection Account will be treated as
collections of Finance Charge Receivables allocable to the Securities of
the related Series. The Yield Supplement Account for any Series will be
funded with the proceeds from offering of the Securities of the related
Series.
Collateral Interest. If so specified in the related Prospectus
Supplement, support for a Series of Securities or one or more Classes
thereof may be provided initially by an uncertificated, subordinated
interest in the Trust (the "Collateral Interest") in an amount initially
equal to a percentage of the Securities of such Series specified in the
Prospectus Supplement. References to Enhancement Invested Amounts herein
include Collateral Interests, if any.
Surety Bond or Insurance Policy. If so specified in the related
Prospectus Supplement, insurance with respect to a Series or Class of
Securities offered hereby may be provided by one or more insurance
companies. Such insurance will guarantee, with respect to one or more
Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond
may be purchased for the benefit of the holders of any Series or Class of
Securities offered hereby to assure distributions of interest or principal
with respect to such Series or Class of Securities in the manner and amount
specified in the related Prospectus Supplement.
Spread Account. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a Series offered hereby may
be provided by the periodic deposit of certain available excess cash flow
from the Trust Assets into a spread account intended to assure the
subsequent distributions of interest and principal on the Securities of
such Class or Series in the manner specified in the related Prospectus
Supplement.
INTEREST RATE SWAPS AND RELATED CAPS, FLOORS AND COLLARS
The Trustee on behalf of the Trust may enter into interest rate swaps
and related caps, floors and collars to minimize the risk to
Securityholders from adverse changes in interest rates (collectively,
"Swaps").
An interest rate Swap is an agreement between two parties
("counterparties") to exchange a stream of interest payments on an agreed
hypothetical or "notional" principal amount. No principal amount is
exchanged between the counterparties to an interest rate Swap. In the
typical Swap, one party agrees to pay a fixed rate on a notional principal
amount, while the counterparty pays a floating rate based on one or more
referenced interest rates such as the London Interbank Offered Rate
("LIBOR"), a specified bank's prime rate, or U.S. Treasury Bill rates.
Interest rate Swaps also permit counterparties to exchange a floating rate
obligation based upon one reference interest rate (such as LIBOR) for a
floating rate obligation based upon another referenced interest rate (such
as U.S. Treasury Bill rates).
The Swap market has grown substantially in recent years with a
significant number of banks and financial service firms acting both as
principals and as agents utilizing standardized Swap documentation. Caps,
floors and collars are more recent innovations, and they are less liquid
than other Swaps. There can be no assurance that the Trust will be able to
enter into or offset Swaps at any specific time or at prices or on other
terms that are advantageous. In addition, although the terms of Swaps may
provide for termination under certain circumstances, there can be no
assurance that the Trust will be able to terminate or offset a Swap on
favorable terms.
SERVICER COVENANTS
In the Pooling and Servicing Agreement, the Servicer has agreed as to
each Receivable and related Account that it will: (a) duly fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables or the related Accounts, and will maintain in effect all
qualifications required and comply in all material respects with all
requirements of law in order to service the Receivables and Accounts, the
failure to maintain or comply with which would have a material adverse
effect on the Securityholders; (b) not permit any rescission or
cancellation of the Receivables except as ordered by a court of competent
jurisdiction or other governmental authority; (c) do nothing to impair the
rights of the Securityholders in the Receivables or the related Accounts;
and (d) not reschedule, revise or defer payments due on the Receivables
except in accordance with its guidelines for servicing receivables.
Under the terms of the Pooling and Servicing Agreement, all
Receivables in an Account will be assigned and transferred to the Servicer
and such Account will no longer be included as an Account if the Servicer
discovers, or receives written notice from the Trustee, that any covenant
of the Servicer set forth above has not been complied with in all material
respects and such noncompliance has not been cured within 60 days (or such
longer period as may be agreed to by the Trustee and the Transferor)
thereafter and has a material adverse effect on the Securityholders'
Interest in such Receivables. Such assignment and transfer will be made
when the Servicer deposits an amount equal to the amount of such
Receivables in the Collection Account on the business day preceding the
Distribution Date following the Monthly Period during which such obligation
arises. This transfer and assignment to the Servicer constitutes the sole
remedy available to the Securityholders if such covenant or warranty of the
Servicer is not satisfied and the Trust's interest in any such assigned
Receivables will be automatically assigned to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement except (i) upon determination that the
performance of such duties is no longer permissible under applicable law or
(ii) if such obligations and duties are assumed by any entity that has
satisfied the Rating Agency Condition. 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. Notwithstanding the foregoing, Partners First may assign part or
all of its obligations and duties as Servicer under the Pooling and
Servicing Agreement to an affiliate of Partners First as long as Partners
First shall have fully guaranteed the performance of such obligations and
duties under the Pooling and Servicing Agreement.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Transferor or the Servicer may be merged or consolidated or
any person resulting from any merger or consolidation to which the
Transferor or the Servicer is a party, or any person succeeding to the
business of the Transferor or the Servicer, will be the successor to the
Transferor or the Servicer, as the case may be, under the Pooling and
Servicing Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the
Trustee or Securityholders holding Securities evidencing more than 50% of
the aggregate unpaid principal amount of all Securities, by written notice
to the Servicer (and to the Trustee if given by the Securityholders) (a
"Termination Notice"), may terminate all of the rights and obligations of
the Servicer, as Servicer, under the Pooling and Servicing Agreement and in
and to the Receivables and the proceeds thereof and the Trustee will
appoint a new Servicer (a "Service Transfer"). The rights and interest of
the Transferor under the Pooling and Servicing Agreement in the
Transferor's Interest will not be affected by any Termination Notice or
Service Transfer. If within 60 days of receipt of a Termination Notice the
Trustee does not receive any bids from eligible servicers to act as
successor Servicer and receives an officer's certificate from the
Transferor to the effect that the Servicer cannot in good faith cure the
Servicer Default which gave rise to the Termination Notice, the Trustee
shall grant a right of first refusal to the Transferor which would permit
the Transferor at its option to purchase the Securityholders' Interest on
the Distribution Date in the next calendar month. The purchase price for
the Securityholders' Interest shall be equal to the sum of the amounts
specified therefor with respect to each outstanding Series in the related
Supplement, and for any Securities offered hereby, in the Prospectus
Supplement.
The Trustee will as promptly as possible, after the giving of a
Termination Notice, 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 rights,
authority, power and obligations of the Servicer under the Pooling and
Servicing Agreement will 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 Servicing Fee plus any amounts payable to
the Transferor pursuant to the Pooling and Servicing Agreement.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make any
payment, transfer or deposit, on the date the Servicer is required
to do so under the Pooling and Servicing Agreement or any
Supplement, which is not cured within a five business day grace
period;
(b) failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the
Servicer in the Pooling and Servicing Agreement or any Supplement
which has an Adverse Effect and which continues unremedied for a
period of 60 days after written notice, or the Servicer assigns
its duties under the Pooling and Servicing Agreement, except as
specifically permitted thereunder;
(c) any representation, warranty or certification made by the
Servicer in the Pooling and Servicing Agreement, in any Supplement
or in any certificate delivered pursuant to the Pooling and
Servicing Agreement or any Supplement proves to have been
incorrect in any material respect when made, which has an Adverse
Effect on the rights of the Securityholders of any Series, and
which Adverse Effect continues for a period of 60 days after
written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of ten business days after
the applicable grace period or referred to under clauses (b) or (c) for a
period of 60 business days after the applicable grace period, will not
constitute a Servicer Default if such delay or failure could not be
prevented by the exercise of reasonable diligence by the Servicer and such
delay or failure was caused by an act of God or other similar occurrence.
Upon the occurrence of any such event the Servicer will not be relieved
from using its best efforts to perform its obligations in a timely manner
in accordance with the terms of the Pooling and Servicing Agreement and the
Servicer must provide the Trustee, the Transferor and any provider of
Series Enhancement prompt notice of such failure or delay by it, together
with a description of its efforts to so perform its obligations.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before August
31 of each calendar year or such other date as specified in the related
Prospectus Supplement, the Servicer will cause a firm of independent
certified public accountants (who may also render other services to the
Servicer or the Transferor and any affiliates thereof) to furnish a report
to the effect that such accounting firm has made a study and evaluation of
the Servicer's internal accounting controls relative to the servicing of
the Accounts and that, on the basis of such examination, such firm is of
the opinion that, assuming the accuracy of reports by the Servicer's
third-party agents, the system of internal accounting controls in effect on
the date of such statement relating to servicing procedures performed by
the Servicer, taken as a whole, was sufficient for the prevention and
detection of errors and irregularities in amounts that would be material to
the financial statements of the Servicer and that such servicing was
conducted in compliance with the sections of the Pooling and Servicing
Agreement during the period covered by such report (which shall be the
period from July 1 (or for the initial period, the relevant Series Issuance
Date) of the preceding calendar year to and including June 30 of such
calendar year), except for such exceptions or errors as such firm shall
believe to be immaterial and such other exceptions as shall be set forth in
such statement.
The Pooling and Servicing Agreement provides for delivery to the
Trustee on or before August 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, of an annual statement
signed by an officer of the Servicer to the effect that 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 any such obligation, specifying the nature and status of the
default.
AMENDMENTS
The Pooling and Servicing Agreement and any Supplement may be amended
from time to time (including in connection with the issuance of a
Supplemental Security, addition of a Participation Interest, allocation of
assets in the Trust to a Series or Group, or to change the definition of
Monthly Period, Determination Date or Distribution Date) by the Servicer,
the Transferor and the Trustee, and without the consent of the
Securityholders of any Series, provided that (i) an opinion of counsel for
the Transferor is addressed and delivered to the Trustee to the effect that
the conditions precedent to any such amendment have been satisfied, (ii)
the Transferor shall have delivered to the Trustee a certificate of an
officer of the Transferor to the effect that the Transferor reasonably
believes that such amendment will not have an Adverse Effect and (iii) the
Rating Agency Condition shall have been satisfied with respect thereto.
The Pooling and Servicing Agreement or any Supplement may be amended
by the Transferor, the Servicer and the Trustee with the consent of the
Securityholders evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Securities of all affected Series for which the
Transferor has not delivered an officer's certificate stating that there
will be no Adverse Effect, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Pooling
and Servicing Agreement or any Supplement or of modifying in any manner the
rights of Securityholders. No such amendment, however, may (a) reduce in
any manner the amount of, or delay the timing of, deposits or distributions
on any Security without the consent of each Securityholder, (b) (i) change
the definition or the manner of calculating the Securityholders' Interest
or the Invested Amount or (ii) reduce the aforesaid percentage of the
aggregate unpaid principal amount of the Securities the holders of which
are required to consent to any such amendment, in each case without the
consent of each Securityholder or (c) adversely affect the rating of any
Series or Class by a Rating Agency without the consent of the holders of
Securities of such Series or Class evidencing not less than 66 2/3% of the
aggregate unpaid principal amount of the Securities of such Series or
Class. Promptly following the execution of any amendment to the Pooling and
Servicing Agreement (other than an amendment described in the preceding
paragraph), the Trustee will furnish written notice of the substance of
such amendment to each Securityholder. Notwithstanding the foregoing, any
Supplement executed in connection with the issuance of one or more new
Series of Securities will not be considered an amendment to the Pooling and
Servicing Agreement.
LIST OF SECURITYHOLDERS
Upon written request of any Holder or group of Holders of Securities
of any Series or of all outstanding Series of record holding Securities
evidencing not less than 10% of the aggregate unpaid principal amount of
the Securities of such Series or all Series, as applicable, the Trustee
will afford such Holder or Holders of Securities access during business
hours to the current list of Securityholders of such Series or of all
outstanding Series, as the case may be, for purposes of communicating with
other Holders of Securities with respect to their rights under the Pooling
and Servicing Agreement. See "Description of the Securities -- Book-Entry
Registration" and "-- Definitive Securities."
The Pooling and Servicing Agreement does not provide for any annual
or other meetings of Securityholders.
THE TRUSTEE
The Bank of New York will act as trustee under the Pooling and
Servicing Agreement. The corporate trust office of The Bank of New York is
located at 101 Barclay Street, New York, New York 10286. The Transferor and
the Servicer and their respective affiliates may from time to time enter
into normal banking and trustee relationships with the Trustee and its
affiliates. The Trustee or the Transferor may hold Securities in their own
names; however, any Securities so held shall not be entitled to participate
in any decisions made or instructions given to the Trustee by the
Securityholders as a group. In addition, for purposes of meeting the legal
requirements of certain local jurisdictions, the Trustee shall have the
power to appoint a co-trustee or separate trustees of all or any part of
the Trust. In the event of such appointment, all rights, powers, duties and
obligations shall be conferred or imposed upon the Trustee and such
separate trustee or co-trustee jointly, or, in any jurisdiction in which
the Trustee shall 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.
DESCRIPTION OF THE PURCHASE AGREEMENTS
PFR PURCHASE AGREEMENTS
On the Initial Series Issuance Date, each of BKB and Harris entered
into three separate receivables purchase agreements with PFR providing for
the sale by BKB or Harris, as applicable, to PFR of all of its right, title
and interest in and to the (i) receivables in existence on the Initial
Series Issuance Date which were not more than 29 days past due as of the
Initial Series Issuance Date (the "Current Initial Receivables Purchase
Agreement"), (ii) receivables in existence on the Initial Series Issuance
Date which were at least 30 days past due as of the Initial Series Issuance
Date and certain other receivables which were otherwise impaired (the
"Overdue Initial Receivables Purchase Agreement" and together with the
Current Initial Receivables Purchase Agreement, the "Initial Receivables
Purchase Agreements") and (iii) all receivables arising in the Accounts
(including any Additional Accounts) originated by BKB or Harris, as
applicable, which arise after the Initial Series Issuance Date (the
"Additional Receivables Purchase Agreements"). Each of BKB and Harris
entered into separate assignment and assumption agreements with PFR (each,
an "Assignment and Assumption Agreement" and together with the Initial
Receivables Purchase Agreements and the Additional Receivables Purchase
Agreements, the "Original PFR Purchase Agreements"), pursuant to which (i)
each of BKB and Harris assigned to PFR all of their respective right, title
and interest in, to and under the receivables subject to the applicable
Initial Receivables Purchase Agreement and (ii) PFR assumed all obligations
with respect to such receivables. In connection with such sale of
receivables to PFR, each of BKB and Harris indicated in its respective
computer records that the subject receivables were sold to PFR. In
addition, each of BKB and Harris will provide to PFR a computer file or a
microfiche list containing a true and complete list showing each Account
owned by BKB or Harris, as applicable, identified by account number and by
total outstanding balance of the related receivables on the applicable date
of designation or addition date for Additional Accounts, as the case may
be. Each of BKB and Harris, as seller, under the applicable Original PFR
Purchase Agreement, filed UCC financing statements meeting the requirements
of applicable state law in each of the jurisdictions in which the books and
records relating to the Accounts are maintained with respect to the
Receivables. See "Risk Factors -- Characteristics as a Sale; Insolvency and
Receivership Risks" and "Certain Legal Aspects of the Receivables."
Under the Additional Receivables Purchase Agreements, each newly
originated Additional Account will, subject to certain conditions, be
deemed to be an Account. Each of BKB and Harris are required under their
respective Additional Receivables Purchase Agreement to take all actions
necessary to comply, or to enable PFR to comply, with the requirements
under the Transferor Purchase Agreement relating to Additional Accounts.
Representations and Warranties; Initial Receivables Purchase
Agreements. In each Initial Receivables Purchase Agreement, each of BKB and
Harris represented and warranted to PFR that, as of the Initial Series
Issuance Date, (a) each Initial Receivables Purchase Agreement constituted
a valid and binding obligation of BKB or Harris, as applicable; (b) it was
the sole owner of all right, title and interest in, to and under all of the
receivables sold by it to PFR, and had the right, power and authority to
sell and transfer the subject receivables to PFR; (c) the receivables sold
by it to PFR were not subject to any assignment, lien, charge, encumbrance
or security interest, except as specified in the related cardholder
agreements (other than the right of cardholders to assert claims and
defenses pursuant to applicable laws); (d) to the best of its knowledge,
the related Accounts were not subject to claims, offsets or adjustments and
represented the legal, valid and binding obligations of the cardholders
(other than the right of cardholders to assert claims and defenses pursuant
to applicable laws); (e) it was in compliance with the applicable
cardholder agreements, except where the failure to so comply would not have
had a material adverse effect on the Receivables; and (f) it was licensed
to participate in programs offered by VISA and MasterCard to the full
extent necessary to generate the subject receivables.
Representations and Warranties; Assignment and Assumption Agreements.
Each of BKB and Harris represented and warranted to PFR in their respective
Assignment and Assumption Agreement, that as of the Initial Series Issuance
Date, (a) the Assignment and Assumption Agreement and each of the related
Initial Receivables Purchase Agreements constituted a valid and binding
obligation of BKB or Harris, as applicable; (b) each of the Receivables
conveyed by it to PFR was free and clear of any lien (other than liens
permitted under the Pooling and Servicing Agreement) of any person claiming
through or under BKB or Harris, as applicable, and each of their respective
affiliates; (c) the Assignment and Assumption Agreement and the related
Additional Receivables Purchase Agreements each constituted a valid sale,
transfer and assignment to PFR of all right, title and interest of BKB or
Harris, as applicable, in its respective Receivables and the proceeds
thereof and the Interchange and Recoveries payable pursuant thereto, or if
such is not the case, such agreements constituted a grant of a first
priority perfected security interest in such property to PFR; (d) each
Account designated by BKB or Harris, as applicable, as an Eligible Account,
was an Eligible Account; (e) each subject Receivable then existing and
designated as an Eligible Receivable was an Eligible Receivable; and (f) no
event of insolvency had occurred with respect to BKB or Harris, as
applicable, and the transfer of the subject Receivables had not been made
in contemplation of the occurrence thereof.
Representations and Warranties; Additional Receivables Purchase
Agreements. Each of BKB and Harris represents and warrants to PFR in their
respective Additional Receivables Purchase Agreement that (a) as of the
date of the Additional Receivables Purchase Agreement and as of each date
of designation of Additional Accounts thereunder, it is duly organized and
in good standing and that it has the authority to consummate the
transactions contemplated by the Additional Receivables Purchase Agreement;
(b) the Additional Receivables Purchase Agreement constitutes a valid and
binding obligation of BKB or Harris, as applicable; (c) each of the
Receivables conveyed by it to PFR is free and clear of any lien (except for
liens permitted under the Pooling and Servicing Agreement) of any person
claiming through or under BKB or Harris, as applicable, or any of their
respective affiliates; (d) the Additional Receivables Purchase Agreement
constitutes a valid sale, transfer and assignment to PFR of all right,
title and interest of each of BKB or Harris, as applicable, in their
respective Receivables and the proceeds thereof and the Interchange and
Recoveries payable pursuant thereto, or if the Additional Receivables
Purchase Agreement does not constitute a sale of such property, then it
constitutes a grant of a first priority perfected security interest in such
property to PFR; (e) as of the Initial Series Issuance Date, each Account
was, and as of each date of designation of Additional Accounts under the
Additional Receivables Purchase Agreement, each Additional Account will be,
an Eligible Account; and (f) as of the Initial Series Issuance Date and as
of each date of designation of Additional Accounts under the Additional
Receivables Purchase Agreement, each Receivable generated thereunder was or
will be, on such date of designation, an Eligible Receivable.
Additional PFR Purchase Agreements. Going forward, PFR may enter into
additional receivables purchase agreements with Account Originators
providing for the purchase by PFR of receivables arising under revolving
consumer credit card accounts originated by financial institutions other
than BKB or Harris ("Additional PFR Purchase Agreements"). Any Additional
PFR Purchase Agreements will contain terms and conditions, and will be
subject to representations and warranties of the related Account
Originator, substantially similar to those found in the Original PFR
Purchase Agreements entered into by BKB and Harris on the Initial Series
Issuance Date.
TRANSFEROR PURCHASE AGREEMENT
Sale of Receivables. Pursuant to the Transferor Purchase Agreement,
PFR sold to the Transferor all its right, title and interest in and to (i)
all of the Eligible Receivables acquired by PFR from the Account
Originators and all of the Eligible Receivables created in the Accounts
following the date of the Transferor Purchase Agreement and (ii) the
Eligible Receivables in each Additional Account designated from time to
time for inclusion as an Account as of the date of such designation,
whether such Eligible Receivables shall then be existing or shall
thereafter be created.
In connection with such sale of the Receivables to the Transferor,
PFR indicated in its computer records that the Receivables had been sold to
PFRF by it and PFRF indicated in its files that such Receivables were to be
sold or transferred by it to the Trust. In addition, PFR will provide or
cause to be provided to the Transferor a computer file or a microfiche list
containing a true and complete list showing each Account identified by
account number and by total outstanding balance of the related Receivables
on the applicable Series date of designation or addition date for
Additional Accounts, as the case may be. The records of PFR and agreements
relating to the Receivables will be marked to evidence such sale or
transfer. PFR, as debtor/seller, and PFRF, as the secured party/purchaser,
filed or caused to be filed, and will file or cause to be filed, UCC
financing statements meeting the requirements of applicable state law in
each of the jurisdictions in which the books and records relating to the
Accounts are maintained with respect to the Receivables. See "Risk Factors
- -- Characteristics as a Sale; Insolvency and Receivership Risks" and
"Certain Legal Aspects of the Receivables."
Pursuant to the Transferor Purchase Agreement, the Transferor will,
subject to certain conditions, designate Additional Accounts to be included
as Accounts under the Transferor Purchase Agreement, if such designation of
Additional Accounts is required under the Pooling and Servicing Agreement.
See "Description of the Pooling and Servicing Agreement -- Additions of
Accounts or Participation Interests."
Representations and Warranties. In the Transferor Purchase Agreement,
PFR represented and warranted to the Transferor to the effect that, among
other things, (a) as of the date of the Transferor Purchase Agreement and
as of each date of designation of Additional Accounts under the Transferor
Purchase Agreement, it was and will be duly organized and in good standing
and that it had and will have the authority to consummate the transactions
contemplated by the Transferor Purchase Agreement, (b) as of the Initial
Series Issuance Date, each Account was, and as of each date of designation
of Additional Accounts under the Transferor Purchase Agreement, each
Additional Account will be, an Eligible Account and (c) as of the Initial
Series Issuance Date and as of each date of designation of Additional
Accounts under the Transferor Purchase Agreement, each Receivable generated
thereunder was or will be, on such date of designation, an Eligible
Receivable. If the breach of any representation and warranty set forth in
the Transferor Purchase Agreement results in the requirement that the
Transferor accept retransfer of an Ineligible Receivable, then PFR will be
obligated to repurchase any such Ineligible Receivable from the Transferor
on the date of such retransfer. The purchase price for any such Ineligible
Receivable will be the principal amount thereof plus applicable finance
charges.
PFR also represented and warranted to the Transferor that, among
other things, as of the date of the Transferor Purchase Agreement and as of
each date of designation of Additional Accounts (a) the Transferor Purchase
Agreement constituted and will constitute a valid and binding obligation of
PFR and (b) the Transferor Purchase Agreement constituted and will
constitute a valid sale to the Transferor of all right, title and interest
of PFR in and to the Receivables then existing and thereafter created in
the Accounts and in the proceeds thereof, or if the Transferor Purchase
Agreement does not constitute a sale of such property, then it constitutes
a grant of a first priority perfected security interest in such property to
the Transferor. If the breach of any of the representations and warranties
described in this paragraph results in the obligation of the Transferor
under the Pooling and Servicing Agreement to accept retransfer of the
Receivables, PFR will repurchase the Receivables retransferred to the
Transferor for an amount of cash at least equal to the amount of cash the
Transferor is required to deposit under the Pooling and Servicing Agreement
in connection with such retransfer.
FORMATION TRANSACTIONS; ACCOUNT ORIGINATION
Contribution Agreements. Pursuant to the Contribution Agreements, on
the Initial Series Issuance Date, each of BKB and Harris contributed to
Partners First all of their respective rights under the credit card
accounts in the Partners First Portfolio, except (i) the related cardholder
agreements, (ii) all rights to create, enforce and collect the receivables
and any other amounts owing under the Partners First Portfolio and (iii)
all rights to amend and modify the related cardholder agreements
(collectively, the "Retained Rights"). Under the Contribution Agreements
and the Assistance Agreements, Partners First has the right to designate
the financial institutions that will exercise the Retained Rights with
respect to the Partners First Portfolio. On the Initial Series Issuance
Date, Partners First designated BKB and Harris as the Account Originators
with respect to the credit card accounts in the Partners First Portfolio
originated by BKB or Harris, respectively. Until March 1998, each of BKB
and Harris remained Account Originators and exercised the Retained Rights
with respect to the Accounts originated by BKB and Harris, as applicable.
In March 1998, Partners First designated BKB as the sole Account Originator
with respect to the existing credit card accounts in the Partners First
Portfolio, including the Accounts. Going forward, Harris may continue to be
an Account Originator with respect to new credit card accounts originated
through Harris' marketing efforts, including any New Accounts. Prior to the
establishment of the Bank, Partners First may designate other financial
institutions as Account Originators, and any such Account Originators would
originate credit card accounts into the Partners First Portfolio. In
addition, it is anticipated that upon the establishment or acquisition by
Partners First of the Bank, Partners First will designate the Bank as the
sole Account Originator with respect to the credit card accounts in the
Partners First Portfolio, including the Accounts and any New Accounts, and,
in connection therewith, each of BKB and Harris will cease to be an Account
Originator. As an Account Originator, the Bank would also originate credit
card accounts. However, none of the credit card accounts originated by the
Bank or any other Account Originator may be designated as Accounts and none
of the related receivables may be transferred to the Trust unless certain
conditions, including the Rating Agency Condition, are satisfied.
Assistance Agreements. Pursuant to the Assistance Agreements, each of
BKB and Harris appointed Partners First as its sole and exclusive agent to
exercise all of its rights and perform all of its obligations with respect
to the credit card accounts in the Partners First Portfolio originated by
BKB and Harris, as applicable, except for the power to determine the terms
under which new credit card accounts will be originated, whether to extend
credit under the credit card accounts and to effect Interchange settlement.
In connection with such appointment, Partners First authorized each of BKB
and Harris to use, on a non-exclusive basis, Partners First's rights under
the credit card accounts in the Partners First Portfolio and related assets
including certain proprietary information related thereto, to the extent
necessary for each of BKB and Harris to perform the forgoing functions. In
its capacity as agent under the Assistance Agreements, Partners First will
perform certain functions, including making recommendations with respect to
the Credit Card Guidelines, administering the Credit Card Guidelines,
managing the Partners First Portfolio, arranging for the billing and
collection of any receivables arising thereunder, and otherwise servicing
and administering the credit card accounts in the Partners First Portfolio
and the related receivables.
Under the rules of the VISA and MasterCard associations, only certain
financial institutions may directly issue credit cards and advance credit
under the credit card accounts which bear the names and service marks of
VISA or MasterCard. The Assistance Agreements were required in connection
with the designation of BKB and Harris as Account Originators because
Partners First is not a financial institution. On a going forward basis the
Bank and other financial institutions, if any, designated by Partners First
as Account Originators, will enter into assistance agreements with Partners
First in the form of, or substantially similar to, the Assistance Agreement
executed by each of BKB and Harris.
LIMITATIONS ON LIABILITY
In the event of a breach of a representation or warranty by BKB or
Harris under their respective Purchase Agreements or Assignment and
Assumption Agreements, BKB or Harris, as applicable, will be liable to PFR
for damages. Partners First has agreed to indemnify BKB and Harris for any
losses suffered by BKB or Harris, as applicable, resulting from damages
payable to PFR in respect of a breach by BKB or Harris of any of their
respective representations or warranties under the applicable Assignment
and Assumption Agreement, to the extent that BKB or Harris, as applicable,
would not have suffered such losses under the Initial Receivables Purchase
Agreements, and except for any such losses caused by the gross negligence
or willful misconduct of BKB or Harris, as applicable. In each of the
Assistance Agreements, Partners First agrees to indemnify BKB and Harris
for any losses suffered by BKB or Harris, as applicable, resulting from,
among other things, damages payable to PFR in respect of a breach by BKB or
Harris of any of their respective representations or warranties under the
Additional Receivables Purchase Agreements, except to the extent caused by
the gross negligence or willful misconduct of BKB or Harris, as applicable.
Under the Additional Receivables Purchase Agreements, the liability of BKB
and Harris for any breach of any representation or warranty is limited to
the amount of any recovery by BKB or Harris, as applicable, from Partners
First pursuant to Partners First's obligation to indemnify BKB and Harris.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Under the PFR Purchase Agreements, the Account Originators sell the
Receivables to PFR. Under the Transferor Purchase Agreement, PFR sells the
Eligible Receivables it acquired from the Account Originators to the
Transferor. Under the Pooling and Servicing Agreement, the Transferor, in
turn, transfers the Eligible Receivables to the Trust. Each Account
Originator, PFR and the Transferor represents and warrants that its
respective transfers constitute valid sales and assignments of all of its
respective right, title and interest in and to the Receivables subject to
the Purchase Agreement to which it is a party. The Transferor also
represents and warrants that, if the transfer of Receivables by the
Transferor to the Trust is deemed to create a security interest under the
UCC, there exists a valid, subsisting and enforceable first priority
perfected security interest in the Receivables in existence at the time of
the formation of the Trust or at the date of designation of any Additional
Accounts, as the case may be, in favor of the Trust and a valid, subsisting
and enforceable first priority perfected security interest in the
Receivables created thereafter in favor of the Trust on and after their
creation, in each case until termination of the Trust. For a discussion of
the Trust's rights arising from these representations and warranties not
being satisfied, see "Description of the Pooling and Servicing Agreement --
Representations and Warranties."
Each Account Originator, PFR and the Transferor represents that the
Receivables are "accounts" or "general intangibles" for purposes of the
UCC. Both the sale of accounts and the transfer of accounts as security for
an obligation are treated under Article 9 of the UCC as creating a security
interest therein and are subject to its provisions and the filing of an
appropriate financing statement or statements is required to perfect the
interest of the Trust in the Receivables. If a transfer of general
intangibles is deemed to create a security interest rather than a sale,
Article 9 of the UCC applies and filing an appropriate financing statement
or statements is also required in order to perfect the security interest of
the Trust. Financing statements covering the Receivables will be filed
under the UCC to protect the Transferor and the Trust if any of the
transfers under the Purchase Agreements or the Pooling and Servicing
Agreements are deemed to be subject to the UCC. If a transfer of general
intangibles is deemed to be a sale, then the UCC is not applicable and no
further action under the UCC is required to protect the Trust's interest
from third parties.
There are certain limited circumstances under the UCC in which prior
or subsequent transferees of Receivables coming into existence after the
Initial Series Issuance Date could have an interest in such Receivables
with priority over the Trust's interest. A tax or other government lien or
other nonconsensual lien on property of an Account Originator, PFR 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.
Furthermore, if the FDIC were appointed as a conservator or receiver of an
Account Originator, the conservator's or receiver's administrative expenses
may also have priority over the interest of the Trust in such related
Receivables. Under the Purchase Agreements, however, each Account
Originator and PFR warrants that it has transferred the Receivables free
and clear of the lien of any third party. In addition, each Account
Originator and PFR covenants that it will not sell, pledge, assign,
transfer or grant any lien on any Receivable (or any interest therein)
other than pursuant to the Purchase Agreement to which it is a party.
CERTAIN MATTERS RELATING TO INSOLVENCY
The Transferor will not engage in any activities except purchasing
accounts receivable from PFR, forming trusts, transferring such accounts
receivable to such trusts, issuing notes or securities and engaging in
activities incident to, or necessary or convenient to accomplish, the
foregoing. The Transferor has no intention of filing a voluntary petition
under the United States Bankruptcy Code or any similar applicable state law
so long as the Transferor is solvent and does not reasonably foresee
becoming insolvent.
Each Account Originator and PFR has represented and warranted in the
Purchase Agreements to which it is a party that the transfer of Receivables
pursuant to such Purchase Agreement is a valid sale and assignment of the
Receivables or if not a sale of the Receivables, a grant of a first
priority perfected security interest in the Receivables. In addition, each
Account Originator, PFR and the Transferor have treated and will treat the
transaction described in the Purchase Agreement to which it is a party as
sales of the Receivables. Each Account Originator has taken or will take
all actions that are required under the UCC to perfect PFR's interest in
the Receivables conveyed to PFR by such Account Originator. PFR has taken
or will take all actions that are required under the UCC to perfect the
Transferor's ownership interest in the Receivables. However, in the event
of an insolvency, receivership or conservatorship of an Account Originator,
it is possible that a receiver or conservator could attempt to
recharacterize the transfer by such Account Originator as a pledge of the
subject Receivables rather than a true sale. The Federal Deposit Insurance
Act ("FDIA"), as amended by FIRREA, which became effective August 9, 1989,
sets forth certain powers that the FDIC could exercise if it were appointed
as conservator or receiver of an Account Originator. Among other things,
the FDIA grants such a conservator or receiver the power to repudiate
contracts of, and to request a stay of up to 90 days of any judicial action
or proceeding involving, an Account Originator. In the event that PFR were
to become a debtor in a bankruptcy case and a creditor or trustee-
in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of Receivables from PFR to the Transferor should be
recharacterized as a pledge of such Receivables to secure a borrowing from
such debtor, then delays in payments of collections of Receivables to the
Transferor (and therefore to the Trust and to Securityholders) could occur
and (should the court rule in favor of any such trustee, debtor in
possession or creditor) reductions in the amount of such payments could
result.
To the extent that (i) an Account Originator granted a security
interest in the Receivables, (ii) the interest was validly perfected before
the insolvency of the Account Originator, (iii) the interest was not taken
or granted in contemplation of the Account Originator's insolvency or with
the intent to hinder, delay or defraud the Account Originator or its
respective creditors, (iv) the applicable Purchase Agreement is
continuously a record of such Account Originator and (v) the applicable
Purchase Agreement represents a bona fide and arm's length transaction
undertaken for adequate consideration in the ordinary course of business,
such valid perfected security interest of PFR should be enforceable (to the
extent of PFR's "actual direct compensatory damages") notwithstanding the
insolvency of, or the appointment of a receiver or conservator for, the
Account Originator and payments to the Trust with respect to the
Receivables (up to the amount of such damages) should not be subject to an
automatic stay of payment or to recovery by the FDIC as conservator or
receiver of the Account Originator. If, however, the FDIC were to require
the Transferor to establish its right to those payments by submitting to
and completing the administrative claims procedure established under
FIRREA, or the conservator or receiver were to request a stay of
proceedings with respect to the Account Originator as provided under
FIRREA, delays in payments on the Securities 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 RTC, formerly
a sister agency of the FDIC, adopted a statement of policy (the "RTC Policy
Statement") 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 the 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.
In the event of an insolvency, receivership or conservatorship of an
Account Originator, and a creditor or conservator of the Account Originator
were to request a court to order that the Account Originator should be
substantively consolidated with the Transferor, delays in payments on the
Securities or possible reductions in such payments could result. In
addition, in the event of an insolvency, receivership, conservatorship or
bankruptcy of PFR, and a creditor or bankruptcy trustee of PFR or PFR
itself, as debtor in possession, were to request a court to order that PFR
should be substantively consolidated with the Transferor, delays in
payments on the Securities and possible reductions in such payments could
result.
The Transferor will take all actions that are required under the UCC
to perfect the Trust's interest in the Receivables and the Transferor has
warranted to the Trust that the Trust will have a first priority security
interest therein and, with certain exceptions, in the proceeds thereof.
Nevertheless, a tax or government lien or other nonconsensual lien on
property of the Transferor arising prior to the time a Receivable is
conveyed to the Trust may have priority over the interest of the Trust in
such Receivable. The Transferor has been structured such that (i) the
voluntary or involuntary application for relief under Bankruptcy Code or
similar applicable state laws, and (ii) the substantive consolidation of
the Transferor and PFR are unlikely. The Transferor is a separate, special
purpose subsidiary, the certificate of formation of which provides that it
shall not file a voluntary petition for relief under Bankruptcy Code
without the unanimous affirmative vote of all of its directors. Pursuant to
the Pooling and Servicing Agreement, the Trustee covenants that it will not
at any time institute against the Transferor any bankruptcy, reorganization
or other proceedings under any federal or state bankruptcy or similar law.
In addition, certain other steps will be taken to avoid the Transferor's
becoming a debtor in a bankruptcy case. Notwithstanding such steps, if the
Transferor were to become a debtor in a bankruptcy case, and a bankruptcy
trustee for the Transferor or a creditor of the Transferor or the
Transferor itself were to take the position that the transfer of the
Receivables from the Transferor to the Trust should be recharacterized as a
pledge of such Receivables, then delays in payments on the Securities and
possible reductions in the amount of such payments could result.
Upon the appointment of a bankruptcy trustee, receiver or conservator
or upon the commencement of a bankruptcy, receivership, conservatorship or
similar proceeding with respect to PFRF, the Servicer will promptly give
notice thereof to the Trustee and a Pay Out Event or Reinvestment Event may
occur with respect to a Series (or all of the Series). Pursuant to the
Pooling and Servicing Agreement, newly created Receivables will not be
transferred to the Trust on and after any such appointment or voluntary
liquidation. In the event of an Insolvency Event, the Trustee will proceed
to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms, unless
within a specified period of time Securityholders representing undivided
interests aggregating more than 50% of the Invested Amount of each Series
of Securities issued and outstanding (or, with respect to any Series with
two or more Classes, 50% of the Invested Amount of each Class) and each
Enhancement Invested Amount and possibly certain other persons specified in
the Supplement for a Series instruct otherwise (assuming that the
bankruptcy trustee, conservator or receiver does not order such a sale
despite such instructions). The Trustee will 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 be treated as collections of the Receivables and
deposited into the Collection Account and after distribution of such
amounts the Trust will terminate. This procedure could be delayed, as
described above. In addition, upon the occurrence of a Pay Out Event or
Reinvestment Event, if a trustee in bankruptcy, a conservator or receiver
is appointed for the Transferor and no Pay Out Event or Reinvestment Event
other than such conservatorship or receivership or bankruptcy or insolvency
of the Transferor exists, the bankruptcy trustee, conservator or receiver
may have the power to prevent the early sale, liquidation or disposition of
the Receivables and the commencement of the Early Amortization Period or
Early Accumulation Period and may be able to require that new Principal
Receivables be transferred to the Trust. In addition, the trustee, receiver
or conservator for the Transferor may have the power to cause early sale of
the Receivables and the early payment of the Securities or to prohibit the
continued transfer of Receivables to the Trust. See "Description of the
Securities -- Pay Out Events and Reinvestment Events."
While Partners First is the Servicer, cash collections held by
Partners First may, subject to certain conditions, be commingled and used
for the benefit of Partners First prior to each Distribution Date and, in
the event of the bankruptcy, insolvency, receivership or conservatorship of
Partners First or, in certain circumstances, the lapse of certain time
periods, the Trust may not have a perfected security interest in such
collections and accordingly, be entitled to such collections. Partners
First will be allowed to make monthly rather than daily deposits of
collections to the Collection Account if Partners First obtains a
commercial paper rating of at least A-1 and P-1 (or its equivalent) by the
applicable Rating Agency, or Partners First makes other arrangements that
satisfy the Rating Agency Condition. Unless otherwise provided in the
related Prospectus Supplement, if any of the foregoing conditions are not
satisfied, then Partners First will, within five business days, commence
the deposit of collections directly into the Collection Account within two
business days of the Date of Processing.
In the event of a Servicer Default relating to the bankruptcy or
insolvency of the Servicer, and no Servicer Default other than such
bankruptcy or insolvency related Servicer Default exists, the bankruptcy
trustee or the Servicer as debtor in possession, or the conservator or
receiver, as the case may be, may have the power to prevent either the
Trustee or the Securityholders from appointing a successor Servicer. See
"Description of the Pooling and Servicing Agreement -- Servicer Default."
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is
extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by the Account Originator, the most
significant federal laws include the Federal Truth-in-Lending, Equal Credit
Opportunity, Fair Credit Billing, Electronic Funds Transfer, Fair Credit
Reporting and Fair Debt Collection Practices Acts. These statutes impose
various disclosure requirements either before or when an Account is opened,
or both, and at the end of monthly billing cycles, and, in addition, limit
cardholder liability for unauthorized use, prohibit certain discriminatory
practices in extending credit, and regulate practices followed in
collections. In addition, cardholders are entitled under these laws to have
payments and credits applied to the credit card account promptly and to
request prompt resolution of billing errors. The Trust may be liable for
certain violations of consumer protection laws that apply to the
Receivables, either as assignee from the Transferor (as the applicable
Account Originator's assignee) 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 obligation to pay the amount of Receivables owing. All
Receivables that were not created in compliance in all material respects
with the requirements of such laws (if such noncompliance has a material
adverse effect on the Securityholders' interest therein) will be reassigned
to the Transferor and ultimately back to PFR. The Servicer has also agreed
in the Pooling and Servicing Agreement to indemnify the Trust, among other
things, for any liability arising from such violations. For a discussion of
the Trust's rights if the Receivables were not created in compliance in all
material respects with applicable laws, see "Description of the Pooling and
Servicing Agreement -- Representations and Warranties."
Application of federal and state bankruptcy and debtor relief laws
would affect the interests of the Securityholders if such laws result in
any Receivables being written off as uncollectible. See "Description of the
Pooling and Servicing Agreement -- Defaulted Receivables; Rebates and
Fraudulent Charges."
PROPOSED LEGISLATION
Congress and the states may enact new laws and amendments to existing
laws to regulate further the credit card industry or to reduce finance
charges or other fees or charges applicable to credit card accounts. The
potential effect of any such legislation could be to reduce the yield on
the Accounts. If such yield is reduced, a Pay Out Event or Reinvestment
Event could occur, and the Early Amortization Period or Early Accumulation
Period would commence. See "Description of the Securities -- Pay Out Events
and Reinvestment Events."
U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing certain anticipated Federal
income tax consequences of the purchase, ownership and disposition of the
Securities of a Series, is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), proposed, temporary and
final Treasury regulations thereunder, and published rulings and court
decisions in effect as of the date hereof, all of which are subject to
change, possibly retroactively. This discussion does not address every
aspect of the Federal income tax laws that may be relevant to Security
Owners of a Series in light of their personal investment circumstances or
to certain types of Security Owners of a Series subject to special
treatment under the Federal income tax laws (for example, banks and life
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 SECURITIES, AS WELL AS
THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN COUNTRY,
OR OTHER TAXING JURISDICTION.
CHARACTERIZATION OF THE SECURITIES AS INDEBTEDNESS
Unless otherwise specified in the related Prospectus Supplement,
special tax counsel to the Transferor ("Special Tax Counsel") specified in
such Prospectus Supplement will, upon issuance of a Series of Securities,
issue an opinion to the Transferor based on the assumptions and
qualifications set forth in the opinion that the Securities of such Series
that are offered pursuant to a Prospectus Supplement (the "Offered
Securities;" and for purposes of this section "U.S. Federal Income Tax
Consequences" the term "Security Owner" refers to a holder of a beneficial
interest in an Offered Security) 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 or franchise tax purposes,
the Offered Securities of each Series will be indebtedness secured by the
Receivables. The Transferor agrees and each Securityholder and Security
Owner, by acquiring an interest in an Offered Security, agrees or will be
deemed to agree to treat the Offered Securities of such Series as
indebtedness for Federal, state and local income or franchise tax purposes.
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.
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 factor in making this
determination is whether the transferee 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, as set forth in its opinion, Special Tax
Counsel will analyze and rely on several factors in reaching its opinion
that the weight of the benefits and burdens of ownership of the Receivables
has not been transferred to the Security Owners.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of
the transaction does not accord with its form. Unless otherwise specified
in a Prospectus Supplement, it is expected that Special Tax Counsel will
advise that the rationale of those cases will not apply to the transaction
evidenced by a Series of Securities, because the form of the transaction,
as reflected in the operative provisions of the documents, either is not
inconsistent with the characterization of the Offered Securities of such
Series as debt for Federal income tax purposes or otherwise makes the
rationale of those cases inapplicable to this situation.
TAXATION OF INTEREST INCOME OF SECURITYHOLDERS
As set forth above, it is expected that, unless otherwise specified
in a Prospectus Supplement, Special Tax Counsel will issue an opinion to
the Transferor that the Offered Securities will constitute indebtedness for
Federal income tax purposes, and accordingly, interest thereon will be
includible in income by Security 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. Interest received on the Offered Securities may also constitute
"investment income" for purposes of certain limitations of the Code
concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Securities will be
issued at a greater than de minimis discount, under applicable Treasury
regulations (the "Regulations") the Offered Securities may nevertheless be
deemed to have been issued with original issue discount ("OID"). This could
be the case, for example, if interest payments for a Series 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 Securities 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. The
Regulations provide that, for purposes of the foregoing test, the
possibility of nonpayment due to default, insolvency, or similar
circumstances, is ignored. Although this does not directly apply to the
Offered Securities (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
Securities at a "qualified floating rate," the Transferor intends to take
the position that interest payments on the Offered Securities constitute
qualified stated interest. If, however, interest payments for a Series were
not classified as "qualified stated interest," all of the taxable income to
be recognized with respect to the Offered Securities would be includible in
income as OID but would not be includible again when the interest is
actually received.
If the Offered Securities are in fact issued at a greater than de
minimis discount or are treated as having been issued with OID under the
Regulations, the following rules will apply. The excess of the "stated
redemption price at maturity" of an Offered Security over the original
issue price (in this case, the initial offering price at which a
substantial amount of the Offered Securities are sold to the public) will
constitute OID. A Security Owner must include OID in income as interest
over the term of the Offered Security 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 a Class of Securities
(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 Security Owner should consult its own
tax advisor regarding the impact to it of the OID rules if the Offered
Securities are issued with OID. Under the Regulations, a holder of a
Security issued with de minimis OID must include such OID in income
proportionately as principal payments are made on a Class of Securities.
A holder who purchases an Offered Security at a discount from its
adjusted issue price 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
Security, and for the deferral of interest deductions with respect to debt
incurred to acquire or carry the Offered Security.
A subsequent holder who purchases an Offered Security at a premium
may elect to amortize and deduct this premium over the remaining term of
the Offered Security in accordance with rules set forth in Section 171 of
the Code.
SALE OF A SECURITY
In general, a Security Owner will recognize gain or loss upon the
sale, exchange, redemption, or other taxable disposition of an Offered
Security 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 Security Owner's tax
basis in the Offered Security (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 Security).
Subject to the market discount rules discussed above and to the holding
requirement for preferential capital gain treatment, any such gain or loss
generally will be such capital gain, provided that the Offered Security 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 rate for
individuals, estates, and trusts exceeds the maximum such capital gains
rate for such taxpayers. In addition, capital losses generally may be used
only to offset capital gains.
TAX CHARACTERIZATION OF THE TRUST
The Pooling and Servicing Agreement permits the issuance of Classes
of Securities that are treated for Federal income tax purposes either as
indebtedness or as an interest in a partnership. Accordingly, the Trust
could be characterized either as (i) a security device to hold Receivables
securing the repayment of the Securities of all Series or (ii) a
partnership in which the Transferor and certain classes of Securityholders
are partners, and which has issued debt represented by other Classes of
Securities (including, unless otherwise specified in a Supplement, the
Offered Securities). In connection with the issuance of Securities of any
Series, Special Tax Counsel will render an opinion to the Transferor, based
on the assumptions and qualifications set forth therein, that under then
current law, the issuance of the Securities of such Series will not cause
the Trust to be characterized for Federal income tax purposes as an
association (or publicly traded partnership) taxable as a corporation.
The opinion of Special Tax Counsel with respect to Offered Securities
and the Trust will not be binding on the courts or the IRS. It is possible
that the IRS could assert that, for purposes of the Code, the transaction
contemplated by this Prospectus and a related Prospectus Supplement
constitutes a sale of the Receivables (or an interest therein) to the
Security Owners of one or more Series or Classes and that the proper
classification of the legal relationship between the Transferor and some or
all of the Security Owners or Securityholders of one or more Series
resulting from the transaction is that of a partnership (including a
publicly traded partnership) or a publicly traded partnership taxable as a
corporation. Unless otherwise specified in a Prospectus Supplement for a
Series, the Transferor intends to treat the securities of each Series that
are sold to investors as indebtedness for Federal income tax purposes and
intends to treat any Participation as a shared ownership interest in the
Receivables, rather than an interest in a partnership. Accordingly, the
Transferor currently does not intend to file the Federal income tax reports
that would apply if any Class of Securities or any Participation was
treated as an interest 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 Security 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 tradeable" 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
intends to take measures designed to reduce the risk that the Trust could
be classified as a publicly traded partnership taxable as a corporation by
reason of trading of interests in the Trust other than the Offered
Securities and other securities with respect to which an opinion is
rendered that such securities constitute debt for Federal income tax
purposes. Although the Transferor expects that such measures would be
successful, there can be no absolute assurance that the Trust could not
become a publicly traded partnership, because certain of the actions
necessary to comply with such exceptions are not fully within the control
of the Transferor.
If a transaction were treated as creating a partnership between the
Transferor and the Security Owners or Securityholders of one or more
Series, 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 Security Owners or Securityholders of such Series, 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 Security Owner could differ
if the Offered Securities 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 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 Offered
Securities. Finally, all or a portion of any taxable income allocated to a
Security Owner that is a pension, profit-sharing or employee benefit plan
or other tax exempt entity (including an individual retirement account)
might, under certain circumstances, constitute "unrelated business taxable
income" which generally would be taxable to the holder under the Code.
Partnership characterization also may have adverse state and local income
or franchise tax consequences for a Security Owner.
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 Security Owners,
possibly including Security Owners of a Class that is treated as
indebtedness. Such classification may also have adverse state and local tax
consequences that would reduce amounts available for distribution to
Security Owners. Cash distributions to the Security Owners (except any
Class not recharacterized as an equity interest) generally would be treated
as dividends for tax purposes to the extent of such deemed corporation's
earnings and profits.
FASIT
Certain provisions of the Code provide for the creation of a new type
of entity for federal income tax purposes, the "financial asset
securitization investment trust" ("FASIT"). While these provisions became
effective September 1, 1997, many technical issues concerning FASITs must
be addressed by Treasury regulations (which have not yet been issued). The
Pooling and Servicing Agreement may be amended in accordance with the
provisions thereof to provide that the Transferor may cause a FASIT
election to be made for the Trust if the Transferor delivers 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 Securities 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 Securityholder or the Trust.
FOREIGN INVESTORS
As set forth above, it is expected that Special Tax Counsel will
render an opinion, upon issuance, that the Offered Securities will be
treated as debt for U.S. Federal income tax purposes. The following
information describes the U.S. Federal income tax treatment of investors
that are not U.S. persons ("Foreign Investors") if the Offered Securities
are treated as debt. The term "Foreign Investor" means any person other
than (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 includible in gross income for U.S. Federal income tax purposes,
regardless of its source or (iv) a trust the income of which is includible
in gross income for U.S. Federal income tax purposes, regardless of its
source or, for tax years beginning after December 31, 1996 (and, if a
trustee so elects, for tax years ending after August 20, 1996), a trust if
a U.S. court is able to exercise primary supervision over the
administration of such trust and one or more U.S. fiduciaries have the
authority to control all substantial decisions of such trust.
Interest, including OID, paid to a Foreign Investor 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 Foreign Investor of a
trade or business in the United States evidenced by IRS Form 4224, signed
by the Security Owner or such owner's Agent, claiming exemption from
withholding of tax on income effectively connected with the conduct of a
trade or business in the United States; (y) the Foreign Investor delivers
IRS Form 1001, signed by the Security Owner or such Security Owner's Agent,
claiming exemption from withholding under an applicable tax treaty; or (z)
the Foreign Investor and each securities clearing organization, bank, or
other financial institution that holds the Offered Securities on behalf of
the customer in the ordinary course of its trade or business, in the chain
between the Security 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. Security Owner does not actually or
constructively own 10 percent or more of the total combined voting power of
all classes of stock of the Transferor entitled to vote (or of a profits or
capital interest of the Trust if characterized as a partnership), (ii) the
non-U.S. Security Owner is not a controlled foreign corporation that is
related to the Transferor (or a trust treated as a partnership) through
stock ownership, (iii) the non-U.S. Security Owner is not a bank receiving
interest described in Code Section 881(c)(3)(A), (iv) such interest is not
contingent interest described in Code Section 871(h)(4), and (v) the
non-U.S. Security Owner does not bear certain relationships to any holder
of the Transferor Security other than the Transferor or any holder of the
Securities 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 signed
under penalties of perjury by the Security Owner, stating that the Security
Owner is not a U.S. person and providing such Security Owner's name and
address. In the case of (x), (y) or (z) the appropriate form will be
effective provided that (a) the applicable form is delivered pursuant to
applicable procedures and is properly transmitted to the United States
entity otherwise required to withhold tax and (b) none of the entities
receiving the form has actual knowledge that the Security Owner is a U.S.
person.
Recently finalized Treasury regulations (the "Withholding
Regulations") could affect the procedures to be followed by a Foreign
Investor in complying with United States Federal withholding, backup
withholding and information reporting rules. The Withholding Regulations
are not currently effective but will be effective for payments made after
December 31, 1998. Prospective investors are urged to consult their tax
advisors regarding the effect, if any, of the Withholding Regulations on
the purchase, ownership, and disposition of the Offered Securities.
A Security Owner that is a nonresident alien or foreign corporation
will not be subject to U.S. Federal income tax on gain realized upon the
sale, exchange, or redemption of an Offered Security, 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 Security Owner that is
an individual, such Security 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 in the second preceding paragraph are
satisfied.
If the interests of the Security Owners of a Series were reclassified
as interests in a partnership (not taxable as a corporation), such
recharacterization could cause a Foreign Investor to be treated as engaged
in a trade or business in the United States. In such event the Security
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 Securityholder that is a corporation, 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.
Federal income tax liability.
DEFEASANCE
The Securities are subject to defeasance in certain circumstances. It
is not clear under the existing authorities whether defeasance would, for
Federal income tax purposes, result in a deemed taxable sale or exchange of
the Securities in exchange for the amounts deposited in the Principal
Funding Account and the Reserve Account as a result of the defeasance;
however, if such a sale or exchange were deemed to occur, each
Securityholder would thereafter be deemed to own its pro rata share of the
assets in which such amount is invested, and would be required to report
its taxable income on such basis.
STATE AND LOCAL TAXATION
General. State income tax consequences to each Securityholder will
depend upon the provisions of the state tax laws to which the
Securityholder is subject. Most states modify or adjust the taxpayer's
federal taxable income to arrive at the amount of income potentially
subject to state tax. Resident individuals generally pay state tax on 100%
of such state-modified income, while corporations and other taxpayers
generally pay state tax only on that portion of state-modified income
assigned to the taxing state under the state's own apportionment and
allocation rules. Because each state's tax law is different, it is
impossible to predict the tax consequences to the Securityholders in all of
the state taxing jurisdictions in which they are already subject to tax.
Securityholders are urged to consult their own tax advisors with respect to
state taxes.
Illinois. Some of the activities to be undertaken by the Servicer in
servicing and collecting the Receivables will take place in Illinois.
Illinois imposes an income tax on corporations doing business in Illinois
measured by their net income apportioned to Illinois. This discussion is
based upon present provisions of Illinois law and regulations, and
applicable judicial or ruling authority, all of which are subject to
change, which change may be retroactive. No opinion of counsel or ruling
from the Illinois Department of Revenue will be sought on any of the issues
discussed below..
Assuming (i) the Securities are treated as indebtedness and (ii) the
Trust is not a taxable entity for Federal income tax purposes, this
treatment will also apply for Illinois tax purposes. Pursuant to this
treatment, Securityholders not otherwise subject to Illinois tax would not
become subject to such tax solely because of their ownership of the
Securities. Securityholders already subject to taxation in Illinois as
corporations, however, could be required to pay tax on the income generated
from ownership of the Securities.
In the alternative, if the Securities are treated as interests in a
partnership (not taxable as a corporation) for Federal income tax purposes,
the same treatment would also apply for Illinois tax purposes. In such
case, Illinois could view the partnership as doing business in Illinois,
and the entity (or the Securityholders) could be subject to Illinois income
and personal property replacement taxes. Such taxes could reduce amounts
available for distribution to Securityholders. Also, a Securityholder not
otherwise subject to taxation in Illinois could become subject to Illinois
income taxes as a result of its mere ownership of Securities.
If the Securities are instead treated as ownership interests in a
"publicly traded partnership" taxable as a corporation, then the entity
could be subject to Illinois income taxes. Such taxes could reduce amounts
available for distribution to Securityholders. While there is no authority
directly on point, a Securityholder not otherwise subject to tax in
Illinois should not become subject to Illinois taxes as a result of its
mere ownership of such an interest.
Finally, even if the Securities are properly classified as debt
obligations for Federal Income tax purposes, they might be treated as debt
obligations of an entity owned by the Seller and the holders of any other
interest in the Trust (including any Collateral Interest). That entity
could be subject to Illinois income taxes. Such taxes could reduce amounts
available for distribution to Securityholders. A Securityholder not
otherwise subject to tax in Illinois would not become subject to Illinois
taxes as a result of its mere ownership of Securities.
Massachusetts. Some of the activities to be undertaken by the
Servicer in servicing the Receivables will take place in Massachusetts.
This discussion is based upon present provisions of Massachusetts law and
regulations, and applicable judicial and ruling authority, all of which are
subject to change, which change may be retroactive. No ruling on any of the
issues discussed below will be sought from the Massachusetts Department of
Revenue.
Assuming the Securities are treated as indebtedness and the Trust is
treated as a security device for Federal income tax purposes, this
treatment will also apply for Massachusetts tax purposes. Pursuant to this
treatment, the Trust will not be subject to Massachusetts income tax and
Securityholders not otherwise subject to Massachusetts tax would not become
subject to such tax solely because of their ownership of Securities.
Alternatively, if any of the Securities or any other interests in the
Trust (including any Collateral Interest) were treated as interests in a
partnership for Federal income tax purposes, the same treatment would apply
for Massachusetts tax purposes. In such case, Massachusetts could view the
partnership as a corporate trust doing business in Massachusetts, and the
Trust could be subject to Massachusetts income tax at a rate of up to 12%
on its net income apportioned to Massachusetts. Such tax could reduce
amounts available for distribution to Securityholders. A Securityholder not
otherwise subject to taxation in Massachusetts would not become subject to
Massachusetts income taxes as a result of its mere ownership of Securities.
Other States. There can be no assurance that other states will not
claim that the Servicer has undertaken activities in such states. If such a
claim were made, no assurances can be given as to whether the Securities
would be treated as indebtedness or the Trust would be taxable by any
particular state.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect
to the plan. ERISA also imposes certain duties on persons who are
fiduciaries of plans subject to ERISA and prohibits certain transactions
between a plan and parties in interest with respect to such plans. Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a plan is considered to be a
fiduciary of such plan (subject to certain exceptions not here relevant). A
violation of these "prohibited transaction" rules may generate excise tax
and other liabilities under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding
of the Securities of a Series 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 Securities of a Series are deemed to own an
interest in the underlying assets of the Trust. There may also be an
improper delegation of the responsibility to manage Benefit Plan assets if
Benefit Plans that purchase the Securities are deemed to own an interest in
the underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes
the "plan assets" of an employee benefit plan subject to ERISA or Section
4975 of the Code, or an individual retirement account ("IRA") (collectively
referred to as "Benefit Plans"), 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 Securities of a Series, the Trust could be deemed to
hold plan assets unless one of the exceptions under the Final Regulation is
applicable to the Trust.
The Final Regulation only applies to the purchase by a Benefit Plan
of an "equity interest" in an entity. Assuming that interests in Securities
of a Series are equity interests in the Trust, the Final Regulation
contains an exception that provides that if a Benefit Plan acquires a
"publicly-offered security," the issuer of the security is not deemed to
hold plan assets. 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 at the
conclusion of the offering and (iii) either is (A) part of a class of
securities registered under Section 12(b) or 12(g) of the Exchange Act or
(B) sold to the Benefit Plan as part of an offering of securities to the
public pursuant to an effective registration statement under the Securities
Act and the class of securities of which such security is a part is
registered under the Exchange Act within 120 days (or such later time as
may be allowed by the Commission) after the end of the fiscal year of the
issuer during which the offering of such securities to the public occurred.
In addition, the Final Regulation provides that if a Benefit Plan
invests in an "equity interest" of an entity that is neither a
"publicly-offered security" nor a security issued by an investment company
registered under the Investment Company Act of 1940, as amended, the
Benefit Plan's assets include both the equity interest and an undivided
interest in each of the entity's underlying assets, unless it is
established that equity participation by "benefit plan investors" is not
"significant" or that another exception applies. Under the Final
Regulation, equity participation in an entity by "benefit plan investors"
is "significant" on any date if, immediately after the most recent
acquisition of any equity interest in the entity (other than a
publicly-offered class of equity), 25% or more of the value of any class of
equity interests in the entity (other than a publicly-offered class) is
held by "benefit plan investors." For purposes of this determination, 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 entity or that provides investment advice for a fee with
respect to such assets (or any affiliate of such person) is disregarded.
The term "benefit plan investor" is defined in the Final Regulation as (a)
any employee benefit plan (as defined in Section 3(3) of ERISA), whether or
not it is subject to the provisions of Title I of ERISA, (b) any plan
described in Section 4975(e)(1) of the Code and (c) any entity whose
underlying assets include plan assets by reason of any such plan's
investment in the entity.
It is anticipated that interests in the Securities of a Series will
meet the criteria of publicly-offered securities as set forth above. The
underwriters expect (although no assurances can be given) that interests in
certain Classes of Securities of each Series, as specified in the related
Prospectus Supplement, will be held by at least 100 independent investors
at the conclusion of the offering for such Series; there are no
restrictions imposed on the transfer of interests in the Securities of such
Classes of such Series; and interests in the Securities of such Classes of
such Series will be sold as part of an offering pursuant to an effective
registration statement under the Securities Act and then will be timely
registered under the Exchange Act.
If interests in the Securities of a Series fail to meet the criteria
of publicly-offered securities and investment by benefit plan investors is
or becomes significant so that the Trust's assets are deemed to include
assets of Benefit Plans that are Securityholders, 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 such Series 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
Securities may be a prohibited transaction under ERISA and Section 4975 of
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 interests in Securities by such plan could constitute a prohibited
transaction. Five class exemptions issued by the DOL that could apply in
such event are DOL Prohibited Transaction Exemption ("PTE") 84-14 (Class
Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers), 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled
Separate Accounts), 95-60 (Class Exemption for Certain Transactions
Involving Insurance Company General Accounts) and 96-23 (Class Exemption
for Plan Asset Transactions Determined by In-House Asset Managers). There
is no assurance that these exemptions, even if all of the conditions
specified therein are satisfied, or any other exemption will apply to all
transactions involving the Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN CONSIDERING
THE PURCHASE OF INTERESTS IN SECURITIES OF ANY SERIES SHOULD CONSULT THEIR
OWN COUNSEL AS TO 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 SECURITIES OF ANY SERIES 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 particular, insurance companies considering the purchase of
interests in Securities of any Series should consult their own employee
benefits counsel or other appropriate counsel with respect to the United
States Supreme Court's decision in John Hancock Mutual Life Insurance Co.
v. Harris Trust & Savings Bank, 510 U.S. 86 (1993) ("John Hancock"), and
the applicability of PTE 95-60. In John Hancock, the Supreme Court held
that assets held in an insurance company's general account may be deemed to
be "plan assets" under certain circumstances; however, PTE 95-60 may exempt
some of the transactions that could occur as the result of the acquisition
and holding of interests in Securities of a Series by an insurance company
general account from the penalties normally associated with prohibited
transactions. Accordingly, investors should analyze whether John Hancock
and PTE 95-60 or any other exemption may have an impact with respect to
their purchase of the Securities of any Series.
In addition, insurance companies considering the purchase of
Securities 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) to 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 is required to issue final regulations (the
"General Account 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. The General Account
Regulations 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. Section
401(c) also provides that, except in the case of avoidance of the General
Account Regulations and actions brought by the Secretary of Labor relating
to certain breaches of fiduciary duties that also constitute breaches of
state or Federal criminal law, until the date that is 18 months after the
General Account Regulations become final, no liability under the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section
4975 may result on the basis of a claim that the assets of the general
account of an insurance company constitute the plan assets of any Benefit
Plan. 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 Benefit Plan invested in a
separate account.
PLAN OF DISTRIBUTION
The Transferor may sell Securities (a) through underwriters or
dealers, (b) directly to one or more purchasers, or (c) through agents. The
related Prospectus Supplement will set forth the terms of the offering of
any Securities offered hereby, including, without limitation, the names of
any underwriters, the purchase price of such Securities 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 Securities of a Series
offered hereby, such Securities 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 Securities may be offered to the public
either through underwriting syndicates represented by managing underwriters
or by underwriters without a syndicate. Unless otherwise set forth in the
related Prospectus Supplement, the obligations of the underwriters to
purchase such Securities will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all of such Securities
if any of such Securities are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
Securities 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 Securities will be named, and any commissions
payable by the Transferor to such agent will be set forth, in the related
Prospectus Supplement. Unless otherwise indicated in the related Prospectus
Supplement, any such agent will act on a best efforts basis for the period
of its appointment.
Any underwriters, agents or dealers participating in the distribution
of Securities may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of Securities 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 and the Bank to indemnification by the Transferor and
the Bank 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 and the Bank or their
affiliates in the ordinary course of business.
LEGAL MATTERS
Certain legal matters and Federal income tax matters relating to the
issuance of the Securities will be passed upon for the Transferor and the
Trust by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
Certain legal matters will be passed upon for the Underwriters by the
counsel named in the Prospectus Supplement.
INDEX OF DEFINED TERMS
Terms Page(s)
Account Originator.......................................................10
Accounts..........................................................1, 13, 40
Accumulation Period Length...............................................57
Additional Accounts......................................................39
Additional PFR Purchase Agreements.......................................83
Additional Receivables Purchase Agreements...............................82
Adjustment Payment.......................................................75
Adverse Effect.......................................................38, 64
Aggregate Addition.......................................................39
Aggregate Addition Accounts..............................................38
Assignment and Assumption Agreement......................................82
Assistance Agreement.....................................................10
Average Rate.............................................................36
Bank.............................................................11, 29, 43
BankBoston............................................................8, 41
Bankmont.................................................................50
Benefit Plans............................................................96
Billing Cycle............................................................47
BKB....................................................................1, 9
BKB Portfolio............................................................40
Cash Collateral Account..................................................77
Cash Collateral Guaranty.................................................77
Cede..................................................................6, 52
Cedel....................................................................18
Cedel Participants.......................................................54
Certificateholders........................................................6
Class.....................................................................1
Code.....................................................................89
Collateral Interest......................................................77
Collection Account.......................................................69
Comerica.................................................................45
Commission................................................................6
Contribution Agreement....................................................9
Controlled Accumulation Amount...........................................21
Controlled Accumulation Period...........................................20
Controlled Amortization Amount...........................................22
Controlled Amortization Period...........................................22
Controlled Deposit Amount................................................21
Controlled Distribution Amount...........................................22
Cooperative..............................................................54
counterparties...........................................................78
Credit Card Guidelines...................................................10
Credit Enhancement.......................................................26
Credit Enhancer..........................................................76
Current Initial Receivables Purchase Agreement...........................82
Date of Processing.......................................................27
Defaulted Amount.........................................................75
Defaulted Receivables....................................................75
Definitive Securities....................................................52
Depositaries.............................................................53
Depository...............................................................52
Determination Date.......................................................27
Dilution.................................................................75
Disclosure Document......................................................16
Discount Option Receivables..............................................65
Discount Percentage......................................................65
Distribution Date........................................................27
DOL......................................................................96
DTC.......................................................................6
Early Accumulation Period................................................21
Early Amortization Period................................................22
Eligible Account.........................................................61
Eligible Institution.....................................................69
Eligible Investments.....................................................70
Eligible Receivable......................................................61
Enhancement Invested Amount..........................................14, 76
ERISA....................................................................96
Euroclear................................................................19
Euroclear Operator.......................................................54
Euroclear Participants...................................................54
Euroclear Provisions.....................................................55
Excess Allocation Series.................................................23
Excess Finance Charge Collections........................................73
Exchange Act..............................................................6
Expected Final Payment Date..............................................19
FAMIS.............................................................9, 41, 50
FASIT....................................................................93
FDC..................................................................30, 44
FDIA.....................................................................87
FDIC.....................................................................30
FDR.......................................................................8
FICO.....................................................................46
Final Regulation.........................................................96
Finance Charge Receivables...............................................18
FIRREA...................................................................30
First Annapolis......................................................41, 50
Floating Allocation Percentage...........................................71
Foreign Investor.........................................................93
Foreign Investors........................................................93
Full Invested Amount.....................................................25
Funding Period...........................................................25
General Account Regulations..............................................98
Group....................................................................14
Group Investor Additional Amounts........................................72
Group Investor Default Amount............................................72
Group Investor Finance Charge Collections................................72
Group Investor Monthly Fees..............................................72
Group Investor Monthly Interest..........................................72
Harris.................................................................1, 9
Harris Portfolio.........................................................40
Holders..................................................................55
Indirect Participants....................................................53
Ineligible Receivables...................................................62
Initial Accounts.........................................................17
Initial Receivables..................................................12, 60
Initial Receivables Purchase Agreements..................................82
Initial Series Issuance Date..............................................9
Insolvency Event.........................................................32
Interchange..........................................................13, 49
Interest Funding Account.................................................19
Interest Payment Date....................................................68
Invested Amount..........................................................68
Investor Finance Charge Collections......................................72
IRA......................................................................96
IRS......................................................................90
John Hancock.............................................................98
L/C Issuer...............................................................76
LIBOR....................................................................78
Master Formation Agreement...............................................50
MasterCard...............................................................13
Minimum Monthly Payment..................................................47
Monthly Period...........................................................15
Monthly Servicing Fee....................................................59
New Accounts.............................................................39
New Issuance.............................................................68
Offered Securities.......................................................90
OID......................................................................90
Original PFR Purchase Agreements.........................................82
Overdue Initial Receivables Purchase Agreement...........................82
Paired Series............................................................24
Participants.............................................................53
Participation........................................................16, 69
Participation Interests..................................................14
Participation Percentage.................................................69
Participation Supplement.............................................16, 69
Partners First............................................................8
Partners First Portfolio..................................................9
Pay Out Event............................................................58
PFR.......................................................................8
PFR Purchase Agreement...................................................12
PFRF...................................................................1, 8
Pooling and Servicing Agreement...........................................1
Portfolio Yield..........................................................35
Pre-Funding Account......................................................25
Pre-Funding Amount.......................................................25
Premium Option Receivables...............................................66
Premium Percentage.......................................................66
Prepayable Instrument....................................................91
Principal Allocation Percentage......................................24, 71
Principal Commencement Date..............................................19
Principal Funding Account................................................21
Principal Receivables....................................................18
Principal Sharing Series.................................................23
Principal Shortfalls.....................................................73
Principal Terms..........................................................68
Prior Series.............................................................24
Prospectus Supplement.....................................................1
PTE......................................................................97
Purchase Agreements......................................................12
Rating Agency............................................................27
Rating Agency Condition..................................................38
Reallocation Group.......................................................24
Receivables...........................................................1, 13
Record Date..............................................................52
Recoveries...........................................................13, 50
Redirected Investor Finance Charge Collections...........................72
Regulations..............................................................90
Reinvestment Events......................................................59
Removed Accounts.........................................................17
Required Minimum Principal Balance.......................................64
Required Transferor Amount...............................................15
Reserve Account..........................................................77
Retained Rights.......................................................9, 84
Revolving Period.........................................................20
RTC..................................................................30, 31
RTC Policy Statement.................................................31, 87
Section 11.............................................................II-1
Securities................................................................1
Securities Act............................................................6
Security Owner...........................................................90
Security Owners...........................................................6
Security Rate.............................................................6
Securityholders...........................................................6
Securityholders' Interest................................................14
Series.................................................................1, 8
Series Adjusted Invested Amount..........................................70
Series Allocable Defaulted Amount........................................70
Series Allocable Finance Charge Collections..........................70, 72
Series Allocable Principal Collections...................................70
Series Allocation Percentage.............................................70
Series Cut-Off Date......................................................20
Series Enhancement.......................................................14
Series Invested Amount...................................................64
Series Issuance Date.....................................................20
Series Required Transferor Amount........................................70
Series Termination Date..................................................20
Service Transfer.........................................................79
Servicer...............................................................1, 8
Servicer Default.........................................................79
Servicer Interchange.....................................................59
Servicing Fee.........................................................8, 59
Shared Principal Collections.............................................73
Special Funding Account..................................................74
Special Payment Date.....................................................58
Special Tax Counsel......................................................90
Supplement...............................................................16
Supplemental Securities..................................................16
Supplemental Security....................................................63
Swaps....................................................................78
Tax Opinion..............................................................69
Termination Notice.......................................................79
Transfer Date............................................................27
Transferor.............................................................1, 8
Transferor Amount....................................................15, 62
Transferor Purchase Agreement............................................12
Transferor Securities....................................................16
Transferor Security......................................................16
Transferor Servicing Fee.................................................59
Transferor's Interest....................................................15
Trust..................................................................1, 8
Trust Adjusted Invested Amount...........................................71
Trust Assets.............................................................13
Trust Portfolio..........................................................40
Trustee................................................................1, 8
U.S. Federal Income Tax Consequences.....................................90
UCC......................................................................31
UJB......................................................................45
VISA.....................................................................13
Withholding Regulations..................................................94
Yield Supplement Account.................................................18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee.......................................... $303.03
Printing and Engraving....................................
Trustee's Fees............................................
Legal Fees and Expenses...................................
Accountant's Fees and Expenses............................
Rating Agency Fees........................................
Miscellaneous Fees........................................
-------
Total
=======
- -----------------
ITEM 15. INDEMNIFICATION OF OFFICERS AND MANAGERS
Section 11 of the Registrant's Limited Liability Company Agreement,
as amended on May 13, 1998 ("Section 11") provides that no person shall be
personally liable to the Registrant or its member for monetary damages for
breach of fiduciary duty as a manager; provided, however, that the
foregoing does not eliminate or limit the liability of a manager (i) for
any breach of the manager's duty of loyalty to the Registrant or its
member, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or (iii) for any
transaction from which the manager derived an improper personal benefit.
The right of indemnification provided in Section 11 is not exclusive of any
other rights to which any person seeking indemnification may otherwise be
entitled, and will be applicable to matters otherwise within its scope
whether or not such matters arose or arise before or after the adoption of
Section 11. Without limiting the generality or the effect of the foregoing,
the Registrant may enter into one or more agreements with any person, which
provide for indemnification greater or different than that provided in
Section 11. No repeal or modification of Section 11 by the member of the
Registrant may adversely affect any right or protection of a manager of the
Registrant existing by virtue of Section 11 at the time of such repeal or
modification.
Section 18-108 of the Delaware Limited Liability Company Act provides
that Delaware limited liability companies may indemnify any manager or
other person from any and all claims whatsoever.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Limited Liability Company Agreement of the
Transferor.
4.1 Amended and Restated Pooling and Servicing Agreement and related
agreements as exhibits thereto among Partners First, the Transferor
and the Trustee.
4.2 Form of Series Supplement among Partners First, the Transferor and
the Trustee.**
4.3 Form of Prospectus Supplement.**
4.4 Merger Agreement between the Transferor and Partner First Receivables
Funding Corporation.**
4.5 Amended and Restated Receivables Purchase Agreement between PFR and
the Transferor.
5.1 Form of opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to legality.
8.1 Form of opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to tax matters.
10.1 Master Agreement for the Formation of a Limited Liability Company
among BankBoston Corporation, Bankmont Financial Corp., Harris, and
First Annapolis Consulting, Inc.**
10.2 Contribution Agreement between BKB and Partners First.**
10.3 Receivables Purchase and Sale Agreement between BKB and PFR.**
10.4 Overdue Receivables Purchase and Sale Agreement between BKB and PFR.**
10.5 Receivables Purchase Agreement between BKB and PFR.**
10.6 Assignment and Assumption Agreement between BKB and PFR.**
10.7 Contribution Agreement between Harris and Partners First.**
10.8 Receivables Purchase and Sale Agreement between Harris and PFR.**
10.9 Overdue Receivables Purchase and Sale Agreement between Harris and
PFR.**
10.10 Receivables Purchase Agreement between Harris and PFR.**
10.11 Assignment and Assumption Agreement between Harris and PFR.**
10.12 Servicing Agreement between First Data Resources Inc. and Partners
First.**
10.13 Assistance Agreement between BKB and Partners First.**
10.14 Assistance Agreement between Harris and Partners First.**
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in its
opinion, filed as Exhibit 5.1).
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in its
opinions filed as Exhibit 8.1).
24 Power of Attorney.**
99.1 Letter to the Securities and Exchange Commission of Kathleen
McGillicuddy.**
99.2 Letter to the Securities and Exchange Commission of Rhanna Kidwell.**
99.3 Letter to the Securities and Exchange Commission of William Parent.**
- ------------------
* To be filed by amendment
** Previously filed.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(i) 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; (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; (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however, that (a)(i) and (a)(ii) will not apply if the
information required to be included in a post-effective amendment by those
sub-paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this registration statement.
(ii) 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.
(iii) 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.
(iv) 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 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.
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 Amendment No. 6 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of
Arundel, State of Maryland, on May 20, 1998.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
(Registrant)
By /s/ John R. Soderlund
--------------------------
Name: John R. Soderlund
Title: Chairman
PARTNERS FIRST CREDIT CARD MASTER TRUST
(Co-Registrant)
By PARTNERS FIRST RECEIVABLES FUNDING, LLC
(Originator of the Registrant)
By /s/ John R. Soderlund
---------------------------
Name: John R. Soderlund
Title: Chairman
Pursuant to the Requirements of the Securities Act of 1933, this
Amendment No. 6 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
SIGNATURE TITLE
- --------- -----
/s/ John R. Soderlund
- --------------------------
John R. Soderlund Chairman May 20, 1998
(Principal Executive Officer)
and Manager
/s/ Jeff H. Slawsky
- --------------------------
Jeff H. Slawsky President and Manager May 20, 1998
/s/ Mark J. Norwicz
- --------------------------
Mark J. Norwicz Treasurer and Manager May 20, 1998
(Principal Financial Officer
Principal Accounting Officer)
/s/ Terence F. Browne
- --------------------------
Terence F. Browne Secretary and Manager May 20, 1998
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Limited Liability Company Agreement of
the Transferor.
4.1 Amended and Restated Pooling and Servicing Agreement and
related agreements as exhibits thereto among Partners First,
the Transferor and the Trustee.
4.2 Form of Series Supplement among Partners First, the Transferor
and the Trustee.**
4.3 Form of Prospectus Supplement.**
4.4 Merger Agreement between the Transferor and Partner First
Receivables Funding Corporation.**
4.5 Amended and Restated Receivables Purchase Agreement between
PFR and the Transferor.
5.1 Form of opinion of Skadden, Arps, Slate, Meagher & Flom LLP
with respect to legality.
8.1 Form of opinion of Skadden, Arps, Slate, Meagher & Flom LLP
with respect to tax matters.
10.1 Master Agreement for the Formation of a Limited Liability
Company among BankBoston Corporation, Bankmont Financial Corp.,
Harris, and First Annapolis Consulting, Inc.**
10.2 Contribution Agreement between BKB and Partners First.**
10.3 Receivables Purchase and Sale Agreement between BKB and PFR.**
10.4 Overdue Receivables Purchase and Sale Agreement between BKB
and PFR.**
10.5 Receivables Purchase Agreement between BKB and PFR.**
10.6 Assignment and Assumption Agreement between BKB and PFR.**
10.7 Contribution Agreement between Harris and Partners First.**
10.8 Receivables Purchase and Sale Agreement between Harris and
PFR.**
10.9 Purchase Receivables Purchase and Sale Agreement between
Harris and PFR.**
10.10 Receivables Purchase Agreement between Harris and PFR.**
10.11 Assignment and Assumption Agreement between Harris and
Partners First.**
10.12 Servicing Agreement between First Data Resources Inc. and
Partners First.**
10.13 Assistance Agreement between BKB and Partners First.**
10.14 Assistance Agreement between Harris and Partners First.**
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in its opinion filed as Exhibit 5.1).
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in its opinion filed as Exhibit 8.1).
24 Power of Attorney.**
99.1 Letter to the Securities and Exchange Commission of Kathleen
McGillicuddy.**
99.2 Letter to the Securities and Exchange Commission of Rhanna
Kidwell.**
99.3 Letter to the Securities and Exchange Commission of William
Parent.**
--------------------
* To be filed by amendment.
** Previously filed.
Exhibit 1.1
PARTNERS FIRST CREDIT CARD MASTER TRUST
PARTNERS FIRST RECEIVABLES FUNDING LLC
(Transferor)
PARTNERS FIRST HOLDINGS, LLC
(Servicer)
UNDERWRITING AGREEMENT
(Standard Terms)
______________, 1998
[Underwriter]
As Representative of the Several Underwriters
Ladies and Gentlemen:
Partners First Receivables Funding, LLC, a Delaware limited
liability company (the "Company"), proposes to cause the Partners First
Credit Card Master Trust (the "Trust") to issue the Asset Backed
Certificates designated in the applicable Terms Agreement (as hereinafter
defined) (the "Certificates"). The Certificates will be issued pursuant to
a Pooling and Servicing Agreement (the "Pooling and Servicing Agreement")
among the Company, as Transferor, Partners First Holdings, LLC
("Holdings"), as Servicer (the "Servicer"), and The Bank of New York, as
trustee (the "Trustee"), as supplemented by the Series Supplement having
the date stated in the applicable Terms Agreement, between the Company, as
Transferor, Holdings, as Servicer and the Trustee (the "Supplement"). The
Company is a wholly owned subsidiary of Partners First Receivables, LLC
("PFR"). PFR is a direct subsidiary of Holdings. Holdings, as Servicer,
PFR, as seller to the Transferor, and the Company, as Transferor, are
referred to collectively herein as the "Partners First Entities." The
assets of the Trust will include, among other things, Receivables (as
defined herein) transferred by BankBoston (NH), National Association
("BKB") and Harris Trust and Savings Bank ("Harris") to PFR and, in turn,
transferred by PFR to the Company and subsequently transferred by the
Company to the Trust pursuant to the Pooling and Servicing Agreement. The
Series of Certificates designated in the applicable Terms Agreement among
the Company, Holdings and the Representative of the several Underwriters
will be sold in a public offering through the underwriters listed on
Schedule I to the applicable Terms Agreement, one or more of which may act
as representative of such underwriters (any underwriter through which
Certificates are sold shall be referred to herein as an "Underwriter" or,
collectively, all such Underwriters may be referred to as the
"Underwriter"; any representatives thereof may be referred to herein as a
"Representative"). Certificates of any Series sold to the Underwriters
shall be sold pursuant to a Terms Agreement by and among the Company,
Holdings and the Underwriter, a form of which is attached hereto as Exhibit
A (a "Terms Agreement"), which incorporates by reference this Underwriting
Agreement (the "Agreement"). Any Series of Certificates sold pursuant to
any Terms Agreement may include the benefits of a letter of credit, cash
collateral guaranty or account, collateral interest, surety bond, insurance
policy, spread account, reserve account, yield supplement account or other
similar arrangement for the benefit of the Certificateholders of such
Series ("Credit Enhancement"). With respect to any such Credit Enhancement,
the Company or Holdings, or both, may enter into an agreement (the "Credit
Enhancement Agreement") by and between such Partners First Entities and the
provider of the Credit Enhancement (the "Credit Enhancement Provider"). The
term "applicable Terms Agreement" means the Terms Agreement executed in
connection with the sale to the Underwriter of a Series of Certificates.
Each Certificate will represent a specified percentage undivided interest
in the Trust. The assets of the Trust include, among other things, certain
amounts due on a portfolio of MasterCard(R) and VISA(R) revolving credit
card accounts of Holdings (the "Receivables"), and the benefit of the
Credit Enhancement, if any. To the extent not defined herein, capitalized
terms used herein have the meanings assigned to such terms in the Pooling
and Servicing Agreement. Unless otherwise stated herein or in the
applicable Terms Agreement, as the context otherwise requires or if such
term is otherwise defined in the Pooling and Servicing Agreement, each
capitalized term used or defined herein or in the applicable Terms
Agreement shall relate only to the Series of Certificates designated in the
applicable Terms Agreement and no other Series of Asset Backed Certificates
issued by the Trust.
Whenever the Company determines to make an offering of
Certificates, the Company and Holdings will enter into a Terms Agreement
providing for the sale of the applicable Certificates to, and the purchase
and offering thereof by, the Underwriters. The Terms Agreement relating to
the Certificates shall specify the type of Certificates to be issued, the
names of the Underwriters participating in such offering (subject to
substitution as provided in Section 10 hereof), the number of Certificates
which each such Underwriter severally agrees to purchase, the price at
which the Certificates are to be purchased by the Underwriters from the
Company, the initial public offering price, the time and place of delivery
and payment and other specific terms. The Terms Agreement may take the form
of an exchange of any standard form of written telecommunication between
you and the Company. Each offering of Certificates will be governed by this
Agreement, as supplemented by the applicable Terms Agreement, and this
Agreement and such Terms Agreement shall inure to the benefit of and be
binding upon the Company, Holdings and each Underwriter participating in
the offering of such Certificates.
Section 1. Representations and Warranties. (a) Each of the Company
and Holdings, only as to itself and not jointly, represents and warrants
to, and agrees with, each Underwriter that:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the
provisions of the Securities Act of 1933, as amended, and the rules
and regulations of the Commission thereunder (collectively, the "1933
Act"), a registration statement on Form S-3 (having the registration
number stated in the applicable Terms Agreement), including a form of
prospectus, relating to the Certificates. Such registration statement,
as amended at the time it was declared effective by the Commission,
including all material incorporated by reference therein, and all
information contained in any Additional Registration Statement (as
defined herein) and deemed to be part of such registration statement
as of the time such Additional Registration Statement (if any) was
declared effective by the Commission pursuant to the General
Instructions of the Form on which it was filed and including all
information (if any) deemed to be a part of such registration
statement as of the time it was declared effective by the Commission
pursuant to Rule 430A(b) ("Rule 430A(b)") under the 1933 Act (such
registration statement, the "Initial Registration Statement") has been
declared effective by the Commission. If any posteffective amendment
has been filed with respect to the Initial Registration Statement,
prior to the execution and delivery of the applicable Terms Agreement,
the most recent such amendment has been declared effective by the
Commission. If (i) an additional registration statement, including the
contents of the Initial Registration Statement incorporated by
reference therein and including all information (if any) deemed to be
a part of such additional registration statement pursuant to Rule
430A(b) (the "Additional Registration Statement") relating to the
Certificates has been filed with the Commission pursuant to Rule
462(b) ("Rule 462(b)") under the 1933 Act and, if so filed, has become
effective upon filing pursuant to Rule 462(b), then the Certificates
have been duly registered under the 1933 Act pursuant to the Initial
Registration Statement and such Additional Registration Statement or
(ii) an Additional Registration Statement is proposed to be filed with
the Commission pursuant to Rule 462(b) and will become effective upon
filing pursuant to Rule 462(b), then upon such filing the Certificates
will have been duly registered under the 1933 Act pursuant to the
Initial Registration Statement and such Additional Registration
Statement. If the Company does not propose to amend the Initial
Registration Statement or, if an Additional Registration Statement has
been filed and the Company does not propose to amend it and if any
posteffective amendment to either such registration statement has been
filed with the Commission prior to the execution and delivery of the
applicable Terms Agreement, the most recent amendment (if any) to each
such registration statement has been declared effective by the
Commission or has become effective upon filing pursuant to Rule 462(c)
under the 1933 Act or, in the case of any Additional Registration
Statement, Rule 462(b). The Initial Registration Statement and any
Additional Registration Statement are hereinafter referred to
collectively as the "Registration Statements" and individually as a
"Registration Statement." Copies of the Registration Statements,
together with any posteffective amendments, have been furnished to the
Underwriters. Holdings proposes to file with the Commission pursuant
to Rule 424 ("Rule 424") under the 1933 Act a supplement (the
"Prospectus Supplement") to the form of prospectus included in a
Registration Statement (such prospectus, in the form it appears in a
Registration Statement or in the form most recently revised and filed
with the Commission pursuant to Rule 424 is hereinafter referred to as
the "Basic Prospectus") relating to the Certificates and the plan of
distribution thereof. The Basic Prospectus and the Prospectus
Supplement, together with any amendment thereof or supplement thereto,
is hereinafter referred to as the "Final Prospectus." Except to the
extent that the Representative shall agree to a modification, the
Final Prospectus shall be in all substantial respects in the form
furnished to the Underwriters prior to the execution of the relevant
Terms Agreement, or to the extent not completed at such time, shall
contain only such material changes as the Company has advised the
Representative, prior to such time, will be included therein. Any
preliminary form of the Prospectus Supplement which has heretofore
been filed pursuant to Rule 424 is hereinafter called a "Preliminary
Final Prospectus;"
(ii) The Initial Registration Statement, including such
amendments thereto as may have been required on the date of the
applicable Terms Agreement, and the Additional Registration Statement
(if any), relating to the Certificates, have been filed with the
Commission and such Initial Registration Statement as amended, and the
Additional Registration Statement (if any), have become effective. No
stop order suspending the effectiveness of the Initial Registration
Statement or the Additional Registration Statement (if any) has been
issued and no proceeding for that purpose has been instituted or, to
the knowledge of any of the Partners First Entities , threatened by
the Commission;
(iii) The Initial Registration Statement conforms, and any
amendments or supplements thereto and the Final Prospectus will
conform, in all material respects to the requirements of the 1933 Act,
and do not and will not, as of the applicable effective date as to the
Initial Registration Statement and any amendment thereto, as of the
applicable filing date as to the Final Prospectus and any supplement
thereto, and as of the Closing Date, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and the Additional Registration Statement (if any) and the Initial
Registration Statement conform, in all material respects, to the
requirements of the 1933 Act, and do not and will not, as of the
applicable effective date as to the Additional Registration Statement,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company or Holdings, as applicable, by or
on behalf of an Underwriter specifically for use in connection with
the preparation of a Registration Statement and the Final Prospectus;
(iv) Holdings is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware, with corporate power and authority under such laws to own,
lease and operate its properties and conduct its business as described
in the Final Prospectus, and is duly qualified as a foreign limited
liability company and duly authorized to transact business and is in
good standing under the laws of each jurisdiction in which it owns or
leases property of a nature, or transacts business of a type, that
would make such qualification necessary, or transacts business of a
type, that would make such qualification necessary, except to the
extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the condition (financial or
otherwise), results of operations, business or prospects of Holdings;
(v) The Company is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
Delaware, with corporate power and authority under such laws to own,
lease and operate its properties and conduct its business as described
in the Final Prospectus, and is duly qualified as a foreign limited
liability company and duly authorized to transact business and is in
good standing under the laws of each jurisdiction in which it owns or
leases property of a nature, or transacts business of a type, that
would make such qualification necessary, except to the extent that the
failure to so qualify or be in good standing would not have a material
adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of the Company;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and Holdings; and upon execution and delivery
of each Terms Agreement by the Company and Holdings, such Terms
Agreement shall have been duly authorized, executed and delivered by
the Company and Holdings;
(vii) As of the Closing Date (as defined in Section 2(a)), the
representations and warranties of the Company, as Transferor, or
Holdings, as Servicer, as applicable, in the Pooling and Servicing
Agreement and the Supplement will be true and correct in all material
respects;
(viii) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the Trust is not required to be registered
under the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(ix) The Certificates have been duly authorized, and, when issued
and delivered pursuant to the Pooling and Servicing Agreement and the
Supplement, duly authenticated by the Trustee and paid for by the
Underwriters in accordance with the terms of this Agreement and the
applicable Terms Agreement, will be duly and validly executed, issued
and delivered and entitled to the benefits provided by the Pooling and
Servicing Agreement and the Supplement; each of the Pooling and
Servicing Agreement and the Supplement have been duly authorized by
each of the Company and Holdings and, when executed and delivered by
the Company, as Transferor, and Holdings, as Servicer, each of the
Pooling and Servicing Agreement and the Supplement will (assuming due
execution and delivery by the Trustee) constitute a valid and binding
agreement of the Company or Holdings, as applicable; the Certificates,
the Pooling and Servicing Agreement and the Supplement conform to the
descriptions thereof in the Final Prospectus in all material respects;
and, if applicable, the Credit Enhancement Agreement has been duly
authorized, and when executed and delivered by the Trustee and Credit
Enhancement Provider, the Credit Enhancement Agreement will constitute
a valid and binding agreement of the Company and Holdings, as
applicable;
(x) Each authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign
(other than under the 1933 Act and the securities or blue sky laws of
the various states), which is required for (A) the valid
authorization, issuance, sale and delivery of the Certificates or (B)
the execution, delivery or performance of this Agreement, the
applicable Terms Agreement, the Pooling and Servicing Agreement, the
Supplement, or the Credit Enhancement Agreement by the Company or
Holdings, as applicable, has been received;
(xi) No consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required to be
obtained or made by the Company or Holdings, as applicable, for the
consummation of the transactions contemplated by this Agreement, the
applicable Terms Agreement, the Pooling and Servicing Agreement or the
Supplement, except such as have been obtained and made under the 1933
Act, such as may be required under state securities laws and the
filing of any financing statements required to perfect the Trust's
interest in the Receivables;
(xii) The Company and Holdings, as applicable, are not in default
in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which
it is a party or by which it may be bound or to which any of its
properties may be subject, except for such defaults that would not
have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the
Company or Holdings, as applicable. The execution and delivery of this
Agreement, the applicable Terms Agreement, the Pooling and Servicing
Agreement, the Supplement and the Credit Enhancement Agreement by the
Company or Holdings, as applicable, the issuance and delivery of the
Certificates, the consummation by the Company or Holdings, as
applicable, of the transactions contemplated in this Agreement, the
applicable Terms Agreement, the Pooling and Servicing Agreement, the
Supplement and the Registration Statement, and compliance by the
Company or Holdings with the terms of this Agreement, the applicable
Terms Agreement, the Pooling and Servicing Agreement, the Supplement
and the Credit Enhancement Agreement have been duly authorized by all
necessary corporate action on the part of the Company or Holdings, as
applicable, and do not and will not result in any violation of the
charter or bylaws of the Company or Holdings, as applicable, and do
not and will not conflict with, or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or Holdings, as applicable, under
(A) any indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or Holdings, as
applicable, is a party or by which it may be bound or to which any of
its properties may be subject or (B) any existing applicable law,
rule, regulation, judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company or Holdings, as applicable, or any of
their respective properties except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company or
Holdings, as applicable;
(xiii) Except as disclosed in the Final Prospectus, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company or Holdings, as applicable, threatened
against or affecting the Company or Holdings, as applicable, that is
required to be disclosed in the Final Prospectus or that, in the final
outcome, could, in the judgment of the Company or Holdings, as
applicable, result in any material adverse change in the condition
(financial or otherwise), earnings, business affairs or business
prospects of the Company or Holdings, as applicable, or that could
materially and adversely affect the properties or assets of the
Company or Holdings, as applicable, or that could adversely affect the
consummation of the transactions contemplated in this Agreement; the
aggregate liability or loss, if any, resulting from the final outcome
of all pending legal or governmental proceedings to which the Company
or Holdings, as applicable, is a party or which affect any of its
respective properties that are not described in the Final Prospectus,
including ordinary routine litigation incidental to its business,
would not have a material adverse effect on the condition (financial
or otherwise), earnings, business affairs or business prospects of the
Company or Holdings, as applicable;
(xiv) Since the respective dates as of which information is given
in the Final Prospectus, except as otherwise stated therein, there has
not been (A) any material adverse change in the condition (financial
or otherwise) or in earnings, business affairs or business prospects
of the Company or Holdings, as applicable, or (B) any transaction
entered into by the Trust, the Company or Holdings, other than in the
ordinary course of business, that is material to the Trust or the
Certificateholders; and
(xv) Neither the Company nor Holdings nor any of their respective
affiliates does business with the government of Cuba or with any
person or affiliate located in Cuba within the meaning of Section
517.075, Florida Statutes.
(b) Any certificate signed by any duly authorized officer of the
Company or Holdings, as applicable, and delivered to you or to counsel for
the Underwriters shall be deemed a representation and warranty by the
Company or Holdings, as applicable, to each Underwriter as to the matters
covered thereby.
Section 2. Purchase and Sale. (a) The several commitments of the
Underwriters to purchase Certificates pursuant to any Terms Agreement shall
be deemed to have been made on the basis of the representations and
warranties herein contained and shall be subject to the terms and
conditions herein set forth. It is understood that the several Underwriters
propose to offer the Certificates for sale to the public, which may include
selected dealers, as set forth in the Final Prospectus.
(b) Unless otherwise provided in the applicable Terms Agreement,
payment for Certificates shall be made to the Company or to its order by
wire transfer of same day funds at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP in New York, New York at 10:00 A.M., New York City time,
on the Closing Date (as hereinafter defined) specified in the Terms
Agreement, or at such other time on the same or such other date as the
Representative and the Company may agree upon. The time and date of such
payment for the Certificates as specified in the applicable Terms Agreement
are referred to herein as the "Closing Date." As used herein, the term
"Business Day" means any day other than a day on which banks are permitted
or required to be closed in New York City.
(c) Unless otherwise provided in the applicable Terms Agreement,
payment for the Certificates shall be made against delivery to the
Representative for the respective accounts of the several Underwriters of
the Certificates registered in the name of Cede & Co. as nominee of The
Depository Trust Company and in such denominations as the Representative
shall request in writing not later than two full Business Days prior to the
Closing Date. The Company shall make the Certificates available for
inspection by the Representative in New York, New York not later than one
full Business Day prior to the Closing Date.
Section 3. Certain Covenants of the Company. The Company
covenants with each Underwriter as follows:
(a) If reasonably requested by you in connection with the offering
of the Certificates, the Company will prepare a preliminary prospectus
supplement containing such information concerning the Certificates as you
and the Company deem appropriate, and immediately following the execution
of the Terms Agreement, the Company will prepare a Prospectus Supplement
that complies with the 1933 Act and that sets forth the number or principal
amount of Certificates covered thereby, the names of the Underwriters
participating in the offering and the number or principal amount of
Certificates which each Underwriter severally has agreed to purchase, the
name of each Underwriter, if any, acting as representative in connection
with the offering, the price at which the Certificates are to be purchased
by the Underwriters from the Company, the initial public offering price,
the selling concession and reallowance, if any, and such other information
concerning the Certificates as you and the Company deem appropriate in
connection with the offering of the Certificates. The Company will promptly
transmit copies of the Prospectus Supplement to the Commission for filing
pursuant to Rule 424 under the 1933 Act and will furnish to the
Underwriters named therein as many copies of any preliminary prospectus
supplement, the Basic Prospectus and the Prospectus Supplement as you shall
reasonably request. In addition, to the extent that any Underwriter (i) has
provided to the Company Collateral Term Sheets or Series Term Sheets (each
as defined below) that such Underwriter has provided to a prospective
investor, the Company will file such Collateral Term Sheets or Series Term
Sheets as an exhibit to a report on Form 8-K within two Business Days of
its receipt thereof, or (ii) has provided to the Company Structural Term
Sheets or Computational Materials (each as defined below) that such
Underwriter has provided to a prospective investor, the Company will file
or cause to be filed with the Commission a report on Form 8-K containing
such Structural Term Sheet and Computational Materials, as soon as
reasonably practicable after the date of this Agreement, but in any event,
not later than the date on which the Final Prospectus is filed with the
Commission pursuant to Rule 424.
(b) If at any time when the Final Prospectus is required by the
1933 Act to be delivered in connection with sales of the Certificates any
event shall occur or condition exist as a result of which it is necessary,
in the opinion of counsel for the Underwriters or counsel for the Company,
to amend the Registration Statement or amend or supplement the Final
Prospectus in order that the Final Prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of either such counsel, at any such time
to amend any Registration Statement or amend or supplement the Final
Prospectus in order to comply with the requirements of the 1933 Act, the
Company will promptly prepare and file with the Commission, subject to
Section 3(d), such amendment or supplement as may be necessary to correct
such untrue statement or omission or to make the Registration Statement or
the Final Prospectus comply with such requirements.
(c) During the period when the Final Prospectus is required by the
1933 Act to be delivered in connection with sales of the Certificates or
during the entire period that any Class of Certificates is outstanding
which were expected to be publicly offered securities for purposes of
ERISA, the Company will, subject to Section 3(d), file promptly all
documents required to be filed with the Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
(d) During the period between the date of the applicable Terms
Agreement and the Closing Date, the Company will inform you of its
intention to file any amendment to any Registration Statement, any
supplement to the Final Prospectus or any document that would as a result
thereof be incorporated by reference in the Final Prospectus, will furnish
you with copies of any such amendment, supplement or other document and
will not file any such amendment, supplement or other document in a form to
which you or your counsel shall reasonably object.
(e) During the period when the Final Prospectus is required by the
1933 Act to be delivered in connection with the sales of the Certificates,
the Company will notify you immediately, and confirm the notice in writing,
(i) of the effectiveness of any amendment to any Registration Statement,
(ii) of the mailing or the delivery to the Commission for filing of any
supplement to the Final Prospectus or any document that would as a result
thereof be incorporated by reference in the Final Prospectus, (iii) of the
receipt of any comments from the Commission with respect to any
Registration Statement or the Prospectus, (iv) of any request by the
Commission for any amendment to any Registration Statement or any
supplement to the Final Prospectus or for additional information relating
thereto or to any document incorporated by reference in the Final
Prospectus and (v) of the issuance by the Commission of any stop order
suspending any effectiveness of any Registration Statement, of the
suspension of the qualification of the Certificates for offering or sale in
any jurisdiction, or of the institution or threatening of any proceeding
for any of such purposes. The Company will use every reasonable effort to
prevent the issuance of any such stop order or of any order suspending such
qualification and, if any such order is issued, to obtain the lifting
thereof at the earliest possible moment.
(f) The Company will furnish to the Representative, without
charge, two copies of each Registration Statement as originally filed and
of all amendments thereto, whether filed before or after the Registration
Statement becomes effective, copies of all exhibits and documents filed
therewith and copies of all consents and certificates of experts as you may
reasonably request, and has furnished or will furnish to you, for each
other Underwriter, one copy of each Registration Statement as originally
filed and of each amendment thereto.
(g) The Company will cause the Trust to make generally available
to Certificateholders and to the Representative as soon as practicable an
earnings statement covering a period of at least twelve months beginning
with the first fiscal quarter of the Trust occurring after the effective
date of the Initial Registration Statement (or, if later, the effective
date of the Additional Registration Statement), which shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 of the Commission
promulgated thereunder.
(h) The Company will use its best efforts, in cooperation with the
Underwriters, to qualify the Certificates for offering and sale under the
applicable securities laws of such states and other jurisdictions as you
may designate and to maintain such qualifications in effect for a period of
not less than one year from the effective date of the Terms Agreement
applicable to such Certificates; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. The Company will file such statements and reports
as may be required by the laws of each jurisdiction in which the
Certificates have been qualified as provided above.
(i) To the extent, if any, that the rating provided with respect
to the Certificates by the rating agency or agencies that initially rate
the Certificates is conditional upon the furnishing of documents or the
taking of any other actions by the Company or Holdings, the Company or
Holdings, as applicable, shall furnish such documents and take any such
other actions.
(j) For a period from the date of this Agreement until the
retirement of the Certificates, or until such time as the Underwriters
shall cease to maintain a secondary market in the Certificates, whichever
first occurs, Holdings will deliver to the Underwriters (i) the annual
Servicer's Certificate, (ii) the annual independent certified public
accountants' reports furnished to the Trustee, (iii) all documents required
to be distributed to Certificateholders of the Trust and (iv) all documents
filed with the Commission pursuant to the Exchange Act or any order of the
Commission thereunder, in each case as provided to the Trustee or filed
with the Commission, as soon as such statements and reports are furnished
to the Trustee or filed or, if an affiliate of the Company is not the
Servicer, as soon thereafter as practicable.
(k) Between the date of the applicable Terms Agreement and the
Closing Date or such other date as is set forth in such Terms Agreement,
the Company will not, without your prior written consent, directly or
indirectly, sell, offer to sell, grant any option for the sale of, or
otherwise dispose of, the Certificates set forth in such Terms Agreement or
any similar securities, other than as set forth in such Terms Agreement.
Section 4. Payment of Expenses; Reimbursement. Each of the
Company and Holdings, only as to itself and not jointly, covenants and
agrees with the Underwriters that they will:
(a) Pay and bear all costs and expenses incident to the
performance of its obligations under this Agreement and any
applicable Terms Agreement, including (i) the preparation,
printing and filing of each Registration Statement (including
financial statements and exhibits), as originally filed and as
amended, any preliminary prospectus supplements and the Final
Prospectus and any amendments or supplements thereto, and the cost
of furnishing copies thereof to the Underwriters, (ii) the
preparation, printing and distribution of this Agreement, the
Terms Agreement, the Pooling and Servicing Agreement, the
Supplement and the Credit Enhancement Agreement, if any, (iii) the
issuance and delivery of the Certificates to the Underwriters,
(iv) the fees and disbursements of the counsel for the Company and
Holdings, as applicable, and accountants, (v) the qualification of
the Certificates under the applicable securities laws in
accordance with Section 3(h) including filing fees and reasonable
fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with any blue sky survey,
(vi) any fees charged by rating agencies for rating any of the
Certificates and (vii) the fees and expenses incurred in
connection with the listing of the applicable Certificates on one
or more domestic or foreign stock exchanges.
(b) Pay or cause to be paid all expenses incident to the
performance of its obligations under this Agreement, including
without limitation: (i) expenses of preparing, printing and
reproducing each Registration Statement, the Preliminary Final
Prospectus, the Final Prospectus, this Agreement, the applicable
Terms Agreement, the Pooling and Servicing Agreement, the
Supplement, the Credit Enhancement Agreement and the Certificates,
(ii) the cost of delivering the Certificates to the Underwriters,
(iii) any fees charged by investment rating agencies for the
rating of such Certificates, and (iv) the reasonable expenses and
costs (not to exceed the amount specified in the applicable Terms
Agreement) incurred in connection with "blue sky" qualification of
the Certificates for sale in those states designated by the
Underwriters and the printing of memoranda relating thereto (it
being understood that, except as specified in this Section 4 and
in Sections 7 and 8 hereof, the Underwriters will pay all their
own costs and expenses, including the cost of printing any
Agreement among Underwriters, the fees of counsel to any
Underwriter, transfer taxes on resale of any Certificates by them
and advertising expenses connected with any offers that they may
make).
(c) Reimburse the Underwriters named in the applicable
Terms Agreement for all of their out of pocket expenses, including
the reasonable fees and disbursements of counsel for such
Underwriters, if such Terms Agreement is terminated by you in
accordance with the provisions of Section 6 hereof.
Notwithstanding the foregoing, the Underwriters may agree
to reimburse the Company or Holdings, as applicable, for certain expenses
incurred in connection with the issuance and distribution of the
Certificates of any series if so specified in the applicable Terms
Agreement.
Section 5. Representations and Warranties of the
Underwriters. Each Underwriter severally represents, warrants, covenants
and agrees with the Company or Holdings, as applicable, that:
(a) It either (A) has not provided any potential investor
with a Collateral Term Sheet (that is required to be filed with
the Commission within two business days of first use under the
Terms of the Public Securities Association Letter as described
below), or (B) has, substantially contemporaneously with its first
delivery of such Collateral Term Sheet to a potential investor,
delivered such Collateral Term Sheet to the Company, which
Collateral Term Sheet, if any, is attached to this Agreement as
Exhibit B.
(b) It either (A) has not provided any potential investor
with a Structural Term Sheet or Computational Materials, or (B)
has provided any such Structural Term Sheet or Computational
Materials to the Company, which Structural Term Sheets and
Computational Materials, if any, are attached to this Agreement as
Exhibit C.
(c) It either (A) has not provided any potential investor
with a Series Term Sheet or (B) has provided any Series Term Sheet
to the Company, which Series Term Sheets, if any, are attached to
this Agreement as Exhibit D.
(d) Each Collateral Term Sheet bears a legend indicating
that the information contained therein will be superseded by the
description of the collateral contained in the Prospectus
Supplement and, except in the case of the initial Collateral Term
Sheet, that such information supersedes the information in all
prior Collateral Term Sheets.
(e) Each Structural Term Sheet and Series Term Sheet and
all Computational Materials bear a legend substantially as follows
(or in such other form as may be agreed prior to the date of this
Agreement):
This information does not constitute either an offer to
sell or a solicitation of an offer to buy any of the
securities referred to herein. Information contained
herein is confidential and provided for information only,
does not purport to be complete and should not be relied
upon in connection with any decision to purchase the
securities. This information supersedes any prior
versions hereof and will be deemed to be superseded by
any subsequent versions including, with respect to any
description of the securities or the underlying assets,
the information contained in the final Prospectus and
accompanying Prospectus Supplement. Offers to sell and
solicitations of offers to buy the securities are made
only by the final Prospectus and the related Prospectus
Supplement.
(f) It has not, and will not, without the prior written
consent of the Company, provide any Collateral Term Sheets,
Structural Term Sheets, Series Term Sheets or Computational
Materials, other than any referred to in clauses (a), (b), or (c)
above, to any investor after the date of this Agreement.
(g) It has only issued or passed on and shall only issue
or pass on in the United Kingdom any document received by it in
connection with the issue of the Certificates to a person who is
of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements)(Exemptions) Order 1996 or who is
a person to whom the document may otherwise lawfully be issued or
passed on, it has complied and shall comply with all applicable
provisions of the Financial Services Act 1986 of Great Britain
with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom
and if that Underwriter is an authorized person under the
Financial Services Act 1986, it has only promoted and shall only
promote (as that term is defined in Regulation 1.02 of the
Financial Services (Promotion of Unregulated Schemes) Regulations
1991) to any person in the United Kingdom the scheme described in
the Prospectus if that person is of a kind described either in
Section 76(2) of the Financial Services Act 1986 or in Regulation
1.04 of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991.
For purposes of this Agreement, "Collateral Term Sheets"
and "Structural Term Sheets" shall have the respective meanings assigned to
them in the February 13, 1995 letter of Cleary, Gottlieb, Steen & Hamilton
on behalf of the Public Securities Association (which letter, and the SEC
staff's response thereto, were publicly available February 17, 1995). The
term "Collateral Term Sheet" as used herein includes any subsequent
Collateral Term Sheet that reflects a substantive change in the information
presented. "Computational Materials" has the meaning assigned to it in the
May 17, 1994 letter of Brown & Wood on behalf of Kidder, Peabody & Co.,
Inc. (which letter, and the SEC staff's response thereto, were publicly
available May 20, 1994). "Series Term Sheet" has the meaning assigned to it
in the April 4, 1996 letter of Latham & Watkins on behalf of Greenwood
Trust Company (which letter, and the SEC staff's response thereto, were
publicly available April 5, 1996).
Section 6. Conditions of Underwriters' Obligations. Except as
otherwise provided in the Terms Agreement, the obligations of the
Underwriters to purchase and pay for the Certificates pursuant to any such
Terms Agreement are subject to the accuracy of the representations and
warranties of the Company and Holdings contained herein at and as of the
date hereof, the date of the Terms Agreement, and the Closing Date or
contained in certificates of any officer of the Company or Holdings
delivered pursuant to the provisions hereof, to the performance by the
Partners First Entities of its obligations hereunder, and the following
further conditions:
(a) At the Closing Date, no stop order suspending the
effectiveness of the Registration Statement and the Additional Registration
Statement (if applicable) shall have been issued under the 1933 Act and no
proceedings for that purpose shall have been instituted or shall be pending
or, to your knowledge or the knowledge of the Partners First Entities,
shall be contemplated by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel for the Underwriters.
(b) At the applicable Closing Date, you shall have received a
signed opinion of Morgan, Lewis & Bockius LLP, counsel for Holdings, dated
as of the Closing Date, together with signed or reproduced copies of such
opinion for each of the other Underwriters, in form and substance
satisfactory to you or your counsel, with respect to general corporate
matters.
(c) The Underwriters shall have received from Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Company, one or more opinions,
in form and substance satisfactory to the Underwriter's counsel, each dated
the applicable Closing Date, with respect to the validity of the
Certificates, the Initial Registration Statement, the Additional
Registration Statement (if any), the Final Prospectus, certain matters of
the Uniform Commercial Code, as adopted in the State of Delaware, and such
other related matters as the Underwriters may reasonably require, and each
of the Company and Holdings shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass on such
matters.
(d) At the applicable Closing Date, you shall have received the
favorable opinion of Orrick, Herrington & Sutcliffe LLP, counsel for the
Underwriters, dated as of the applicable Closing Date, together with signed
or reproduced copies of such opinion for each of the other Underwriters,
the Certificates, this Agreement, the Registration Statement, the Final
Prospectus, the Pooling and Servicing Agreement, the Supplement and such
other related matters as you may require. In giving such opinion, such
counsel may rely, as to all matters governed by the laws of jurisdictions
other than the law of the State of New York, the Limited Liability Company
Law of the State of Delaware and the federal law of the United States, upon
the opinions of counsel satisfactory to you. Such counsel may also state
that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the
Company and Holdings and certificates of public officials.
(e) At the applicable Closing Date, you shall have received the
favorable opinion of Emmett, Marvin & Martin, LLP, counsel for the Trustee,
dated as of the applicable Closing Date, together with signed or reproduced
copies of such opinion for each of the other Underwriters with respect to
such matters as you may require.
(f) At the applicable Closing Date there shall not have been,
since the date of the applicable Terms Agreement or since the respective
dates as of which information is given in the Registration Statement, any
material adverse change in the condition (financial or otherwise) or in the
earnings, business affairs or business prospects of the Company or
Holdings, whether or not arising in the ordinary course of business, and
you shall have received separate certificates of an authorized officer of
the Company and Holdings, dated as of such Closing Date, to the effect that
(i) there has been no such material adverse change, (ii) the
representations and warranties of the Company and Holdings, as applicable,
contained in Section 1 hereof are true and correct with the same force and
effect as though expressly made at and as of such Closing Date, (iii) the
Company and Holdings, as applicable, has complied with all agreements and
satisfied all conditions on its part to be complied with or satisfied at or
prior to such Closing Date, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and, to the
best knowledge of such person, no proceedings for that purpose have been
initiated or threatened by the Commission.
(g) At the date of the Final Prospectus and at the Closing Date,
Ernst & Young, L.L.P. (or such other independent public accountants as
shall be named in the applicable Terms Agreement), certified independent
public accountants for the Partners First Entities, shall have furnished to
the Underwriters a letter or letters, dated respectively as of the date of
the Final Prospectus and as of the Closing Date confirming that they are
certified independent public accountants within the meaning of the 1933 Act
and the Exchange Act, and the respective applicable published rules and
regulations thereunder and substantially in the form heretofore agreed and
otherwise in form and in substance satisfactory to the Representative and
counsel for the Underwriters.
(h) Subsequent to the date of the Terms Agreement relating to such
Certificates, none of the following shall have occurred: (i) a material
adverse change in the financial markets in the United States or the United
States shall have become engaged in the outbreak or escalation of
hostilities involving the United States or there has been a declaration by
the United States of a national emergency or a declaration of war, (ii) a
banking moratorium shall have been declared by either Federal or New York
State authorities, or (iii) trading in any securities of the Partners First
Entities shall have been suspended or materially limited by the Commission
or the New York Stock Exchange, or if trading generally on the New York
Sock Exchange shall have been suspended or materially limited, or minimum
or maximum prices for trading shall have been fixed, or maximum ranges for
prices shall have been required, by such exchange or by order of the
Commission or by any other governmental authority, any of which events, in
your reasonable judgment, renders it inadvisable to proceed with the public
offering or the delivery of the Certificates.
(i) The Underwriters shall receive evidence satisfactory to them
that, on or before the Closing Date, UCC-1 financing statements have been
or are being filed in the office of the Secretary of State of the State of
Delaware, reflecting the interest of the Trustee in the Receivables and the
proceeds thereof.
(j) The Underwriters shall have received evidence satisfactory to
them that the Certificates shall be rated in accordance with the applicable
Terms Agreements by the Rating Agency and subsequent to the date of the
applicable Terms Agreement there shall not have occurred a downgrading in
the rating assigned to the Certificates or any other securities issued by
the Company by any "nationally recognized statistical rating agency", as
that term is defined by the Commission for purposes of Rule 436(g)(2) under
the 1933 Act, and no such organization shall have publicly announced that
it has under surveillance or review its rating of the Certificates or any
of such other securities.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, the applicable Terms
Agreement may be terminated by you by notice to the Company at any time on
or prior to the applicable Closing Date, and such termination shall be
without liability of any party to any other party except as provided in
Section 4 hereof. Notwithstanding any such termination, the provisions of
Sections 7, 8 and 9 shall remain in effect.
Section 7. Indemnification. (a) The Company and Holdings each
agree to jointly and severally indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of an untrue
statement or alleged untrue statement of a material fact contained
in any Registration Statement as originally filed (or any
amendment thereto), and all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of an untrue
statement or alleged untrue statement of a material fact contained
in any preliminary prospectus, or any preliminary prospectus
supplement, or the Final Prospectus (or any amendment of
supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected with the
written consent of the Company or Holdings; and
(iii) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel chosen by
you), reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that
any such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that (i) this indemnity agreement does not apply to any
loss, liability, claim, damage or expense to the extent arising out of an
untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to
the Company or Holdings by any Underwriter through you expressly for use in
any Registration Statement as originally filed (or any amendment thereto)
or any preliminary prospectus, or any preliminary prospectus supplement, or
the Final Prospectus (or any amendment or supplement thereto) and (ii) such
indemnity with respect to any Preliminary Prospectus shall not inure to the
benefit of the Underwriter (or any person controlling any of the
Underwriters) from whom the person asserting any such loss, claim, damage
or liability purchased the Certificates which are the subject thereof if
the Company or Holdings, as applicable, shall sustain the burden of proving
(A) such person did not receive a copy of the Final Prospectus (or the
Final Prospectus as supplemented, excluding, in either case, documents
incorporated therein by reference) at or prior to the confirmation of the
sale of such Certificates to such person in any case where such delivery is
required by the 1933 Act and (B) that the untrue statement or omission of a
material fact contained in such Preliminary Prospectus was corrected in the
Final Prospectus (or the Final Prospectus as supplemented). This indemnity
agreement will be in addition to any liability which the Company or
Holdings may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold
harmless the Company and Holdings, their respective directors, each officer
of the Company who signed the Registration Statement, and each person, if
any, who the Company or Holdings within the meaning of Section 15 of the
1933 Act, against any and all loss, liability, claim, damage and expense
described in the indemnity contained in Section 7(a), as incurred, but only
with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement as originally
filed (or any amendment thereto) or any preliminary prospectus, or any
preliminary prospectus supplement or the Final Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company or Holdings by such Underwriter
through you expressly for use in any Registration Statement as originally
filed (or any amendment thereto) or any preliminary prospectus, or any
preliminary prospectus supplement or the Final Prospectus (or any amendment
or supplement thereto). This indemnity agreement will be in addition to any
liability which the Underwriter may otherwise have had.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account
of this indemnity agreement. An indemnifying party may participate at its
own expense in the defense of any such action; provided, however, that
counsel to the indemnifying party shall not (except with the consent of the
indemnified party) also be counsel to the indemnified party. In no event
shall the indemnifying parties be liable for fees and expenses of more than
one counsel (in addition to any local counsel and counsel to the
indemnifying parties) for all indemnified parties in connection with any
one action or but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be
sought under this Section 7 or Section 8 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as
to or an admission of fault, culpability or a failure to act by or on
behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 7(a)(ii) effected without
its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of
such settlement at least 30 days prior to such settlement being entered
into and (iii) such indemnifying party shall not have reimbursed such
indemnifying party in accordance with such request prior to the date of
such settlement.
Section 8. Contribution. In order to provide for just and
equitable contribution in circumstances under which the indemnity provided
for in Section 7 is for any reason held to be unenforceable by the
indemnified parties although applicable in accordance with its terms, the
Company and Holdings on the one hand and the Underwriters on the other
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by
the Company or Holdings on the one hand and one or more of the Underwriters
on the other, as incurred, in such proportions that (a) the Underwriters
are responsible for that portion represented by the percentage that results
from dividing the underwriting discount by the net proceeds of the offering
(before deducting expenses) received by the Company and (b) the Company and
Holdings are responsible for the balance; provided, however, that (i) in no
case shall any Underwriter be liable or responsible for any amount in
excess of the underwriting discount applicable to the Certificates
purchased by such Underwriter hereunder and under the applicable Terms
Agreement and (ii) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Company, Holdings and the Underwriters each agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. For purposes of this
Section, each person, if any, who controls an Underwriter within the
meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such Underwriter, and each director of each of the Company
and Holdings, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company or Holdings
within the meaning of Section 15 of the 1933 Act shall have the same rights
to contribution as the Company and Holdings, respectively. The Underwriters
respective obligations to contribute pursuant to this Section 8 are several
in proportion to the amount of Certificates set opposite their respective
names in Schedule I to the applicable Term Sheet.
Section 9. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and
other statements of the Company, Holdings, the Underwriters and their
respective officers set forth in or made pursuant to this Agreement and any
Terms Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Company,
Holdings or any Underwriter or controlling person and shall survive
delivery of any payment for the Certificates. The provisions of Sections 4,
7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
Section 10. Default by One or More of the Underwriters. If one or
more of the Underwriters participating in an offering of Certificates shall
fail at the applicable Closing Date to purchase the Certificates which it
or they are obligated to purchase hereunder and under the applicable Terms
Agreement (the "Default Securities"), you shall have the right, within 36
hours thereafter, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein
set forth; if however, you have not completed such arrangements within such
36 hour period, then:
(a) if the number of Defaulted Securities does not exceed
10% of the number of Certificates to be purchased pursuant to such
Terms Agreement, the nondefaulting Underwriters named in such
Terms Agreement shall be obligated to purchase the full amount
thereof in the proportions that their respective underwriting
obligations bear to the underwriting obligations of all
nondefaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of
the Certificates to be purchased pursuant to such Terms Agreement,
the applicable Terms Agreement shall terminate without liability
on the part of any nondefaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default under this
Agreement and the applicable Terms Agreement.
In the event of any such default that does not result in the
termination of the applicable Terms Agreement, either you or the Company
shall have the right to postpone the applicable Closing Date for a period
not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.
Section 11. Notices. All notices and other communications under
this Agreement and any Terms Agreement shall be in writing and shall be
deemed to have been duly given if delivered, mailed or transmitted by any
standard form of telecommunication. Notices to the Underwriters shall be
directed to each of you at your respective addresses set forth on the first
page hereof, or in respect of any Terms Agreement, to such other person and
place as may be specified therein; notices to the Company shall be directed
to it at Partners First Receivables Funding LLC, 900 Elkridge Landing Road,
Suite 400, Linthicum, MD 21090; notices to Holdings shall be directed to it
at Partners First Holdings LLC, 900 Elkridge Landing Road, Suite 400,
Linthicum, MD 21090.
Section 12. Parties. This Agreement herein set forth and any Terms
Agreement is made solely for the benefit of any Underwriter which becomes a
party to a Terms Agreement, the Company, Holdings and, to the extent
expressed, any person controlling the Company or Holdings or any such
Underwriter, and the directors of the Company, its officers who have signed
the Registration Statement, and their respective executors, administrators,
successors and assigns and, subject to the provisions of Section 10, no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any
purchaser, as such purchaser, from any Underwriter of the Certificates. All
of the obligations of any Underwriters hereunder and under any Terms
Agreement are several and not joint.
Section 13. Governing Law and Time. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REFERENCE TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 14. Counterparts. This Agreement may be executed in one or
more counterparts and when a counterpart has been executed by each party,
all such counterparts taken together shall constitute one and the same
agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon
this instrument will become a binding agreement among the Company, Holdings
and each Underwriter in accordance with its terms.
Very truly yours,
PARTNERS FIRST HOLDINGS, LLC
By:__________________________________
Name:
Title:
PARTNERS FIRST RECEIVABLES FUNDING LLC
By:________________________
Name:
Title:
Confirmed and accepted as of the date first above written:
[UNDERWRITER]
By: ________________________________
Name:
Title:
For themselves and the other several Underwriters named
in Schedule I to the applicable Terms Agreement
Exhibit A
PARTNERS FIRST CARD MASTER TRUST
[Title of Securities]
TERMS AGREEMENT
Dated: ___________, ____
To: Partners First Holdings, LLC
900 Elkridge Landing Road
Suite 400
Linthicum, Maryland 21090
Partners First Receivables Funding LLC
900 Elkridge Landing Road
Suite 400
Linthicum, Maryland 21090
Re: Underwriting Agreement dated __________, 1998
Ladies and Gentlemen:
We (the "Representative[s]") understand that Partners First
Receivable Funding, LLC, a Delaware limited liability company (the
"Company"), proposes to issue and sell $_____________ of Certificates to be
issued by Partners First Credit Card Master Trust. This Agreement is the
Terms Agreement referred to in the underwriting agreement dated __________,
____ (the "Underwriting Agreement"). Subject to the terms and conditions
set forth herein or incorporated by reference herein, the Underwriters
named below (the "Underwriters") offer to purchase, severally and not
jointly, the respective Certificates.
Underwriters:
The Underwriters named on Schedule I attached hereto are the
"Underwriters" for the purpose of this Agreement and for the purposes of
the above referenced Underwriting Agreement as such Underwriting Agreement
is incorporated herein and made a part hereof.
Terms of the Certificates:
Initial Invested Interest Rate Price to
Class Amount or Formula Public (1)
- ----- ---------------- ------------- ----------
Class _ $___________ ____% _________%
Class _ $ __________ ____% _________%
(1) Plus accrued interest at the applicable rate from ____________, ____.
Distribution Dates: the __th calendar day of each Month,
commencing __________, ____.
Certificate Ratings:
Class _: ___ by Standard & Poor's
___ by Moody's
Class _: ___ by Standard & Poor's
___ by Moody's
Credit Enhancement Provider:
Trustee: The Bank of New York
Pooling and Servicing Agreement: Dated __________, ____, among Partners
First Receivables Funding Corporation, as Transferor, Partners First
Holdings, LLC, as Servicer, and The Bank of New York, as Trustee, on behalf
of the Certificateholders of Partners First Credit Card Master Trust
Supplement: Series ______ Supplement, dated _________, ____, among Partners
First Receivables Financing Corporation, as Transferor, Partners First
Holdings, LLC, as Servicer, and The Bank of New York, as Trustee, on behalf
of the Series _______ Certificateholders
Purchase Price:
The purchase price payable by the Underwriters for the
Certificates covered by this Agreement will be the following percentage of
the principal amounts to be issued:
Per Class A Certificate: __________%
Per Class B Certificate: __________%
Registration Statement: Registration No. 333-29495
Underwriting Commissions, Concessions and Discounts:
The Underwriters' discounts and commissions, the
concessions that the Underwriters may allow to certain dealers, and the
discounts that such dealers may reallow to certain other dealers, each
expressed as a percentage of the principal amount of the Class _ and Class
_ Certificates, shall be as follows:
Underwriting
Discounts Selling
Class and Concessions Concessions Reallowance
Class _ _____% _____% _____%
Class _ _____% _____% _____%
Closing Date: ______, ____, 10:00 a.m., New York Time
Location of Closing: Skadden, Arps, Slate, Meagher & Flom LLP,
919 Third Avenue, New York, New York 10022
Payment for the Certificates: Wire transfer of same day funds
Blue Sky Fees: Up to $
Opinion Modifications:
Other securities being offered concurrently:
Currency:
Redemption provisions:
Listing requirement: [None] [NYSE] [BSE] [Luxembourg]
Reimbursement of expenses:
Other terms and conditions:
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
If the foregoing is in accordance with your understanding of the
agreement among the Underwriters, the Company and Holdings, please sign and
return to the undersigned a counterpart hereof, whereupon this instrument,
along with all counterparts and together with the Underwriting Agreement,
shall be a binding agreement among the Underwriters named herein, the
Company and Holdings in accordance with its terms and the terms of the
Underwriting Agreement.
Very truly yours,
[Representative[s]]
By: ________________
Acting on behalf of themselves
and the other named Underwriters
Confirmed and accepted as of
the date first above written:
PARTNERS FIRST HOLDINGS, LLC
By: ______________________
Name and Title:
PARTNERS FIRST RECEIVABLES FUNDING LLC
By: ______________________
Name and Title:
SCHEDULE I
UNDERWRITERS
$___________ Principal Amount of Class _____% Asset Backed Certificates,
Series ______
Underwriters Principal Amount
-------------
Total $
$__________ Principal Amount of Class _____% Asset Backed Certificates,
Series ______
Underwriters Principal Amount
-------------
Total $
Exhibit B
Collateral Term Sheets
Exhibit C
Structural Term Sheets and Computational Materials
Exhibit D
Series Term Sheets
Exhibit 3.1
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
PARTNERS FIRST RECEIVABLES FUNDING, LLC
A DELAWARE LIMITED LIABILITY COMPANY
The undersigned has formed a limited liability company pursuant
to, and in accordance with, the Delaware Limited Liability Company Act, 6
Del. C. section 18-101, et seq. (the "Act"), and, in connection therewith,
has executed a Limited Liability Company Agreement, dated as of January
26th, 1998. The undersigned hereby amends and restates such agreement in
its entirety as follows:
1. Name. The name of the limited liability company is Partners
First Receivables Funding, LLC (the "LLC").
2. Registered Office. The registered office of the LLC in the
State of Delaware is located at 1209 Orange Street, in the City of
Wilmington, County of New Castle.
3. Registered Agent. The name and address of the registered
agent of the LLC for service of process on the LLC in the State of Delaware
is The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle.
4. Purpose. The nature of the business or purposes to be
conducted or promoted by the LLC is to engage in the following activities:
(a) to acquire for cash, promissory notes, or other
consideration from time to time all right, title and interest in
and to open-end or revolving credit receivables, including the
right to receive payment of interest or finance charges and other
obligations of the persons obligated to make payments with
respect thereto and any other proceeds related thereto, and any
other related rights (collectively, "Receivables") pursuant to
one or more receivables purchase agreements (the "Receivables
Purchase Agreements");
(b) to acquire, own, hold, service, sell, assign, pledge
and otherwise deal with the Receivables, collateral securing the
Receivables, any related insurance policies, agreements with
originators or servicers of Receivables and any proceeds or
further rights associated with any of the foregoing;
(c) to transfer Receivables to one or more trusts (the
"Trusts") pursuant to one or more pooling and servicing
agreements or other agreements (the "Pooling and Servicing
Agreements") to be entered into by and among, among others, the
LLC, the trustees named therein and any entities acting as
servicers of the Receivables;
(d) to authorize, sell, deliver to or acquire from the
Trusts certificates of one or more classes or series representing
undivided interests in the assets of the Trusts (collectively,
the "Certificates") or any other securities issued by the Trusts
pursuant to the Pooling and Servicing Agreements and to sell and
deliver any such Certificates or other securities;
(e) to enter into one or more indentures or other
agreements (collectively, the "Indentures") with the trustees
named therein, providing, among other things, for the issuance of
the Notes referred to below and the pledging of pools of
Receivables or Certificates of any class issued by one or more
Trusts;
(f) to authorize, issue, sell and deliver one or more
series and classes of bonds, notes or other evidences of
indebtedness secured or collateralized by one or more pools of
Receivables or by Certificates of any class issued by one or more
Trusts (collectively, the "Notes"), provided that the LLC shall
have no liability under any Notes except to the extent of the one
or more pools of Receivables or Certificates securing or
collateralizing such Notes;
(g) to hold, and to enjoy all of the rights and privileges
of a holder of, any Certificates issued by the Trusts to the LLC
under the related Pooling and Servicing Agreements and to hold
and enjoy all of the rights and privileges of any class of any
series of Notes issued under the related Indentures, including
any class or series of Notes or Certificates that may be
subordinate to any other class or series of Notes or
Certificates, respectively;
(h) to enter into and perform its obligations under the
Receivables Purchase Agreements, the Pooling and Servicing
Agreements, the Indentures, any agreement providing for the sale
of any Certificates or Notes (including any sale of Certificates
or Notes through one or more underwriters or dealers), and any
agreement providing for the funding of any amount due under any
Certificates through direct borrowings, letters of credit,
insurance, swap or cap agreements or otherwise (collectively, the
"Program Documents"); and
(i) to engage in all such other activities and to exercise
all such other powers permitted to LLCs under the laws of the
State of Delaware that are incidental to or connected with the
foregoing business or purposes or necessary or desirable to
accomplish the foregoing.
5. Conduct of Business. (a) Notwithstanding any other
provision of this Limited Liability Company Agreement (this "Agreement")
and any provision of law that otherwise so empowers the LLC, the LLC shall
not, without the affirmative vote of 100% of the members of the Board of
Managers (as defined herein) including at least two Independent Managers
(as defined herein), do any of the following:
(i) engage in any business or activity other than those set
forth in Section 4;
(ii) incur any indebtedness, or assume or guaranty any
indebtedness of any other entity, other than (i) indebtedness to the
Member or any affiliate thereof incurred in connection with the
acquisition of Receivables, which indebtedness from time to time may
be represented by notes issued by the LLC to the Member or any such
affiliate that will be subordinate to the Certificates and Notes and
will only be payable to the extent the LLC has available cash to pay
such indebtedness, (ii) indebtedness incurred in connection with Notes
issued in compliance with an Indenture, (iii) salaries, fees and
expenses to its professional advisors and counsel, mangers, officers
and employees and (iv) other indebtedness not exceeding $4,750 at any
one time outstanding, on account of incidentals or services supplied
or furnished to the LLC;
(iii) dissolve or liquidate, in whole or in part,
consolidate or merge with or into any other entity or convey or
transfer its properties and assets substantially as an entirety to any
entity.
(iv) institute proceedings to be adjudicated bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consent to
reorganization or relief under any applicable Federal or state law
relating to bankruptcy, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the LLC or a substantial part of its property, or make
any assignment for the benefit of creditors, or admit in writing its
inability to pay its debts generally as they become due, or take
action in furtherance of any such action.
(b) The LLC shall at all times:
(i) maintain its existence as an LLC and remain in good
standing under the laws of the State of Delaware;
(ii) observe all corporate procedures required by this
Agreement and the limited liability company law of the State of
Delaware;
(iii) ensure that (x) the business and affairs of the LLC
are at all times managed by or under the direction of its Board of
Managers, (y) its Board of Managers shall have duly authorized all
actions requiring such authorization and, (z) when necessary, the LLC
shall have obtained proper authorization for action from its Member;
(iv) include at least two Independent Managers (as defined
herein);
(v) to the extent the LLC's office is located in the offices
of the Member or any affiliate of the Member, pay fair market rent for
its office space located in the offices of such affiliate and a fair
share of any overhead costs;
(vi) maintain the LLC's books, financial statements,
accounting records and other corporate documents and records separate
from those of the Member, any affiliate of the Member or any other
entity and keep correct and complete books and records of account and
minutes of meetings and other proceedings of its Board of Managers and
the Member;
(vii) not commingle the LLC's assets with those of the
Member or any affiliate of the Member, and not hold itself out as
being liable for the debts of another;
(viii) maintain separate bank accounts and books of account
from those of its affiliates and ensure that its funds and other
assets shall at all times be readily distinguishable from the funds
and other assets of its affiliates and not be commingled with the
funds or other assets of its affiliates;
(ix) disclose in its annual financial statements the
effects of the transactions contemplated herein and in each
Receivables Purchase Agreement in accordance with generally accepted
accounting principles. Such financial statements shall (x) clearly
indicate the separate existence of the LLC and its affiliates, (y)
reflect the LLC's separate assets and liabilities and (z) record the
purchase of the Receivables pursuant to the applicable Receivables
Purchase Agreement as a purchase under generally accepted accounting
principles;
(x) act solely in its own name and through its own
authorized officers and agents so as not to mislead others as to its
identity or the identity of any affiliate. All oral and written
communications of the LLC, including without limitation letters,
invoices, purchase orders, contracts, statements, and applications
shall be made solely in the name of the LLC;
(xi) pay from its own separate funds all material
liabilities incurred by it, including material operating and
administrative expenses; provided that the organizational expenses of
the LLC and expenses relating to the preparation, negotiation,
execution and delivery of the documentation with respect to the
issuance of the Certificates or Notes that it may issue from time to
time may be paid by an affiliate. No general overhead or
administrative expenses of any affiliate shall be charged or otherwise
allocated to the LLC unless such general overhead or administrative
expenses are directly attributable to services provided to or for the
account of the LLC;
(xii) pay from the LLC's assets all obligations and
indebtedness of any kind incurred by the LLC;
(xiii) except as provided in Section 5(a)(ii), ensure that
there will be no intercompany debt between the LLC and any affiliate;
provided, that the Member of the LLC may contribute capital to the LLC
in such amounts as are necessary to assure that such LLC has adequate
capital for its business and the LLC may issue subordinated notes in
the amount and manner specified in the related Receivables Purchase
Agreement;
(xiv) at all times maintain an arm's length relationship
with its affiliates; and
(xv) operate in such a manner that it would not be
substantively consolidated with any other entity.
(c) The LLC shall abide by all corporate formalities, including
the maintenance of current minute books, and the LLC shall cause its
financial statements to be prepared in accordance with generally accepted
accounting principles in a manner that indicates the separate existence of
the LLC and its assets and liabilities. The LLC shall not assume the
liabilities of the Member or any affiliate of the Member. The LLC shall not
guarantee the liabilities of the Member nor any affiliate of the Member,
and neither the Member or an affiliate of the Member shall make any
guaranty with respect to the obligations of the LLC. The LLC shall not:
(v) hold itself out as having agreed to pay or become liable for the debts
of any affiliate; (w) fail to correct any known misrepresentation with
respect to this Agreement to pay or become liable for the debts of any
affiliate; (x) operate or purport to operate as an integrated, single
economic unit with any affiliate in its dealings with any other Person; (y)
seek or obtain credit or incur any obligation to any Person based upon the
assets of an affiliate or unaffiliated entity; or (z) induce any Person
reasonably to rely on the creditworthiness of any affiliate in its dealings
with the LLC. The Managers of the LLC shall make decisions with respect to
the business and daily operations of the LLC independent of, and not
dictated by, the Member or any affiliate of the Member.
6. The Board of Managers. Pursuant to Section 18-402 of the
Act, and to the extent specifically set forth in this Agreement, certain
activities of the LLC shall be managed through a Board of Managers (the
"Board of Managers"). At all times that any Certificates or Notes are
outstanding, the Board of Managers of the LLC shall include at least two
Independent Managers. So long as any Certificates or Notes are
outstanding, this Section 6 shall not be amended without the prior written
consent of the Independent Managers. When voting on matters subject to the
vote of the Board of Managers, including those matters specified in Section
4, notwithstanding that the LLC is not then insolvent, the Independent
Managers shall take into account the interests of the creditors of the LLC
as well as the interests of the LLC. The Board of Managers shall have the
following characteristics:
(a) the Board of Managers shall meet annually and at such
other times as may be necessary for the business of the LLC upon
at least five (5) business days' prior written notice of the
time, place and purpose of the meeting given by any two (2)
Managers. Meetings of the Board of Managers may be in person or
by conference telephone or other similar communications system,
and actions of the Board of Managers may be by written consent.
The presence of three (3) Managers shall constitute a quorum.
Each Manager has the right to one vote. Each Manager not only
has the right to his own vote, but may vote by proxy for one
other Manager (except for votes which require unanimous consent
of the Managers hereunder, in which case no Independent Manager
shall be permitted to vote by proxy);
(b) the term of each Manager shall be one year, and the
Member shall designate the Managers, and shall replace or
reappoint such managers annually, by executing a certificate
signed by an authorized officer of the Member setting forth the
name of each Manager for the following year; and the Member may
remove any Manager for any reason or no reason by executing a
certificate setting forth the Manager being removed and the
replacement Manager;
(c) in the event there exists a vacancy on the Board of
Managers, the Member shall, as soon as practicable, execute a
certificate setting forth a replacement Manager; and
(d) the debts, obligations and liabilities of the LLC,
whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the LLC, and no Manager
shall be obligated for any such debt, obligation or liability of
the LLC solely by reason of its acting as a Manager of the LLC.
(e) An "Independent Manager" shall be an individual who:
(A) is not and has not been employed by the Member or any of its
subsidiaries or affiliates as a director, manager officer or
employee (other than as an Independent manager of the LLC or any
other special purpose subsidiary of the Member or any of its
affiliates, the certificate of incorporation, limited liability
company agreement, or other governing document of which is
substantially similar hereto) within the five years immediately
prior to such individual's appointment as an Independent Manager;
(B) is not, and has not been within the five years immediately
prior to such individual's appointment as an Independent Manager,
affiliated with a supplier to which the Member and any of its
subsidiaries or affiliates collectively in the preceding fiscal
year of the Member made payments in consideration for the
supplier's products and services in excess of 3% of the
consolidated gross revenues of the Member and its subsidiaries
during such fiscal year; (C) does not have, and has not had
within the five years immediately prior to such individual's
appointment as an Independent Manager, a personal services
contract with the Member or any of its subsidiaries or
affiliates, from which fees and other compensation received by
the person pursuant to such personal services contract would
exceed 5% of his or her gross revenues during the preceding
calendar year; (D) is not affiliated with a tax-exempt entity
that receives, or has received within the five years prior to
such appointment as an Independent Manager, contributions from
the Member or any of its subsidiaries or affiliates, in excess of
the lesser of (1) 3% of the consolidated gross revenues of the
Member, and its subsidiaries during such fiscal year and (2) 5%
of the contributions received by the tax-exempt entity during
such fiscal year; (E) is not the beneficial owner at the time of
such individual's appointment as an Independent Manager, or at
any time thereafter while serving as an Independent Manager, of
such number of shares of any class of equity of the Member the
value of which constitutes more than 5% of such individual's net
worth; (F) is not a spouse, parent, sibling or child of any
person described by (A) through (E); and (G) is not, and was not
within the five years prior to such appointment as an Independent
Manager, a financial institution to which the Member or any of
its subsidiaries or affiliates owes outstanding indebtedness for
borrowed money in a sum exceeding more than 5% of the Member's
total consolidated assets.
(f) An "affiliate" of a person, or a person "affiliated
with," a specified person, shall mean a person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the specified
person.
(g) The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") shall mean the
possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract, or
otherwise; provided, however, a person shall not be deemed to
control another person solely because he or she is a director of
such other person.
(h) The term "person" shall mean an individual,
partnership, firm, corporation, association, trust,
unincorporated organization or other entity, as well as any
syndicate or group deemed to be a person pursuant to Section
13(d)(3) of the Securities Exchange Act of 1934, as amended.
(i) A "subsidiary" of the Member shall mean any entity a
majority of voting equity of which is owned, directly or
indirectly through one or more other subsidiaries, by the Member.
(j) except as otherwise provided in Sections 5(a), 13, 14,
16, 17 and 18 of this Agreement, all actions of the Board of
Managers shall require a majority vote of the quorum of the
Managers; provided, however, that the Board of Managers may
delegate the day-to-day management of the LLC to an individual or
entity which may or may not be a Manager;
7. Tax Characterization. It is intended that the LLC be
classified for Federal income tax purposes as a non-entity, for so long as
it has a single member, and otherwise as a partnership.
8. Admission of the Member, Capital Contribution, Percentage
Interest and Allocation of Profits and Losses. (a) Simultaneously with
the execution and delivery of this Agreement, Partners First Receivables,
LLC shall be admitted as the Member of the LLC (the "Member") with an
interest of 100% (as such percentage may change from time to time, a
"Percentage Interest"). The name and address of the Member is as follows:
Partners First Receivables, LLC
220 Continental Drive
Suite 208
Newark, Delaware 19713
(b) A capital contribution shall be made by the Member.
(c) The Member hereby appoints the following persons to serve
initially as Managers of the Board of Managers of the LLC:
John R. Soderlund
Jeff H. Slawsky
Mark J. Norwicz
Terence F. Browne
Andrew L. Stidd
Kevin P. Burns
9. Distributions. At the time determined by a majority of the
Managers, but at least once during each fiscal year, the Managers shall
cause the LLC to distribute to the Member any cash held by it which is
neither reasonably necessary for the operation of the LLC or the
performance of its obligations under the Program Documents nor in violation
of Sections 18-607 or 18-804 of the Act.
10. Powers; Liability of the Member. (a) Subject to Section 5,
the Member shall have the right and authority to take all actions
specifically enumerated in the Certificate of Formation or this Agreement
or which the Member otherwise deems necessary, useful or appropriate for
the day-to-day management and conduct of the LLC's business. All
instruments, contracts, agreements and documents providing for the
acquisition, mortgage or disposition of property of the LLC shall be valid
and binding on the LLC only if executed by any officer of the Member, which
officer shall also be an "authorized person" within the meaning of the Act
for purposes of executing the LLC's Certificate of Formation.
(b) Except as expressly provided in the Program Documents, the
debts, obligations and liabilities of the LLC, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities
of the LLC, and the Member shall not be obligated for any such debt,
obligation or liability of the LLC solely by reason of its status as the
Member of the LLC.
11. Indemnification. (a) Subject to Section 11(g), any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is
or was a Manager, employee or agent of the LLC, shall be indemnified and
held harmless by the LLC to the fullest extent legally permissible against
all expenses, liabilities and losses (including attorneys' fees and
disbursements), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such action, suit
or proceeding.
(b) To the extent that a Member, employee or agent of the LLC
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in paragraph (a) of this Section 11, or in
defense of any claim, issue or matter therein, he shall be indemnified by
the LLC against expenses (including attorneys' fees and disbursements)
actually and reasonably incurred by him in connection therewith without the
necessity of any action being taken by the LLC other than the
determination, in good faith, that such defense has been successful. In
all other cases wherein indemnification is provided by this Section 11,
unless ordered by a court, indemnification shall be made by the LLC only as
authorized in the specific case upon a determination that indemnification
of the manager, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct specified in this
Section 11. Such determination shall be made (1) by the Board of Managers
by a majority vote of a quorum consisting of Managers who were not parties
to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested Managers so
directs, by independent legal counsel in a written opinion.
(c) The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person seeking indemnification did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests
of the LLC, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Entry of a
judgment by consent as part of a settlement shall not be deemed a final
adjudication of liability for negligence or misconduct in the performance
of duty, nor of any other issue or matter.
(d) Subject to Section 11(g), expenses (including attorneys'
fees and disbursements) incurred by a Manager, employee or agent of the LLC
in defending any civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the LLC in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
of Managers in the specific case upon receipt of an undertaking by or on
behalf of such Manager, employee or agent to repay such amount unless it
shall ultimately be determined that he is entitled to be indemnified by the
LLC. Expenses (including attorneys' fees and disbursements) incurred by
other employees or agents of the LLC in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by
the LLC upon such terms and conditions, if any, as the Board of Managers
deems appropriate.
(e) No Manager of the LLC shall be personally liable to the LLC
for monetary damages for any breach of fiduciary duty by such person as a
Manager. Notwithstanding the foregoing sentence, a Manager shall be liable
to the extent provided by applicable law (i) for breach of the Manager's
duty of loyalty to the LLC or the Member, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation
of law or (iii) for any transaction from which the Manager derived an
improper personal benefit. No amendment to or repeal of this Section
11.1(e) shall apply to or have any effect on the liability or alleged
liability of any Manager of the LLC for or with respect to any acts or
omissions of such Manager occurring prior to such amendment.
(f) The indemnification and advancement of expenses provided by
this Section 11 shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement may be entitled under any
agreement, vote of the Board of Managers or otherwise, both as to action in
an official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
Manager, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
(g) Any amounts payable by the LLC in accordance with this
Section 11 shall be payable solely to the extent of funds actually received
by the LLC under the Program Documents.
12. Compensation. The Member shall not receive compensation for
services rendered to the LLC. The Managers shall receive such compensation
for their services as may be agreed between the Manager and the Member from
time to time.
13. Term. Pursuant to Section 18-801 of the Act, the LLC shall
dissolve, and its affairs shall be wound up, only upon the earliest to
occur of (a) one year and one day following the payment in full of all
outstanding securities issued by, or outstanding liabilities of, the Trust
and (b) December 31, 2059.
14. Assignments. Pursuant to Section 18-702 of Act, the Member
may sell, assign or participate in any or all of its limited liability
company interest at any time without the consent of the Managers, and the
assignee of any such limited liability company interest shall possess all
of the rights and obligations of a Member hereunder, and the right to
become a Member pursuant to Section 18-704 of the Act; provided that (i)
the LLC and the Trustee, shall have received written confirmation from each
rating agency which is then rating any outstanding series of class of
Securities (the "Rating Agency") that such assignment will not cause the
rating of such class or series to be withdrawn or reduced and (ii) the
Member provides an opinion of counsel to the Trustee (which opinion of
counsel shall in form and substance be reasonably satisfactory to the
Trustee) to the effect that the failure to retain such interests will not
cause the Trust to be classified for Federal income tax purposes as an
association taxable as a corporation (or a publicly traded partnership).
15. Limited Liability. The Member shall have no liability for
the obligations of the LLC except to the extent provided herein and in the
Program Documents.
16. Bankruptcy or Insolvency of the Member. If any event of
bankruptcy specified in Section 18-304(a) or if any event specified in
Section 18-304(b) shall occur with respect the Member, then the Member
shall, notwithstanding the occurrence of any such event, remain a Member of
the LLC and, notwithstanding the occurrence of any such event, the LLC
shall continue, subject to the provisions of Section 13.
17. Amendments. This Agreement may be amended only in a writing
signed by the Member; provided that, if any securities issued by the Trust
are outstanding, no such amendment shall be effective unless the LLC and
the Trustee, shall have received written confirmation from the Rating
Agency that such amendment will not cause the rating of such class or
series to be withdrawn or reduced; provided further that the provisions of
Sections 5, 6, 13, 14, 15 and 16 hereof may be amended only with the
unanimous written consent of the Board of Managers.
18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
19. Authorized Person. Deborah M. Reusch and/or Mary Keogh have
been authorized to sign and file the Certificate of Formation for the LLC
by the Member.
IN WITNESS WHEREOF, the undersigned has duly executed this
Amended and Restated Limited Liability Company Agreement as of the 13th day
of May, 1998.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
By: /s/ Mark Norwicz
--------------------
Name: Mark Norwicz
Title: Treasurer
Exhibit 4.1
PARTNERS FIRST RECEIVABLES FUNDING, LLC
Transferor,
PARTNERS FIRST HOLDINGS, LLC
Servicer,
and
THE BANK OF NEW YORK
Trustee
PARTNERS FIRST CREDIT CARD MASTER TRUST
AMENDED AND RESTATED
POOLING AND SERVICING AGREEMENT
Dated as of May 13, 1998
amending and restating in its entirety
the Pooling and Servicing Agreement
dated as of January 29, 1998
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . 34
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1 Conveyance of Receivables . . . . . . . . . . . . . . . . 36
Section 2.2 Acceptance by Trustee . . . . . . . . . . . . . . . . . . 38
Section 2.3 Representations and Warranties of the
Transferor . . . . . . . . . . . . . . . . . . . . . . . 39
Section 2.4 Representations and Warranties of the
Transferor Relating to the Agreement and Any
Supplement and the Receivables. . . . . . . . . . . . . . 40
Section 2.5 Reassignment of Ineligible Receivables . . . . . . . . . 42
Section 2.6 Reassignment of Securityholders' Interest in
Trust Portfolio . . . . . . . . . . . . . . . . . . . . . 44
Section 2.7 Covenants of the Transferor . . . . . . . . . . . . . . . 45
Section 2.8 Covenants of the Transferor with Respect to
Receivables Purchase Agreement . . . . . . . . . . . . . 49
Section 2.9 Addition of Accounts . . . . . . . . . . . . . . . . . . 50
Section 2.10 Removal of Accounts and Participation Interests . . . . . 55
Section 2.11 Account Allocations . . . . . . . . . . . . . . . . . . . 57
Section 2.12 Discount Option . . . . . . . . . . . . . . . . . . . . . 58
Section 2.13 Premium Option . . . . . . . . . . . . . . . . . . . . . 59
Section 2.14 Covenant of Holdings with Respect to Account Owners . . . 61
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other Matters
Relating to the Servicer . . . . . . . . . . . . . . . . 61
Section 3.2 Servicing Compensation . . . . . . . . . . . . . . . . . 63
Section 3.3 Representations, Warranties and Covenants of
the Servicer . . . . . . . . . . . . . . . . . . . . . . 63
Section 3.4 Reports and Records for the Trustee . . . . . . . . . . . 67
Section 3.5 Annual Certificate of Servicer . . . . . . . . . . . . . 68
Section 3.6 Annual Servicing Report of Independent Public
Accountants; Copies of Reports Available . . . . . . . . 68
Section 3.7 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . 69
Section 3.8 Notices to Holdings . . . . . . . . . . . . . . . . . . . 70
Section 3.9 Adjustments . . . . . . . . . . . . . . . . . . . . . . . 70
Section 3.10 Reports to the Commission . . . . . . . . . . . . . . . . 71
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.1 Rights of Securityholders . . . . . . . . . . . . . . . . 72
Section 4.2 Establishment of Collection Account and Special
Funding Account . . . . . . . . . . . . . . . . . . . . . 72
Section 4.3 Collections and Allocations . . . . . . . . . . . . . . . 75
Section 4.4 Shared Principal Collections . . . . . . . . . . . . . . 77
Section 4.5 Additional Withdrawals from the Collection
Account . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 4.6 Allocation of Trust Assets to Series or Groups. . . . . . 77
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
SECURITYHOLDERS
ARTICLE VI
THE SECURITIES
Section 6.1 The Securities . . . . . . . . . . . . . . . . . . . . . 80
Section 6.2 Authentication of Securities . . . . . . . . . . . . . . 80
Section 6.3 New Issuances . . . . . . . . . . . . . . . . . . . . . . 81
Section 6.4 Registration of Transfer and Exchange of
Securities . . . . . . . . . . . . . . . . . . . . . . . 83
Section 6.5 Mutilated, Destroyed, Lost or Stolen Securities . . . . . 87
Section 6.6 Persons Deemed Owners . . . . . . . . . . . . . . . . . . 87
Section 6.7 Appointment of Paying Agent . . . . . . . . . . . . . . . 88
Section 6.8 Access to List of Registered Securityholders'
Names and Addresses . . . . . . . . . . . . . . . . . . . 89
Section 6.9 Authenticating Agent . . . . . . . . . . . . . . . . . . 90
Section 6.10 Book-Entry Securities . . . . . . . . . . . . . . . . . . 91
Section 6.11 Notices to Clearing Agency . . . . . . . . . . . . . . . 92
Section 6.12 Definitive Securities . . . . . . . . . . . . . . . . . . 92
Section 6.13 Global Security; Exchange Date . . . . . . . . . . . . . 93
Section 6.14 Meetings of Securityholders . . . . . . . . . . . . . . . 95
Section 6.15 Uncertificated Classes . . . . . . . . . . . . . . . . . 98
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 Liability of the Transferor . . . . . . . . . . . . . . . 99
Section 7.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Transferor . . . . . . . . . . . 99
Section 7.3 Limitations on Liability of the Transferor . . . . . . . 100
Section 7.4 Transferor Authorized to Execute Registration
Statements and Reports on Behalf of the Trust . . . . . . 101
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
Section 8.1 Liability of the Servicer . . . . . . . . . . . . . . . . 102
Section 8.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Servicer . . . . . . . . . . . . 102
Section 8.3 Limitation on Liability of the Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 8.4 Servicer Indemnification of the Trust and the
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 8.5 Resignation of the Servicer . . . . . . . . . . . . . . . 103
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables . . . . . . . . . . . . . . . . 104
Section 8.7 Delegation of Duties . . . . . . . . . . . . . . . . . . 105
Section 8.8 Examination of Records . . . . . . . . . . . . . . . . . 105
ARTICLE IX
INSOLVENCY EVENTS
Section 9.1 Rights upon the Occurrence of an Insolvency
Event . . . . . . . . . . . . . . . . . . . . . . . . . . 106
ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults . . . . . . . . . . . . . . . . . . . . 108
Section 10.2 Trustee To Act; Appointment of Successor . . . . . . . . 111
Section 10.3 Notification to Securityholders . . . . . . . . . . . . . 113
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . 114
Section 11.2 Certain Matters Affecting the Trustee . . . . . . . . . 116
Section 11.3 Trustee Not Liable for Recitals in Securities . . . . . . 118
Section 11.4 Trustee May Own Securities . . . . . . . . . . . . . . . 118
Section 11.5 The Servicer To Pay Trustee's Fees and Expenses . . . . . 118
Section 11.6 Eligibility Requirements for Trustee . . . . . . . . . . 119
Section 11.7 Resignation or Removal of Trustee . . . . . . . . . . . . 119
Section 11.8 Successor Trustee . . . . . . . . . . . . . . . . . . . . 120
Section 11.9 Merger or Consolidation of Trustee . . . . . . . . . . . 121
Section 11.10 Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . . . . 121
Section 11.11 Tax Returns . . . . . . . . . . . . . . . . . . . . . 123
Section 11.12 Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . . . . . . . 123
Section 11.13 Suits for Enforcement . . . . . . . . . . . . . . . . 123
Section 11.14 Rights of Securityholders To Direct
Trustee . . . . . . . . . . . . . . . . . . . . . . . 124
Section 11.15 Representations and Warranties of Trustee . . . . . . 124
Section 11.16 Maintenance of Office or Agency . . . . . . . . . . . 125
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust . . . . . . . . . . . . . . . . . . 126
Section 12.2 Final Distribution . . . . . . . . . . . . . . . . . . . 126
Section 12.3 The Transferor's Termination Rights . . . . . . . . . . . 128
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment; Waiver of Past Defaults . . . . . . . . . . . 129
Section 13.2 Protection of Right, Title and Interest to
Trust . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section 13.3 Limitation on Rights of Securityholders . . . . . . . . . 132
Section 13.4 Governing Law . . . . . . . . . . . . . . . . . . . . . 133
Section 13.5 Notices; Payments . . . . . . . . . . . . . . . . . . . . 134
Section 13.6 Severability of Provisions . . . . . . . . . . . . . . . 135
Section 13.7 Securities Nonassessable and Fully Paid . . . . . . . . . 135
Section 13.8 Further Assurances . . . . . . . . . . . . . . . . . . . 135
Section 13.9 Nonpetition Covenant . . . . . . . . . . . . . . . . . . 135
Section 13.10 No Waiver; Cumulative Remedies . . . . . . . . . . . . 136
Section 13.11 Counterparts . . . . . . . . . . . . . . . . . . . . . 136
Section 13.12 Third-Party Beneficiaries . . . . . . . . . . . . . . 136
Section 13.13 Actions by Securityholders . . . . . . . . . . . . . . 136
Section 13.14 Rule 144A Information . . . . . . . . . . . . . . . . 136
Section 13.15 Merger and Integration . . . . . . . . . . . . . . . . 137
Section 13.16 Headings . . . . . . . . . . . . . . . . . . . . . . . 137
EXHIBITS
Exhibit A Form of Transferor Security
Exhibit B Form of Assignment of Receivables in
Additional Accounts
Exhibit C Form of Reassignment of Receivables in Removed
Accounts
Exhibit D Form of Annual Servicer's Certificate
Exhibit E-1 Form of Opinion of Counsel with respect to
Amendments
Exhibit E-2 Form of Opinion of Counsel with respect to
Accounts
Exhibit E-3 Form of Annual Opinion of Counsel
Exhibit F-1 Form of Certificate of Foreign Clearing Agency
Exhibit F-2 Form of Alternate Certificate to be delivered to Foreign
Clearing Agency
Exhibit F-3 Form of Certificate to be delivered to Foreign Clearing
Agency
Exhibit G-1 Private Placement Legend
Exhibit G-2 Representation Letter
Exhibit G-3 ERISA Legend
SCHEDULES
Schedule 1 List of Accounts [Deemed Incorporated]
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT dated as of
May 13, 1998, among PARTNERS FIRST RECEIVABLES FUNDING, LLC, a Delaware
limited liability company, as Transferor; PARTNERS FIRST HOLDINGS, LLC, a
Delaware limited liability company, as Servicer; and THE BANK OF NEW YORK,
a New York banking corporation, as Trustee.
WHEREAS, Partners First Receivables Funding, LLC, as Transferor,
Partners First Holdings, LLC, as Servicer, and The Bank of New York, as
Trustee entered into that certain Pooling and Servicing Agreement, dated as
of January 29, 1998 (the "Original Pooling and Servicing Agreement"); and
WHEREAS, Partners First Receivables Funding, LLC, as Transferor,
Partners First Holdings, LLC, as Servicer, and The Bank of New York, as
Trustee, desire to amend and restate the Original Pooling and Servicing
Agreement in its entirety;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Original Pooling and Servicing Agreement is hereby amended
and restated in its entirety as follows and each party agrees as follows
for the benefit of the other parties, the Securityholders and any Series
Enhancer (as defined below) to the extent provided herein and in any
Supplement:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings, and the
definitions of such terms are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such terms.
"Account" shall mean (a) each Initial Account, (b) each
Additional Account (but only from and after the Addition Date with respect
thereto), (c) each Related Account, and (d) each Transferred Account, but
shall exclude (e) any Account all the Receivables in which on and after the
date of such action are: (i) removed by the Transferor pursuant to Section
2.10, (ii) reassigned to the Transferor pursuant to Section 2.5 or (iii)
assigned and transferred to the Servicer pursuant to Section 3.3.
"Account Originator" shall mean the original issuer of the credit
card relating to an Account pursuant to a Credit Card Agreement, which has
sold the related Receivables to PFR or the Transferor pursuant to a
Receivables Purchase Agreement.
"Account Originator Purchase Agreement" shall mean a receivables
purchase agreement pursuant to which an Account Originator sells
Receivables to PFR or the Transferor.
"Account Owner" shall mean, with respect to any Account, the
entity which is either the Account Originator with respect to such Account
or an entity which has acquired such Account, and in either case, has sold
the related Receivables to PFR or the Transferor pursuant to a Receivables
Purchase Agreement.
"Account Owner Purchase Agreement" shall mean a receivables
purchase agreement, pursuant to which an Account Owner sells Receivables
to PFR or the Transferor.
"Accumulation Period" shall mean, with respect to any Series, or
any Class within a Series, a period following the Revolving Period, which
shall be the controlled accumulation period, the principal accumulation
period, the rapid accumulation period, the optional accumulation period,
the limited accumulation period or other accumulation period, in each case
as defined with respect to such Series in the related Supplement.
"Act" shall mean the Securities Act of 1933, as amended.
"Addition Date" shall mean (i) with respect to Aggregate Addition
Accounts, the date from and after which such Aggregate Addition Accounts
are to be included as Accounts pursuant to subsection 2.9(a) or (b), (ii)
with respect to Participation Interests, the date from and after which such
Participation Interests are to be included as assets of the Trust pursuant
to subsection 2.9(a) or (b), and (iii) with respect to New Accounts, the
date on which such New Accounts are activated.
"Additional Account" shall mean each New Account and each
Aggregate Addition Account.
"Additional Cut-Off Date" shall mean (i) with respect to
Aggregate Addition Accounts or Participation Interests, the date specified
as such in the notice delivered with respect thereto pursuant to subsection
2.9(c) and (ii) with respect to New Accounts, the later of the dates on
which such New Accounts are originated or designated pursuant to subsection
2.9(d).
"Adjustment Payment" shall have the meaning specified in
subsection 3.9(a).
"Adjustment Payment Shortfall" shall mean, for any Monthly
Period, the amount by which the Transferor Amount would have been reduced
below zero as a result of adjustments to the aggregate amount of Principal
Receivables pursuant to subsection 3.9 of the Agreement and with respect to
which the Transferor was obligated but failed to make a deposit into the
Special Funding Account on the related Distribution Date.
"Adverse Effect" shall mean, with respect to any action, that
such action will (a) result in the occurrence of a Pay Out Event or a
Reinvestment Event or (b) materially adversely affect the amount or timing
of distributions to be made to the Investor Securityholders of any Series
or Class pursuant to this Agreement and the related Supplement.
"Affiliate" shall mean, with respect to any specified Person, any
other Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" shall
mean the power to direct the management and policies of a Person, directly
or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Aggregate Addition" shall mean the designation of additional
Eligible Accounts, other than New Accounts, to be included as Accounts or
of Participation Interests to be included as Trust Assets pursuant to
subsection 2.9(a) or (b).
"Aggregate Addition Account" shall mean each Eligible Account
designated pursuant to subsection 2.9(a) or (b) to be included as an
Account and identified in the computer file or microfiche list delivered to
the Trustee by the Transferor pursuant to Sections 2.1 and 2.9(h).
"Aggregate Invested Amount" shall mean, as of any date of
determination, the aggregate adjusted Invested Amounts of all Series of
Securities issued and outstanding on such date of determination.
"Agreement" shall mean this Pooling and Servicing Agreement and
all amendments hereof and supplements hereto, including, with respect to
any Series or Class, the related Supplement.
"Amortization Period" shall mean, with respect to any Series, or
any Class within a Series, a period following the Revolving Period, which
shall be the controlled amortization period, the principal amortization
period, the rapid amortization period, the optional amortization period,
the limited amortization period or other amortization period, in each case
as defined with respect to such Series in the related Supplement.
"Annual Membership Fee" shall have the meaning specified in the
Credit Card Agreement applicable to each Account for annual membership fees
or similar terms.
"Applicants" shall have the meaning specified in Section 6.8.
"Appointment Date" shall have the meaning specified in subsection
9.1(a).
"Assignment" shall have the meaning specified in subsection
2.9(h).
"Authorized Newspaper" shall mean any newspaper or newspapers of
general circulation in the Borough of Manhattan, The City of New York,
printed in the English language (and, with respect to any Series or Class,
if and so long as the Investor Securities of such Series are listed on the
Luxembourg Stock Exchange and such Exchange shall so require, in
Luxembourg, printed in any language satisfying the requirements of such
exchange) and customarily published on each business day at such place,
whether or not published on Saturdays, Sundays or holidays.
"Automatic Addition Commencement Date" shall mean the date
specified in Section 2.9(h) hereof.
"Automatic Addition Suspension Date" shall mean the Business Day
specified in Section 2.9(h) hereof.
"Automatic Addition Termination Date" shall mean the Business Day
specified by the Transferor pursuant to Section 2.9(h) hereof.
"Average Rate" shall mean, as of any date of determination and
with respect to any Group, the percentage equivalent of a decimal equal to
the sum of the amounts for each outstanding Series (or each Class within
any Series consisting of more than one Class) within such Group obtained by
multiplying (a) the Security Rate (reduced to take into account the
payments received pursuant to any interest rate agreements net of any
amounts payable under such agreements, or, if such agreements result in a
net amount payable, increased by such net amount payable) for such Series
or Class, by (b) a fraction, the numerator of which is the aggregate unpaid
principal amount of the Investor Securities of such Series or Class and the
denominator of which is the aggregate unpaid principal amount of all
Investor Securities within such Group.
"Bearer Securities" shall have the meaning specified in Section
6.1.
"Benefit Plan" shall have the meaning specified in subsection
6.4(c).
"Book-Entry Securities" shall mean beneficial interests in the
Investor Securities, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 6.10.
"Business Day" shall mean any day other than (a) a Saturday or
Sunday or (b) any other day on which national banking associations or state
banking institutions in Illinois, Massachusetts, New York or any other
State in which the principal executive offices of Holdings or the Trustee,
is located, are authorized or obligated by law, executive order or
governmental decree to be closed or (c) for purposes of any particular
Series, any other day specified in the applicable Series Supplement.
"Calculation Date" shall mean, with respect to any Monthly
Period, the 15th day of such Monthly Period (or if any such day is not a
Business Day, the next succeeding Business Day) and the last Business Day
of such Monthly Period.
"Cash Advance Fees" shall mean cash advance transaction fees and
cash advance late fees, if any, as specified in the Credit Card Agreement
applicable to each Account.
"Cedel" shall mean Cedel Bank, sociEtE anonyme, a professional
depository incorporated under the laws of Luxembourg, and its successors.
"Class" shall mean, with respect to any Series, any one of the
classes of Investor Securities of that Series.
"Clearing Agency" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended, and serving as clearing agency for a Series or Class of
Book-Entry Securities.
"Clearing Agency Participant" shall mean a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date" shall mean, with respect to any Series, the
closing date specified in the related Supplement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collection Account" shall have the meaning specified in Section
4.2.
"Collections" shall mean all payments by or on behalf of Obligors
(including Insurance Proceeds) received in respect of the Receivables, in
the form of cash, checks, wire transfers, electronic transfers, ATM
transfers or any other form of payment in accordance with a Credit Card
Agreement in effect from time to time and all other amounts specified by
this Agreement or any Supplement as constituting Collections and shall
include Recoveries, investment earnings on amounts on deposit in the
Collection Account, Special Funding Account and any Series Account to the
extent specified in any Series Supplement and all ancillary fee income
received by the Servicer in respect of the Accounts. As specified in any
Participation Interest Supplement or Series Supplement, Collections shall
include amounts received with respect to Participation Interests. The
aggregate Recoveries received during any Monthly Period not in excess of
the aggregate amount of Principal Receivables (other than Ineligible
Receivables) which became Defaulted Receivables during such Monthly Period
shall be treated as Collections of Principal Receivables. The aggregate
Recoveries received during any Monthly Period in excess of the aggregate
Principal Receivables (other than Ineligible Receivables) which became
Defaulted Receivables during such Monthly Period shall be treated as
Collections of Finance Charge Receivables. Collections with respect to any
Monthly Period shall include a portion, calculated pursuant to subsection
2.7(i), of Interchange paid to the Trust with respect to such Monthly
Period, to be applied as if such amount were Collections of Finance Charge
Receivables for all purposes. Amounts withdrawn from the yield supplement
account or reserve account established with respect to any Series and
deposited in the Collection Account shall, unless otherwise specified in
the related Supplement, be treated as Collections of Finance Charge
Receivables.
"Common Depositary" shall mean, with respect to the Investor
Securities of any Series or Class, the common depositary for the respective
accounts of any Foreign Clearing Agencies or any successor thereto.
"Commission" shall mean the Securities and Exchange Commission
and its successors in interest.
"Companion Series" shall mean (i) each Series which has been
paired with another Series (which Series may be prefunded or partially
prefunded), such that the reduction of the Invested Amount of such Series
results in the increase of the Invested Amount of such other Series, as
described in the related Supplements, and (ii) such other Series.
"Corporate Trust Office" shall have the meaning specified in
Section 11.16.
"Coupon" shall have the meaning specified in Section 6.1.
"Credit Card Agreement" shall mean, with respect to a revolving
credit card account, the agreements between an Account Originator and the
Obligor governing the terms and conditions of such account, as such
agreements may be amended, modified or otherwise changed from time to time
and as distributed (including any amendments and revisions thereto) to
holders of such account.
"Credit Card Guidelines" shall mean, with respect to any Account
and the related Receivables, the respective policies and procedures of the
Account Owner (as of any date of determination, as such policies and
procedures may be amended from time to time), or of the Account Originator
(as of the date of origination of the Account), (a) relating to the
operation of its credit card business as of such date, which generally are
applicable to its portfolio of revolving credit card accounts or, in the
case of an Account Owner that has only a portion of its portfolio subject
to a Receivables Purchase Agreement, applicable to such portion of its
portfolio, and in each case which are consistent with prudent practice,
including the policies and procedures for determining the creditworthiness
of credit card customers and the extension of credit to credit card
customers, and (b) relating to the maintenance of credit card accounts and
collection of credit card receivables.
"Date of Processing" shall mean, with respect to any transaction
or receipt of Collections, the date on which such transaction is first
recorded on the Servicer's computer file of revolving credit card accounts
(without regard to the effective date of such recordation).
"Defaulted Amount" shall mean, with respect to any Monthly
Period, an amount (which shall not be less than zero) equal to (a) the
excess, if any, of the amount of Principal Receivables which became
Defaulted Receivables in such Monthly Period over the Recoveries for such
Monthly Period, minus (b) the amount of any Defaulted Receivables of which
the Transferor or the Servicer became obligated to accept reassignment or
assignment in accordance with the terms of this Agreement during such
Monthly Period; provided, however, that, if an Insolvency Event occurs with
respect to the Transferor, the amount of such Defaulted Receivables which
are subject to reassignment to the Transferor in accordance with the terms
of this Agreement shall not be added to the sum so subtracted and, if any
of the events described in subsection 10.1(d) occur with respect to the
Servicer, the amount of such Defaulted Receivables which are subject to
reassignment or assignment to the Servicer in accordance with the terms of
this Agreement shall not be added to the sum so subtracted.
"Defaulted Receivables" shall mean, with respect to any Monthly
Period, all Principal Receivables which are charged off as uncollectible in
such Monthly Period in accordance with the Credit Card Guidelines and the
Servicer's customary and usual servicing procedures for servicing revolving
credit card accounts. A Principal Receivable shall become a Defaulted
Receivable on the day on which such Principal Receivable is recorded as
charged-off on the Servicer's computer file of revolving credit card
accounts.
"Definitive Securities" shall have the meaning specified in
Section 6.10.
"Definitive Euro-Securities" shall have the meaning specified in
subsection 6.13(a).
"Deposit Date" shall mean each day on which the Servicer deposits
Collections in the Collection Account.
"Depository Agreement" shall mean, with respect to any Series or
Class of Book-Entry Securities, the agreement among the Transferor, the
Trustee and the Clearing Agency.
"Determination Date" shall mean, unless otherwise specified in
the Supplement for a particular Series, the third Business Day preceding
the Distribution Date in each Monthly Period.
"Discount Option Date" shall mean each date on which a Discount
Percentage designated by the Transferor pursuant to Section 2.12 takes
effect.
"Discount Option Receivables" shall have the meaning specified in
subsection 2.12(a). The aggregate amount of Discount Option Receivables
outstanding on any Date of Processing occurring on or after the Discount
Option Date shall equal the sum of (a) the aggregate Discount Option
Receivables at the end of the prior Date of Processing (which amount, prior
to the Discount Option Date, shall be zero) plus (b) any new Discount
Option Receivables created on such Date of Processing minus (c) any
Discount Option Receivables Collections received on such Date of
Processing. Discount Option Receivables created on any Date of Processing
shall mean the product of the amount of any Principal Receivables created
on such Date of Processing (without giving effect to the proviso in the
definition of Principal Receivables) and the Discount Percentage.
"Discount Option Receivable Collections" shall mean on any Date
of Processing occurring in any Monthly Period succeeding the Monthly Period
in which the Discount Option Date occurs, the product of (a) a fraction the
numerator of which is the Discount Option Receivables and the denominator
of which is the sum of the Principal Receivables and the Discount Option
Receivables in each case (for both the numerator and the denominator) at
the end of the preceding Monthly Period and (b) Collections of Principal
Receivables on such Date of Processing (without giving effect to the
proviso in the definition of Principal Receivables).
"Discount Percentage" shall mean the percentages, if any,
designated by the Transferor pursuant to subsection 2.12(a).
"Distribution Date" shall mean, with respect to any Series, the
date specified in the applicable Supplement.
"Document Delivery Date" shall have the meaning specified in
subsection 2.9(g).
"Dollars", "$" or "U.S. $" shall mean United States dollars.
"Eligible Account" shall mean a consumer revolving credit card
account, which, as of (i) the Initial Issuance Date, in the case of an
Initial Account, or (ii) as of the applicable Additional Cut Off Date, in
the case of an Additional Account:
(a) is a revolving credit card account in existence and
maintained by the applicable Account Owner;
(b) is payable in Dollars;
(c) has a cardholder who has provided, as his most recent
billing address, an address located in the United States or its
territories or possessions or a military address;
(d) except as provided below, has a cardholder who has not been
identified by the Servicer in its computer files as being involved in
a voluntary or involuntary bankruptcy proceeding;
(e) has not been identified by the Servicer in its computer
files as an account with respect to which the related card has been
lost or stolen or has a cardholder who has not been identified by the
Servicer in its computer files as being deceased;
(f) is not sold or pledged to any other party except for any
sale by an Account Originator to an entity that has entered into a
Receivables Purchase Agreement;
(g) does not have outstanding receivables which have been sold
or pledged by the related Account Owner to any party other than PFR or
the Transferor pursuant to a Receivables Purchase Agreement;
(h) except as provided below, does not have any Receivables that
are Defaulted Receivables;
(i) does not have any Receivables that have been identified by
the Servicer or the relevant Obligor as having been incurred as a
result of fraudulent use of any related credit card;
(j) was created in accordance with the Credit Card Guidelines of
the applicable Account Originator at the time of creation of such
account;
(k) with respect to Additional Accounts, may, in lieu of
satisfying the requirements of clauses (a) through (j) above, be an
account which shall have satisfied the Rating Agency Condition.
Eligible Accounts may include Accounts, the Receivables of which have been
written off, the Receivables with respect to which the Servicer believes
the related Obligor is bankrupt as of the Initial Issuance Date, with
respect to the Initial Accounts, and as of the related Additional Cut-Off
Date, with respect to Additional Accounts; provided, that (a) the balance
of all Receivables included in such Accounts is reflected on the books and
records of such Seller (and is treated for purposes of this Agreement) as
"zero" and (b) charging privileges with respect to all such Accounts have
been canceled in accordance with the relevant Credit Card Guidelines.
Notwithstanding the foregoing, for the purposes of subsection
2.9(h) "Eligible Account" shall mean a consumer revolving credit card
account which satisfies each of the criteria set forth in clauses (a)
through (j) above, and (i) the related Account Owner is the originator of
such revolving credit card account, (ii) the Account Originator is a direct
or indirect subsidiary of Holdings and notice of the designation of such
consumer revolving credit card account as an Account pursuant to subsection
2.9(h) shall have been given to the Rating Agency or (iii) the Rating
Agency Condition has been satisfied with respect to the inclusion in the
Trust of the Receivables arising in such consumer revolving credit card
account.
"Eligible Deposit Account" shall mean either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with
the corporate trust department of a depository institution which is
authorized to engage in trust activities and which is organized under the
laws of the United States or any one of the states thereof, including the
District of Columbia (or any domestic branch of a foreign bank), and acts
as a trustee for funds deposited in such account, so long as any of the
unsecured, unguaranteed senior debt securities of such depository
institution shall have a credit rating from the Rating Agency in one of its
generic credit rating categories that signifies investment grade.
"Eligible Institution" shall mean any depository institution
(which may be the Trustee) organized under the laws of the United States or
any one of the states thereof, including the District of Columbia (or any
domestic branch of a foreign bank), which depository institution at all
times is a member of the FDIC and (i) whose short-term unsecured debt
obligations have the Highest Rating or (ii) which has a certificate of
deposit rating acceptable to the Rating Agency, except that no such rating
will be required with respect to an institution which maintains a trust
fund in a fully segregated trust account with the corporate trust
department of such institution; provided that such institution is a member
of the FDIC and maintains a credit rating in one of the Rating Agency's
generic credit rating categories which signifies investment grade.
Notwithstanding the previous sentence, any institution the appointment of
which satisfies the Rating Agency Condition shall be considered an Eligible
Institution. If so qualified, the Servicer may be considered an Eligible
Institution for the purposes of this definition.
"Eligible Investments" shall mean negotiable instruments or
securities represented by instruments in bearer or registered form, or, in
the case of deposits described below, deposit accounts held in the name of
the Trustee in trust for the benefit of the Securityholders, subject to the
exclusive custody and control of the Trustee and for which the Trustee has
sole signature authority, which evidence:
(a) obligations issued or fully guaranteed, as to timely
payment, by the United States of America or any instrumentality or
agency thereof when such obligations are backed by the full faith and
credit of the United States of America;
(b) demand deposits, time deposits or certificates of deposit
(having original maturities of no more than 365 days) of depository
institutions or trust companies incorporated under the laws of the
United States of America or any state thereof, including the District
of Columbia (or domestic branches of foreign banks) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided that at the time of the Trust's
investment or contractual commitment to invest therein, the depository
institution or trust company shall have the Highest Rating;
(c) commercial paper or other short-term securities having, at
the time of the Trust's investment or contractual commitment to invest
therein, the Highest Rating;
(d) demand deposits, time deposits and certificates of deposit
which are fully insured by the FDIC having, at the time of the Trust's
investment therein, the Highest Rating;
(e) bankers' acceptances (having original maturities of no more
than 365 days) issued by any depository institution or trust company
referred to in clause (b) above;
(f) money market funds having, at the time of the Trust's
investment therein, the Highest Rating (including funds for which the
Trustee or any of its Affiliates is investment manager or advisor);
(g) time deposits other than as referred to in clause (d) above,
with a Person the commercial paper of which has a credit rating
satisfactory to the Rating Agency;
(h) repurchase agreements transacted with either
(i) an entity subject to the United States federal
bankruptcy code, provided that (A) the repurchase agreement matures
prior to the next Distribution Date or is due on demand, (B) the
Trustee or a third party acting solely as agent for the Trustee has
possession of the collateral, (C) the Trustee on behalf of the Trust
has a perfected first priority security interest in the collateral,
(D) the market value of the collateral is maintained at the requisite
collateral percentage of the obligation in accordance with standards
of the Rating Agencies, (E) the failure to maintain the requisite
collateral level will obligate the Trustee to liquidate the collateral
immediately, (F) the securities subject to the repurchase agreement
are either obligations of, or fully guaranteed as to principal and
interest by, the United States of America or any instrumentality or
agency thereof, certificates of deposit or bankers acceptances and (G)
the securities subject to the repurchase agreement are free and clear
of any third party lien or claim; or
(ii) a financial institution insured by the FDIC, or any
broker-dealer with "retail customers" that is under the jurisdiction
of the Securities Investors Protection Corp. ("SIPC") provided that
(A) the market value of the collateral is maintained at the requisite
collateral percentage of the obligation in accordance with the
standards of the Rating Agencies, (B) the Trustee or a third party
(with a short-term debt rating of P-1 or higher by Moody's) acting
solely as agent for the Trustee has possession of the collateral, (C)
the Trustee on behalf of the Trust has a perfected first priority
security interest in the collateral, (D) the collateral is free and
clear of third party liens and, in the case of an SIPC broker, was not
acquired pursuant to a repurchase or reverse repurchase agreement and
(E) the failure to maintain the requisite collateral percentage will
obligate the Trustee to liquidate the collateral; provided, however,
that at the time of the Trust's investment or contractual commitment
to invest in any repurchase agreement, the short-term deposits or
commercial paper rating of such entity or institution in subsections
(i) and (ii) shall have a credit rating not lower than the Highest
Rating; and
(i) any other investment of a type or rating that satisfies the
Rating Agency Condition.
"Eligible Receivable" shall mean each Receivable, including,
where applicable, the underlying receivable:
(a) which has arisen in an Eligible Account;
(b) which was created in compliance in all material respects
with all Requirements of Law applicable to the related Account
Originator at the time of the creation of such Receivable and which
was created pursuant to a Credit Card Agreement which complies in all
material respects with all Requirements of Law applicable to the
related Account Originator at the time of the creation of such
Receivable and the Requirements of Law applicable to any subsequent
Account Owner with respect to such Receivable;
(c) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with,
any Governmental Authority required to be obtained, effected or given
in connection with the creation of such Receivable or the execution,
delivery and performance by the applicable Account Originator and any
subsequent Account Owner of the Credit Card Agreement pursuant to
which such Receivable was created, have been duly obtained, effected
or given and are in full force and effect;
(d) as to which at the time of the transfer of such Receivable
to the Trust, the Transferor or the Trust will have good and
marketable title thereto and which itself is, and the underlying
receivables are, free and clear of all Liens (other than any Lien for
municipal or other local taxes if such taxes are not then due and
payable or if the Transferor is then contesting the validity thereof
in good faith by appropriate proceedings and has set aside on its
books adequate reserves with respect thereto);
(e) which is the legal, valid and binding payment obligation of
the Obligor thereon enforceable against such Obligor in accordance
with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a suit
at law or in equity);
(f) which, at the time of transfer to the Trust, is not subject
to any right of rescission, setoff, counterclaim or any other defense
(including defenses arising out of violations of usury laws) of the
Obligor, other than defenses arising out of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights in general; and
(g) which constitutes either an "account" or a "general
intangible" under and as defined in Article 9 of the UCC as then in
effect in the Relevant UCC State.
"Eligible Servicer" shall mean an entity which, at the time of
its appointment as Servicer, (a) is servicing or has the ability to service
a portfolio of revolving credit card accounts, (b) is legally qualified and
has the capacity to service the Accounts, (c) in the sole determination of
the Trustee, which determination shall be conclusive and binding, has
demonstrated the ability to service professionally and competently a
portfolio of similar accounts in accordance with high standards of skill
and care, (d) is qualified to use the software that is then being used to
service the Accounts or obtains the right to use or has its own software
which is adequate to perform its duties under this Agreement and (e) has a
net worth of at least $50,000,000 as of the end of its most recent fiscal
quarter or the obligations of such entity have been guaranteed by an
Affiliate thereof which has a net worth of at least $50,000,000 as of the
end of its most recent fiscal quarter.
"Enhancement Agreement" shall mean any agreement, instrument or
document governing the terms of any Series Enhancement or pursuant to which
any Series Enhancement is issued or outstanding.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Euroclear Operator" shall mean Morgan Guaranty Trust Company of
New York, Brussels office, as operator of the Euroclear System.
"Excess Allocation Series" shall mean a Series that, pursuant to
the Supplement therefor, is entitled to receive certain excess Collections
of Finance Charge Receivables, as more specifically set forth in such
Supplement.
"Exchange Date" shall mean, with respect to any Series, any date
that is after the related Closing Date, in the case of Definitive
Euro-Securities in registered form, or upon presentation of certification
of non-United States beneficial ownership (as described in Section 6.13),
in the case of Definitive Euro-Securities in bearer form.
"FDIC" shall mean the Federal Deposit Insurance Corporation or
any successor.
"FDR" shall have the meaning specified in Section 8.7.
"Finance Charge Receivables" shall mean all amounts billed to the
Obligors on any Account in respect of (i) all Periodic Rate Finance
Charges, (ii) Cash Advance Fees, (iii) Annual Membership Fees, (iv) Late
Fees, (v) Overlimit Fees, (vi) Returned Check Fees, (vii) Discount Option
Receivables, if any, (viii) Miscellaneous Fees and Charges and (ix) any
other fees with respect to the Accounts designated by the Transferor at any
time and from time to time to be included as Finance Charge Receivables;
provided, however, that after the Premium Option Date, Finance Charge
Receivables on any Date of Processing thereafter shall mean Finance Charge
Receivables as otherwise determined pursuant to this definition minus the
amount of Premium Option Receivables. Finance Charge Receivables shall
also include (a) the interest portion of Participation Interests as shall
be determined pursuant to, and only if so provided in, the applicable
Participation Interest Supplement or Series Supplement, (b) Interchange as
calculated pursuant to the Supplement for any Series, and (c) payments in
respect of Adjustments Payment Shortfalls pursuant to the proviso in the
last sentence of subsection 3.9(a). Collections of Finance Charge
Receivables shall include (i) the aggregate Recoveries received during any
Monthly Period in excess of the aggregate Principal Receivables (other than
Ineligible Receivables) which became Defaulted Receivables during such
Monthly Period and (ii) investment earnings on amounts on deposit in the
Collection Account, Special Funding Account and any Series Account to the
extent specified in any Series Supplement.
"FIRREA" shall mean the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as amended.
"Fitch" shall mean Fitch IBCA, Inc., or its successors.
"Foreign Clearing Agency" shall mean Cedel and the Euroclear
Operator.
"Global Security" shall have the meaning specified in subsection
6.13(a).
"Global Security Exchange Date" shall mean, with respect to any
Series or Class, a date determined by the Manager with respect to such
Series or Class which is at least 40 days after the later of the
commencement of the offering of the related Investor Securities and the
related Series Issuance Date.
"Governmental Authority" shall mean the United States of America,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Group" shall mean, with respect to any Series, the group of
Series, if any, in which the related Supplement specifies such Series is to
be included.
"Highest Rating" shall mean, with respect to Moody's, P-1 or Aaa,
with respect to Standard & Poor's, A-1+ or AAA, and with respect to Fitch,
F-1+ or AAA or or any rating category that will not cause a Ratings Event.
"Holdings" shall mean Partners First Holdings, LLC, a Delaware
limited liability company.
"Independent Director" shall have the meaning specified in
subsection 2.7(h)(vii).
"Ineligible Receivables" shall have the meaning specified in
subsection 2.5(a).
"Initial Account" shall mean each MasterCardregistered trademark(1)
and VISAregistered trademark consumer revolving credit card account which
is identified in the computer file or microfiche list delivered to the
Trustee by the Transferor pursuant to Section 2.1 on the Initial Issuance
Date.
------------------
(1) MasterCard and VISA are registered trademarks of
MasterCard International Incorporated and VISA USA,
Inc., respectively.
"Initial Issuance Date" shall mean January 29, 1998, the date the
Transferor Security is issued by the Trust and delivered to the Transferor.
"Insolvency Event" shall have the meaning specified in subsection
9.1(a).
"Insolvency Proceeds" shall have the meaning specified in
subsection 9.1(b).
"Institutional Investor" shall mean an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act of 1933, as amended.
"Insurance Proceeds" shall mean any amounts received pursuant to
the payment of benefits under any credit life insurance policies, credit
disability or unemployment insurance policies covering any Obligor with
respect to Receivables under such Obligor's Account or any other credit
insurance policy designated by the Transferor including, without
limitation, credit insurance coverage of Receivables on a pooled basis.
"Interchange" shall mean interchange fees payable to an Account
Owner, as partial compensation for taking credit risk, absorbing fraud
losses, and funding receivables for the period prior to the initial
billing. Any reference in this Agreement or any Supplement to Interchange
shall refer only to the interchange fees that are transferred by the
Account Owner to PFR and by PFR to the Transferor, which shall be an amount
equal to the product of (i) the percentage equivalent of a fraction, the
numerator of which is the amount of cardholder sales charges in the
Accounts of such Account Owner, and the denominator of which is the total
amount of cardholder sales charges for all accounts in the Account Owner's
entire portfolio and (ii) the total interchange fees payable to the Account
Owner in respect of all of the accounts in the Account Owner's entire
portfolio. Interchange for any Series shall be calculated pursuant to the
related Supplement.
"Invested Amount" shall mean, with respect to any Series and for
any date, an amount equal to the invested amount or adjusted invested
amount, as applicable, specified in the related Supplement.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
"Investor Securityholder" shall mean the Person in whose name a
Registered Security is registered in the Security Register or the bearer of
any Bearer Security (or the Global Security, as the case may be) or Coupon.
"Investor Securities" shall mean any certificated or
uncertificated interest in the Trust designated as, or deemed to be, an
"Investor Security" in the related Supplement.
"Investor Exchange" shall have the meaning specified in Section
6.3(b).
"Late Fees" shall have the meaning specified in the Credit Card
Agreement applicable to each Account for late fees or similar terms.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, equity interest,
encumbrance, lien (statutory or other), preference, participation interest,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever, including any conditional sale or other title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the UCC or comparable law of any jurisdiction to evidence
any of the foregoing; provided, however, that any assignment permitted by
subsection 6.3(b) or Section 7.2 and the lien created by this Agreement
shall not be deemed to constitute a Lien.
"Manager" shall mean the lead manager, manager or co-manager or
Person performing a similar function with respect to an offering of
Definitive Euro-Securities.
"Miscellaneous Fees and Charges" shall mean Receivables created
pursuant to any Credit Card Agreement in respect of any administrative fees
or service charges (including any portion of insurance premiums payable by
the Obligor which the Account Owner is not required to pay to the
applicable insurer) other than Late Fees, Overlimit Fees, Returned Check
Fees, Annual Membership Fees and Cash Advance Fees, including all ancillary
fee income received by the Servicer in respect of the Accounts.
"MasterCard" shall mean MasterCard International Incorporated,
and its successors in interest.
"Monthly Period" shall mean, with respect to each Distribution
Date, unless otherwise provided in a Supplement, the period from and
including the first day of the preceding calendar month to and including
the last day of such calendar month; provided, however, that unless
otherwise specified in the related Supplement, the initial Monthly Period
with respect to any Series will commence on the Closing Date with respect
to such Series.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.2.
"Moody's" shall mean Moody's Investors Service, Inc., or its
successor.
"New Account" shall mean each MasterCard and VISA consumer
revolving credit card account established pursuant to a Credit Card
Agreement, which account is designated pursuant to subsection 2.9(d) to be
included as an Account and is identified in the computer file or microfiche
list delivered to the Trustee by the Transferor pursuant to Section 2.1 and
subsection 2.9(h).
"Notices" shall have the meaning specified in subsection 13.5(a).
"Obligor" shall mean, with respect to any Account, the Person or
Persons obligated to make payments with respect to such Account, including
any guarantor thereof, but excluding any merchant.
"Officer's Certificate" shall mean, unless otherwise specified in
this Agreement, a certificate delivered to the Trustee signed by the
President, any Vice President or the Treasurer of the Transferor or the
Servicer, as the case may be, or by the President, any Vice President or
the financial controller (or an officer holding an office with equivalent
or more senior responsibilities or, in the case of the Servicer, a
Servicing Officer, and, in the case of the Transferor, any executive of the
Transferor designated in writing by a Vice President or more senior officer
of the Transferor for this purpose) of a Successor Servicer.
"Opinion of Counsel" shall mean a written opinion of counsel, who
may be counsel for, or an employee of, the Person providing the opinion and
who shall be reasonably acceptable to the Trustee.
"Original Pooling and Servicing Agreement" shall mean the Pooling
and Servicing Agreement, dated as of January 29, 1998, among PFRF, as
Transferor, Holdings, as Servicer, and The Bank of New York, as Trustee.
"Overlimit Fees" shall have the meaning specified in the Credit
Card Agreement applicable to each Account for overlimit fees or similar
terms if such fees are provided for with respect to such Account.
"Participation Interest Supplement" shall mean a Supplement
entered into pursuant to subsection 2.9(a)(ii) or (b) in connection with
the conveyance of Participation Interests to the Trust.
"Participation Interests" shall have the meaning specified in
subsection 2.9(a)(ii).
"Paying Agent" shall mean any paying agent appointed pursuant to
Section 6.7 and shall initially be the Trustee; provided, that if the
Supplement for a Series so provides, a separate or additional Paying Agent
may be appointed with respect to such Series.
"Pay Out Event" shall mean, with respect to any Series, any Pay
Out Event specified in the related Supplement.
"Periodic Rate Finance Charges" shall have the meaning specified
in the Credit Card Agreement applicable to each Account for finance charges
(due to periodic rate) or any similar term.
"Person" shall mean any legal person, including any individual,
corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental entity or other entity of similar nature.
"PFR" shall mean Partners First Receivables, LLC, a Delaware
limited liability company and a wholly owned subsidiary of Holdings.
"PFRF" shall mean Partners First Receivables Funding, LLC, a
Delaware limited liability company and a wholly owned subsidiary of PFR.
"Portfolio Yield" shall mean with respect to the Trust as a whole
and, with respect to any Monthly Period, the annualized percentage
equivalent of a fraction (a) the numerator of which is the aggregate of the
sum of the Series Allocable Finance Charge Collections for all Series
during the immediately preceding Monthly Period calculated on a cash basis,
after subtracting therefrom the Series Allocable Defaulted Amounts for all
Series with respect to such Monthly Period and (b) the denominator of which
is the total amount of Principal Receivables plus (without duplication) the
then outstanding principal amount of any Participation Interests conveyed
to the Trust, plus the amount of funds on deposit in the Special Funding
Account, in each case, as of the last day of the immediately preceding
Monthly Period; provided that, with respect to any Monthly Period in which
an Aggregate Addition occurs or a removal of Accounts pursuant to Section
2.10 occurs, the amount of Principal Receivables and Participation
Interests referred to in clause (b) shall be the average amount of
Principal Receivables and Participation Interests in the Trust on each
Business Day during such Monthly Period based upon the assumptions that (1)
the aggregate amount of Principal Receivables in the Trust plus the then
outstanding principal amount of any Participation Interests conveyed to the
Trust at the end of the day on the last day of the prior Monthly Period is
the aggregate amount of Principal Receivables and Participation Interests
in the Trust on each Business Day of the period from and including the
first day of such Monthly Period to but excluding the related Addition Date
or Removal Date and (2) the aggregate amount of Principal Receivables in
the Trust plus the then outstanding principal amount of any Participation
Interests conveyed to the Trust at the end of the day on the related
Addition Date or Removal Date is the aggregate amount of Principal
Receivables and Participation Interests in the Trust on each Business Day
of the period from and including the related Addition Date or Removal Date
to and including the last day of such Monthly Period.
"Pre-Funding Account" shall mean, with respect to any Series, the
account, if any, specified in the related Supplement.
"Premium Option Date" shall mean each date on which a Premium
Percentage designated by the Transferor pursuant to Section 2.13 takes
effect.
"Premium Option Receivables" shall have the meaning specified in
Section 2.13. The aggregate amount of Premium Option Receivables
outstanding on any Date of Processing occurring on or after the Premium
Option Date shall equal the sum of (a) the aggregate Premium Option
Receivables at the end of the prior Date of Processing (which amount, prior
to the Premium Option Date, shall be zero) plus (b) any new Premium Option
Receivables created on such Date of Processing minus (c) any Premium Option
Receivables Collections received on such Date of Processing. Premium
Option Receivables created on any Date of Processing shall mean the product
of the amount of any Finance Charge Receivables created on such Date of
Processing and the Premium Percentage.
"Premium Option Receivable Collections" shall mean on any Date of
Processing occurring in any Monthly Period succeeding the Monthly Period in
which the Premium Option Date occurs, the product of (a) a fraction the
numerator of which is the Premium Option Receivables and the denominator of
which is the sum of the Finance Charge Receivables and the Premium Option
Receivables in each case (for both the numerator and the denominator) at
the end of the preceding Monthly Period and (b) Collections of Finance
Charge Receivables on such Date of Processing.
"Premium Percentage" shall mean the percentages, if any,
designated by the Transferor pursuant to Section 2.13.
"Principal Allocation Percentage" shall mean, with respect to any
Series, the percentage specified in the related Supplement.
"Principal Funding Account" shall mean, with respect to any
Series, the account, if any, specified in the related Supplement.
"Principal Receivables" shall mean all Receivables other than
Finance Charge Receivables or Defaulted Receivables. Principal
Receivables shall include the principal portion of Participation Interests
as shall be determined pursuant to, and only if so provided in, the
applicable Participation Interest Supplement or Series Supplement.
Collections of Principal Receivables also shall include the aggregate
Recoveries with respect to each Monthly Period not in excess of the
aggregate amount of Principal Receivables (other than Ineligible
Receivables) which became Defaulted Receivables during such Monthly
Period. In calculating the aggregate amount of Principal Receivables on
any day, the amount of Principal Receivables shall be reduced by the
aggregate amount of credit balances in the Accounts on such day. Any
Principal Receivables which the Transferor is unable to transfer as
provided in Section 2.11 shall not be included in calculating the amount of
Principal Receivables.
"Principal Sharing Series" shall mean a Series that, pursuant to
the Supplement therefor, is entitled to receive Shared Principal
Collections.
"Principal Shortfalls" shall have the meaning specified in
Section 4.4.
"Principal Terms" shall mean, with respect to any Series, (i) the
name or designation; (ii) the initial principal amount (or method for
calculating such amount), the Invested Amount, the Series Invested Amount
and the Required Series Transferor Amount, (iii) the Security Rate (or
method for the determination thereof); (iv) the payment date or dates and
the date or dates from which interest shall accrue; (v) the method for
allocating Collections to Investor Securityholders; (vi) the designation of
any Series Accounts and the terms governing the operation of any such
Series Accounts; (vii) the Servicing Fee; (viii) the terms of any form of
Series Enhancements with respect thereto; (ix) the terms on which the
Investor Securities of such Series may be exchanged for Investor Securities
of another Series, repurchased by the Transferor or remarketed to other
investors; (x) the Series Termination Date; (xi) the number of Classes of
Investor Securities of such Series and, if more than one Class, the rights
and priorities of each such Class; (xii) the extent to which the Investor
Securities of such Series will be issuable in temporary or permanent global
form (and, in such case, the depositary for such global security or
securities, the terms and conditions, if any, upon which such global
security may be exchanged, in whole or in part, for Definitive Securities,
and the manner in which any interest payable on a temporary or global
security will be paid); (xiii) whether the Investor Securities of such
Series may be issued in bearer form and any limitations imposed thereon;
(xiv) the priority of such Series with respect to any other Series; (xv)
whether such Series will be part of a Group; (xvi) whether such Series will
be a Principal Sharing Series, (xvii) whether such Series will be an Excess
Allocation Series, (xviii) the Distribution Date for such Series, and (xix)
any other terms of such Series.
"Rating Agency" shall mean, with respect to any outstanding
Series or Class, each rating agency, as specified in the applicable
Supplement, selected by the Transferor to rate the Investor Securities of
such Series or Class.
"Rating Agency Condition" shall mean, with respect to any action,
that the Rating Agency shall have notified the Transferor, the Servicer and
the Trustee in writing that such action will not result in a reduction or
withdrawal of the then existing rating of any outstanding Series or Class
with respect to which it is a Rating Agency.
"Ratings Event" with respect to any Class of any outstanding
Series of Investor Securities rated by a Rating Agency, shall mean a
reduction or withdrawal of the rating of any such Class by a Rating Agency.
"Reassignment" shall have the meaning specified in Section 2.10.
"Receivables" shall mean all amounts shown on the Servicer's
records as amounts payable by Obligors on any Account from time to time,
including amounts owing for purchases of goods and services, cash advances
and Finance Charge Receivables. Receivables which become Defaulted
Receivables will cease to be included as Receivables as of the day on which
they become Defaulted Receivables. A Receivable shall be deemed to have
been created at the end of the Date of Processing of such Receivable.
"Receivables Purchase Agreement" shall mean, as applicable, (i)
the receivables purchase agreement between PFR and the Transferor, dated as
of January 29, 1998, as amended from time to time in accordance with the
terms thereof, (ii) any Account Owner Purchase Agreement, (iii) any
Account Originator Receivables Purchase Agreement, or (iv) any receivables
purchase agreement entered into by PFR or the Transferor and an Account
Owner in the future; provided, that (A) the Rating Agency Condition is
satisfied with respect to such receivables purchase agreement and (B) PFR
or the Transferor, as applicable, shall have delivered to the Trustee (with
a copy to the Rating Agency) an Officer's Certificate to the effect that
such officer reasonably believes that the execution and delivery of such
receivables purchase agreement will not have an Adverse Effect.
"Record Date" shall mean, with respect to any Distribution Date,
the last day of the calendar month immediately preceding such Distribution
Date unless otherwise specified for a Series in the applicable Supplement.
"Recoveries" shall mean all amounts received (net of out-of-
pocket costs of collection) including Insurance Proceeds, with respect to
Defaulted Receivables, including the net proceeds of any sale of such
Defaulted Receivables by the Transferor.
"Registered Securityholder" shall mean the Holder of a Registered
Security.
"Registered Securities" shall have the meaning specified in
Section 6.1.
"Reinvestment Event" shall mean, if applicable with respect to
any Series, any Reinvestment Event specified in the related Supplement.
"Related Account" shall mean an Account with respect to which a
new credit account number has been issued by the applicable Account Owner
or Servicer or the Transferor under circumstances resulting from a lost or
stolen credit card and not requiring standard application and credit
evaluation procedures under the Credit Card Guidelines.
"Relevant UCC State" shall mean each jurisdiction in which the
filing of a UCC financing statement is necessary to evidence the security
interest of the Trustee established under this Agreement.
"Removal Date" shall have the meaning specified in Section 2.10.
"Removed Accounts" shall have the meaning specified in Section
2.10.
"Removed Participation Interests" shall have the meaning
specified in Section 2.10.
"Required Designation Date" shall have the meaning specified in
subsection 2.9(a).
"Required Minimum Principal Balance" shall mean, with respect to
any date, (a) the sum of the numerators used in the Principal Allocation
Percentage for each Series outstanding on such date minus (b) the Special
Funding Amount minus (c) the amount on deposit in the Principal Funding
Account for each Series outstanding on such date minus (d) the amount on
deposit in the Pre-Funding Account for each Series outstanding on such
date.
"Required Transferor Amount" shall mean, with respect to any
date, the sum of the Series Required Transferor Amounts for all Series
outstanding on such date.
"Requirements of Law" shall mean any law, treaty, rule or
regulation, or determination of an arbitrator or Governmental Authority,
whether Federal, state or local (including usury laws, the Federal Truth in
Lending Act and Regulation B and Regulation Z of the Board of Governors of
the Federal Reserve System), and, when used with respect to any Person, the
certificate of formation, certificate of incorporation and by-laws or other
organizational or governing documents of such Person.
"Responsible Officer" shall mean, when used with respect to (i)
the Trustee, any officer within the Corporate Trust Office of the Trustee
including any vice president, assistant vice president, assistant
treasurer, assistant secretary, trust officer or any other officer of the
Trustee customarily performing functions similar to those performed by the
persons who at the time shall be such officers or to whom any corporate
trust matter is referred at the Corporate Trust Office because of such
officer's knowledge of and familiarity with the particular subject or (ii)
the Transferor, a senior officer of the Transferor with oversight and
supervisory responsibilities over the Transferor's performance of its
obligations hereunder.
"Restart Date" shall mean the date specified in the notice
delivered by the Transferor to the Trustee pursuant to Section 2.9(h)
hereof.
"Returned Check Fees" shall have the meaning specified in the
Credit Card Agreement applicable to each Account for fees for returned
checks or similar terms.
"Revolving Period" shall mean, with respect to any Series, the
period specified in the related Supplement.
"Security" shall mean any one of the Investor Securities or the
Transferor Securities.
"Securityholder" or "Holder" shall mean an Investor
Securityholder or a Person in whose name any one of the Transferor
Securities is registered.
"Securityholders' Interest" shall have the meaning specified in
Section 4.1. For purposes of determining whether Holders of Investor
Securities evidencing a specified percentage of the Securityholders'
Interest have approved, consented or otherwise agreed to any action
hereunder, such determination shall be made based on the percentage of the
Invested Amount represented by such Investor Securities.
"Security Owner" shall mean, with respect to a Book-Entry
Security, the Person who is the owner of such Book-Entry Security, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in accordance with the
rules of such Clearing Agency).
"Security Rate" shall mean, as of any particular date of
determination and with respect to any Series or Class, the security rate as
of such date specified therefor in the related Supplement.
"Security Register" shall mean the register maintained pursuant
to Section 6.4, providing for the registration of the Registered Securities
and transfers and exchanges thereof.
"Series" shall mean any series of Investor Securities issued
pursuant to Section 6.3.
"Series Account" shall mean any deposit, trust, escrow or similar
account maintained for the benefit of the Investor Securityholders of any
Series or Class, as specified in any Supplement.
"Series Adjusted Invested Amount" shall mean, with respect to any
Series and for any Monthly Period, the Series Invested Amount of such
Series, after subtracting therefrom the excess, if any, of the cumulative
amount (calculated in accordance with the terms of the related Supplement)
of investor charge-offs, subordination of principal collections and funding
the investor default amount or another Series allocable to the Invested
Amount for such Series as of the last day of the immediately preceding
Monthly Period over the aggregate reimbursement of such investor charge-
offs, subordination of principal collections and funding the investor
default amount for any other Class of Investor Securities of such Series or
another Series as of such last day, or such lesser amount as may be
provided in the Series Supplement for such Series.
"Series Allocable Defaulted Amount" shall mean, with respect to
any Series and for any Monthly Period, the product of the Series Allocation
Percentage and the Defaulted Amount with respect to such Monthly Period.
"Series Allocable Finance Charge Collections" shall mean, with
respect to any Series and for any Monthly Period, the product of the Series
Allocation Percentage and the amount of Collections of Finance Charge
Receivables deposited in the Collection Account for such Monthly Period.
"Series Allocable Principal Collections" shall mean, with respect
to any Series and for any Monthly Period, the product of the Series
Allocation Percentage and the amount of Collections of Principal
Receivables deposited in the Collection Account for such Monthly Period.
"Series Allocation Percentage" shall mean, with respect to any
Series and for any Monthly Period, the percentage equivalent of a fraction,
the numerator of which is the Series Adjusted Invested Amount plus the
Series Required Transferor Amount as of the last day of the immediately
preceding Monthly Period and the denominator of which is the Trust Adjusted
Invested Amount plus the sum of all Series Required Transferor Amounts as
of such last day.
"Series Enhancement" shall mean the rights and benefits provided
to the Trust or the Investor Securityholders of any Series or Class
pursuant to any letter of credit, surety bond, cash collateral account or
guaranty, collateral invested amount, spread account, yield supplement
account, guaranteed rate agreement, maturity liquidity facility, tax
protection agreement, notional principal contract, options, hedging
agreements, insurance policy or other similar arrangement. The
subordination of any Series or Class to another Series or Class shall be
deemed to be a Series Enhancement.
"Series Enhancer" shall mean the Person or Persons providing any
Series Enhancement, other than (except to the extent otherwise provided
with respect to any Series in the Supplement for such Series) the Investor
Securityholders of any Series or Class which is subordinated to another
Series or Class.
"Series Invested Amount" shall have, with respect to any Series,
the meaning specified in the related Supplement.
"Series Issuance Date" shall mean, with respect to any Series,
the date on which the Investor Securities of such Series are to be
originally issued in accordance with Section 6.3 and the related
Supplement.
"Series Required Transferor Amount" shall have the meaning, with
respect to any Series, specified in the related Supplement.
"Series Termination Date" shall mean, with respect to any Series,
the termination date for such Series specified in the related Supplement.
"Service Transfer" shall have the meaning specified in Section
10.1.
"Servicer" shall mean Holdings, in its capacity as Servicer
pursuant to this Agreement, and, after any Service Transfer, the Successor
Servicer.
"Servicer Default" shall have the meaning specified in Section
10.1.
"Servicer Interchange" shall have the meaning specified in
Section 3.2.
"Servicing Fee" shall have the meaning specified in Section 3.2.
"Servicing Fee Rate" shall mean, with respect to any Series, the
servicing fee rate specified in the related Supplement.
"Servicing Officer" shall mean any officer of the Servicer or an
attorney-in-fact of the Servicer who in either case is involved in, or
responsible for, the administration and servicing of the Receivables and
whose name appears on a list of servicing officers furnished to the Trustee
by the Servicer, as such list may from time to time be amended.
"Shared Principal Collections" shall have the meaning specified
in Section 4.4.
"Special Funding Account" shall have the meaning set forth in
Section 4.2.
"Special Funding Amount" shall mean the amount on deposit in the
Special Funding Account.
"Standard & Poor's" shall mean Standard & Poor's Ratings Group or
its successor.
"Successor Servicer" shall have the meaning specified in
subsection 10.2(a).
"Supplement" shall mean, with respect to any Series, a supplement
to this Agreement, executed and delivered in connection with the original
issuance of the Investor Securities of such Series pursuant to Section 6.3,
and, with respect to any Participation Interest, an amendment to this
Agreement executed pursuant to Section 13.1, and, in either case, including
all amendments thereof and supplements thereto.
"Supplemental Security" shall have the meaning specified in
subsection 6.3(b).
"Tax Opinion" shall mean, with respect to any action, an Opinion
of Counsel to the effect that, for federal income tax purposes, (a) such
action will not adversely affect the tax characterization as debt of the
Investor Securities of any outstanding Series or Class that was
characterized as debt at the time of its issuance, (b) following such
action the Trust will not be deemed to be an association (or publicly
traded partnership) taxable as a corporation, (c) such action will not
cause or constitute an event in which gain or loss would be recognized by
any Investor Securityholder and (d) except as is otherwise provided in a
Supplement, in the case of subsection 6.3(b)(vi), the Investor Securities
of the Series or class thereof established pursuant to such Supplement will
be properly characterized as debt.
"Termination Notice" shall have the meaning specified in
subsection 10.1(d).
"Termination Proceeds" shall have the meaning specified in
subsection 12.2(c).
"Transfer Agent and Registrar" shall have the meaning specified
in Section 6.4.
"Transfer Date" shall mean the Business Day immediately preceding
each Distribution Date.
"Transfer Restriction Event" shall have the meaning specified in
Section 2.11.
"Transferor" shall mean Partners First Receivables Funding, LLC,
a Delaware limited liability company and a wholly owned special purpose
subsidiary of PFR or its successor under this Agreement.
"Transferor LLC Agreement" shall mean the Limited Liability
Company Agreement of PFRF, dated as of January 26, 1998.
"Transferor Amount" shall mean on any date of determination an
amount equal to the difference between (I) the sum of (A) the aggregate
balance of Principal Receivables at the end of the day immediately prior to
such date of determination and (B) Special Funding Amount at the end of the
day immediately prior to such date of determination and (C) the aggregate
principal amounts on deposit in the Principal Funding Account and Pre-
Funding Account for each Series minus (II) the Aggregate Invested Amount at
the end of such day.
"Transferor Security" shall mean the security executed by
Partners First Receivables Funding, LLC and authenticated by or on behalf
of the Trustee, substantially in the form of Exhibit A, as the same may be
modified in accordance with Exhibit A.
"Transferor Securities" shall mean, collectively, the Transferor
Security and any outstanding Supplemental Securities.
"Transferor Percentage" shall have, with respect to each Series,
the meaning specified in the related Supplement
"Transferor's Interest" shall have the meaning specified in
Section 4.1.
"Transferred Account" shall mean each account into which an
Account shall be transferred provided that (i) such transfer was made in
accordance with the Credit Card Guidelines and (ii) such account can be
traced or identified as an account into which an Account has been
transferred.
"Trust" shall mean the Partners First Credit Card Master Trust
created by this Agreement.
"Trust Adjusted Invested Amount" shall mean, with respect to any
Monthly Period, the aggregate Series Adjusted Invested Amounts as adjusted
in any Supplement for all outstanding Series for such Monthly Period.
"Trust Assets" shall have the meaning specified in Section 2.1.
"Trustee" shall mean The Bank of New York, a New York banking
corporation, in its capacity as trustee on behalf of the Trust, or its
successor in interest, or any successor trustee appointed as herein
provided.
"Supplemental Security Supplement" shall have the meaning
specified in subsection 6.3(b).
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in any specified jurisdiction.
"VISA" shall mean VISA USA, Inc., and its successors in interest.
Section 2.1 Other Definitional Provisions.
(a) With respect to any Series, all terms used herein and not
otherwise defined herein shall have meanings ascribed to them in the
related Supplement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such
certificate or other document to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles or regulatory accounting principles, as applicable and as in
effect on the date of this Agreement. To the extent that the definitions
of accounting terms in this Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under generally
accepted accounting principles or regulatory accounting principles in the
United States, the definitions contained in this Agreement or in any such
certificate or other document shall control.
(d) The agreements, representations and warranties of PFRF and
Holdings in this Agreement in each of their respective capacities as
Transferor and Servicer shall be deemed to be the agreements,
representations and warranties of PFRF and Holdings solely in each such
capacity for so long as PFRF and Holdings act in each such capacity under
this Agreement.
(e) Any reference to the Rating Agency shall only apply to any
specific rating agency if such rating agency is then rating any outstanding
Series.
(f) Unless otherwise specified, references to any amount as on
deposit or outstanding on any particular date shall mean such amount at the
close of business on such day.
(g) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement; references
to any subsection, Section, Schedule or Exhibit are references to
subsections, Sections, Schedules and Exhibits in or to this Agreement
unless otherwise specified; and the term "including" means "including
without limitation."
[END OF ARTICLE I]
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1 Conveyance of Receivables. By execution of this
Agreement, PFRF does hereby transfer, assign, set over, and otherwise
convey to the Trustee, on behalf of the Trust, for the benefit of the
Securityholders, without recourse except as provided herein, all its right,
title and interest in, to and under (i) the Receivables existing at the
close of business on the Initial Issuance Date, in the case of Receivables
arising in the Initial Accounts, and on each Additional Cut-Off Date, in
the case of Receivables arising in the Additional Accounts, and in each
case thereafter created from time to time until the termination of the
Trust, all Interchange and Recoveries allocable to the Trust as provided
herein, all monies due or to become due and all amounts received with
respect thereto and all proceeds (including "proceeds" as defined in the
UCC) thereof and (ii) each Receivables Purchase Agreement. Such property,
together with the Collection Account, the Series Accounts and the Special
Funding Account and all monies on deposit in any such account, the rights
of the Trustee on behalf of the Trust under this Agreement and any
Supplement, the property conveyed to the Trustee on behalf of the Trust
under any Participation Interest Supplement, any Series Enhancement and the
right to receive Recoveries shall constitute the assets of the Trust (the
"Trust Assets"). The foregoing does not constitute and is not intended to
result in the creation or assumption by the Trust, the Trustee, any
Investor Securityholder or any Series Enhancer of any obligation of any
Account Owner or the Transferor, the Servicer or any other Person in
connection with the Accounts or the Receivables or under any agreement or
instrument relating thereto, including any obligation to Obligors, merchant
banks, merchants clearance systems, VISA, MasterCard or insurers. The
Obligors shall not be notified in connection with the creation of the Trust
of the transfer, assignment, set-over and conveyance of the Receivables to
the Trust. The foregoing transfer, assignment, set-over and conveyance to
the Trust shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such transfer, assignment, set-over and
conveyance shall be construed accordingly.
The Transferor agrees to record and file, at its own expense,
financing statements (and continuation statements when applicable) with
respect to the Receivables conveyed by the Transferor now existing and
hereafter created meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect, and maintain
the perfection of, the transfer and assignment of its interest in such
Receivables to the Trust, and to deliver a file stamped copy of each such
financing statement or other evidence of such filing to the Trustee as soon
as practicable after the first Closing Date, in the case of Receivables
arising in the Initial Accounts, and (if any additional filing is so
necessary) as soon as practicable after the applicable Addition Date, in
the case of Receivables arising in Additional Accounts. The Trustee shall
be under no obligation whatsoever to file such financing or continuation
statements or to make any other filing under the UCC in connection with
such transfer and assignment.
The Transferor further agrees, at its own expense, (a) on or
prior to (x) the first Closing Date, in the case of the Initial Accounts,
(y) the applicable Addition Date, in the case of Additional Accounts, and
(z) the applicable Removal Date, in the case of Removed Accounts, to
indicate in the appropriate computer files that Receivables created (or
reassigned, in the case of Removed Accounts) in connection with the
Accounts have been conveyed to the Trust pursuant to this Agreement for the
benefit of the Securityholders (or conveyed to the Transferor or its
designee in accordance with Section 2.10, in the case of Removed Accounts)
by including (or deleting in the case of Removed Accounts) in such computer
files the code identifying each such Account and (b) on or prior to (w) the
first Closing Date, in the case of the Initial Accounts, (x) the date that
is five Business Days after the applicable Addition Date, in the case of
Aggregate Additions, (y) the date that is 30 days after the applicable
Addition Date, in the case of New Accounts, and (z) the date that is five
Business Days after the applicable Removal Date, in the case of Removed
Accounts, to deliver, or cause to be delivered, to the Trustee, a copy of
the computer file or microfiche list delivered to the Transferor pursuant
to the related Receivables Purchase Agreement, containing a true and
complete list of all such Accounts specifying for each such Account, as of
the Initial Issuance Date, in the case of the Initial Accounts, the
applicable Additional Cut-Off Date in the case of Additional Accounts, and
the applicable Removal Date in the case of Removed Accounts, its account
number and, other than in the case of New Accounts, the aggregate amount
outstanding in such Account and the aggregate amount of Principal
Receivables outstanding in such Account. Each such file or list, as
supplemented, from time to time, to reflect Additional Accounts and Removed
Accounts, shall be marked as Schedule 1 to this Agreement and is hereby
incorporated into and made a part of this Agreement. The Transferor
further agrees not to alter the code referenced in this paragraph with
respect to any Account during the term of this Agreement unless and until
such Account becomes a Removed Account.
The Transferor hereby grants and transfers to the Trust, for the
benefit of the Securityholders, a security interest in all of the
Transferor's right, title and interest in, to and under the Receivables and
all other Trust Assets, to secure a loan in an amount equal to the unpaid
principal amount of the Investor Securities issued hereunder or to be
issued pursuant to this Agreement and the interest accrued at the related
Security Rate, and agrees that this Agreement shall constitute a security
agreement under applicable law.
Section 2.2 Acceptance by Trustee.
(a) The Trustee hereby acknowledges its acceptance on behalf of
the Trust of all right, title and interest to the property, now existing
and hereafter created, conveyed to the Trust pursuant to Section 2.1 and
declares that it shall maintain such right, title and interest, upon the
trust herein set forth, for the benefit of all Securityholders. The
Trustee further acknowledges that, prior to or simultaneously with the
execution and delivery of this Agreement, the Transferor delivered to the
Trustee the computer file or microfiche list relating to the Initial
Accounts described in the penultimate paragraph of Section 2.1. The
Trustee shall maintain a copy of Schedule 1, as delivered from time to
time, at the Corporate Trust Office.
(b) The Trustee hereby agrees not to disclose to any Person any
of the account numbers or other information contained in the computer files
or microfiche lists marked as Schedule 1 and delivered to the Trustee, from
time to time, except (i) to a Successor Servicer or as required by a
Requirement of Law applicable to the Trustee, (ii) in connection with the
performance of the Trustee's duties hereunder, (iii) in enforcing the
rights of Securityholders or (iv) to bona fide creditors or potential
creditors of any Account Originator, Account Owner, PFR or the Transferor
for the limited purpose of enabling any such creditor to identify
Receivables or Accounts subject to this Agreement or any Receivables
Purchase Agreement. The Trustee agrees to take such measures as shall be
reasonably requested by the Transferor to protect and maintain the security
and confidentiality of such information and, in connection therewith, shall
allow the Transferor or its duly authorized representatives to inspect the
Trustee's security and confidentiality arrangements as they specifically
relate to the administration of the Trust from time to time during normal
business hours upon prior written notice. The Trustee shall provide the
Transferor with notice five Business Days prior to disclosure of any
information of the type described in this subsection 2.2(b).
(c) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2.3 Representations and Warranties of the Transferor.
The Transferor hereby severally represents and warrants to the Trustee (and
agrees that the Trustee may conclusively rely on each such representation
and warranty in accepting the Receivables in trust and in authenticating
the Securities) that:
(a) Organization and Good Standing. The Transferor is a limited
liability company validly existing under the laws of the jurisdiction of
its organization and has, in all material respects, full power and
authority to own its properties and conduct its business as presently owned
or conducted, and to execute, deliver and perform its obligations under
this Agreement, each Receivables Purchase Agreement and each applicable
Supplement and to execute and deliver to the Trustee the Securities.
(b) Due Qualification. The Transferor is duly qualified to do
business and is in good standing as a foreign limited liability company and
has obtained all necessary licenses and approvals, in each jurisdiction in
which failure to so qualify or to obtain such licenses and approvals would
(i) render any Credit Card Agreement relating to an Account or any
Receivable conveyed to the Trust by the Transferor unenforceable by the
Transferor or the Trust or (ii) have a material adverse effect on the
Investor Securityholders.
(c) Due Authorization. The execution and delivery of this
Agreement, each Receivables Purchase Agreement and each Supplement by the
Transferor and the execution and delivery to the Trustee of the Securities
and the consummation by the Transferor of the transactions provided for in
this Agreement, each Receivables Purchase Agreement and each Supplement
have been duly authorized by the Transferor by all necessary corporate
action on the part of the Transferor.
(d) No Conflict. The execution and delivery by the Transferor
of this Agreement, each Receivables Purchase Agreement, each Supplement,
and the Securities, the performance of the transactions contemplated by
this Agreement, each Receivables Purchase Agreement and each Supplement and
the fulfillment of the terms hereof and thereof applicable to the
Transferor, will not conflict with or violate any Requirements of Law
applicable to the Transferor or conflict with, result in any breach of any
of the material terms and provisions of, or constitute (with or without
notice or lapse of time or both) a material default under, any indenture,
contract, agreement, mortgage, deed of trust or other instrument to which
the Transferor is a party or by which it or its properties are bound.
(e) No Proceedings. There are no proceedings or investigations,
pending or, to the best knowledge of the Transferor, threatened against the
Transferor before any Governmental Authority (i) asserting the invalidity
of this Agreement, each Receivables Purchase Agreement, each Supplement or
the Securities, (ii) seeking to prevent the issuance of any of the
Securities or the consummation of any of the transactions contemplated by
this Agreement, each Receivables Purchase Agreement, each Supplement or the
Securities, (iii) seeking any determination or ruling that, in the
reasonable judgment of the Transferor, would materially and adversely
affect the performance by the Transferor of its obligations under this
Agreement, each Receivables Purchase Agreement or each Supplement, (iv)
seeking any determination or ruling that would materially and adversely
affect the validity or enforceability of this Agreement, each Receivables
Purchase Agreement, each Supplement or the Securities or (v) seeking to
affect adversely the income or franchise tax attributes of the Trust under
the United States Federal or any State income or franchise tax systems.
(f) All Consents. All authorizations, consents, orders or
approvals of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Transferor in
connection with the execution and delivery by the Transferor of this
Agreement, each Receivables Purchase Agreement, each Supplement and the
Securities and the performance of the transactions contemplated by this
Agreement and each Supplement by the Transferor have been duly obtained,
effected or given and are in full force and effect.
Section 2.4 Representations and Warranties of the Transferor
Relating to the Agreement and Any Supplement and the Receivables.
(a) Representations and Warranties. The Transferor hereby
severally represents and warrants to the Trustee as of the Initial Issuance
Date, each Closing Date and, with respect to Additional Accounts, as of the
related Addition Date that:
(i) this Agreement, each Receivables Purchase Agreement, each
Supplement and, in the case of Additional Accounts, the related
Assignment, each constitutes a legal, valid and binding obligation of
the Transferor enforceable against the Transferor in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally from time to time in effect
or general principles of equity;
(ii) as of the Initial Issuance Date and as of the related
Additional Cut-Off Date with respect to Additional Accounts, Schedule
1 to this Agreement, as supplemented to such date, is an accurate and
complete listing in all material respects of all the Accounts the
Receivables in which were transferred by the Transferor as of the
Initial Issuance Date or such Additional Cut-Off Date, as the case may
be, and the information contained therein with respect to the identity
of such Accounts and the Receivables existing thereunder is true and
correct in all material respects as of the Initial Issuance Date or
such Additional Cut-Off Date, as the case may be;
(iii) each Receivable conveyed to the Trust by the Transferor
has been conveyed to the Trust free and clear of any Lien of any
Person claiming through or under the Transferor or any of its
Affiliates (other than Liens permitted under subsection 2.7(b)).
(iv) all authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority required
to be obtained, effected or given by the Transferor in connection with
the conveyance by the Transferor of Receivables to the Trust have been
duly obtained, effected or given and are in full force and effect;
(v) either this Agreement or, in the case of Additional
Accounts, the related Assignment constitutes a valid sale, transfer
and assignment to the Trust of all right, title and interest of the
Transferor in the Receivables conveyed to the Trust and the proceeds
thereof and Recoveries and Interchange identified as relating to the
Receivables conveyed to the Trust or a grant of a first priority
perfected "security interest" (as defined in the UCC) in such property
to the Trust, which, in the case of existing Receivables and the
proceeds thereof and said Recoveries and Interchange, is enforceable
upon execution and delivery of this Agreement, or, with respect to
then existing Receivables in Additional Accounts, as of the applicable
Addition Date, and which will be enforceable with respect to such
Receivables hereafter and thereafter created and the proceeds thereof
upon such creation. Upon the filing of the financing statements and,
in the case of Receivables hereafter created and the proceeds thereof,
upon the creation thereof, the Trust shall have a first priority
perfected security or ownership interest in such property and
proceeds;
(vi) on the Initial Issuance Date, each Initial Account
specified in Schedule 1 is an Eligible Account and, on the applicable
Additional Cut-Off Date, each related Additional Account specified in
Schedule 1 is an Eligible Account;
(vii) on the Initial Issuance Date, each Receivable then
existing and conveyed to the Trust is an Eligible Receivable and, on
the applicable Additional Cut-Off Date, each Receivable contained in
the related Additional Accounts and conveyed to the Trust is an
Eligible Receivable; and
(viii) as of the date of the creation of any new Receivable in
an Account specified in a Receivables Purchase Agreement, such
Receivable is an Eligible Receivable.
(b) Notice of Breach. The representations and warranties set
forth in Section 2.3, this Section 2.4 and subsection 2.9(f) shall survive
the transfers and assignments of the Receivables to the Trust and the
issuance of the Securities. Upon discovery by the Transferor, the Servicer
or the Trustee of a breach of any of the representations and warranties set
forth in Section 2.3, this Section 2.4 or subsection 2.9(f), the party
discovering such breach shall give notice to the other parties and to each
Series Enhancer within three Business Days following such discovery;
provided that the failure to give notice within three Business Days does
not preclude subsequent notice.
Section 2.5 Reassignment of Ineligible Receivables.
(a) Reassignment of Receivables. In the event (i) any
representation or warranty contained in subsection 2.4(a)(ii), (iii), (iv),
(vi), (vii) or (viii) is not true and correct in any material respect as of
the date specified therein with respect to any Receivable or the related
Account and such breach has a material adverse effect on the
Securityholders' Interest in any Receivable (which determination shall be
made without regard to whether funds are then available pursuant to any
Series Enhancement) unless cured within 60 days (or such longer period, not
in excess of 120 days, as may be agreed to by the Trustee and the Servicer)
after the earlier to occur of the discovery thereof by the Transferor which
conveyed such Receivables to the Trust or receipt by the Transferor of
written notice thereof given by the Trustee or the Servicer, or (ii) it is
so provided in subsection 2.7(a) or 2.9(d)(iii) with respect to any
Receivables conveyed to the Trust by the Transferor, then the Transferor
shall accept reassignment of the Securityholders' Interest in all
Receivables in the related Account ("Ineligible Receivables") on the terms
and conditions set forth in paragraph (b) below.
(b) Price of Reassignment. The Servicer shall deduct the
portion of such Ineligible Receivables reassigned to the Transferor which
are Principal Receivables from the aggregate amount of the Principal
Receivables used to calculate the Transferor Amount. In the event that,
following the exclusion of such Principal Receivables from the calculation
of the Transferor Amount, the Transferor Amount would be less than the
Required Transferor Amount, not later than 1:00 P.M., New York City time,
on the first Distribution Date following the Monthly Period in which such
reassignment obligation arises, the Transferor shall make a deposit into
the Special Funding Account in immediately available funds in an amount
equal to the amount by which the Transferor Amount would be below the
Required Transferor Amount (up to the amount of such Principal
Receivables).
Upon reassignment of any Ineligible Receivable, the Trustee, on
behalf of the Trust, shall automatically and without further action be
deemed to transfer, assign, set over and otherwise convey to the Transferor
or its designee, without recourse, representation or warranty, all the
right, title and interest of the Trust in and to such Ineligible
Receivable, all monies due or to become due and all proceeds thereof and
such reassigned Ineligible Receivable shall be treated by the Trust as
collected in full as of the date on which it was transferred. The
obligation of the Transferor to accept reassignment of any Ineligible
Receivables conveyed to the Trust by the Transferor, and to make the
deposits, if any, required to be made to the Special Funding Account as
provided in this Section, shall constitute the sole remedy respecting the
event giving rise to such obligation available to Securityholders (or the
Trustee on behalf of the Securityholders) or any Series Enhancer.
Notwithstanding any other provision of this subsection 2.5(b), a
reassignment of an Ineligible Receivable in excess of the amount that would
cause the Transferor Amount to be less than the Required Transferor Amount
shall not occur if the Transferor fails to make any deposit required by
this subsection 2.5(b) with respect to such Ineligible Receivable. The
Trustee shall execute such documents and instruments of transfer or
assignment and take such other actions as shall reasonably be requested and
provided by the Transferor to effect the conveyance of such Ineligible
Receivables pursuant to this subsection 2.5(b), but only upon receipt of an
Officer's Certificate from the Transferor that states that all conditions
set forth in this Section 2.5 have been satisfied.
Section 2.6 Reassignment of Securityholders' Interest in Trust
Portfolio. In the event any representation or warranty of the Transferor
set forth in subsection 2.3(a) or (c) or subsection 2.4(a)(i) or (v) is not
true and correct in any material respect and such breach has a material
adverse effect on the Securityholders' Interest in Receivables conveyed to
the Trust by the Transferor or the availability of the proceeds thereof to
the Trust (which determination shall be made without regard to whether
funds are then available pursuant to any Series Enhancement), then either
the Trustee or the Holders of Investor Securities evidencing not less than
50% of the aggregate unpaid principal amount of all outstanding Investor
Securities, by notice then given to the Transferor and the Servicer (and to
the Trustee if given by the Investor Securityholders), may direct the
Transferor to accept a reassignment of the Securityholders' Interest in the
Receivables and any Participation Interests conveyed to the Trust by the
Transferor if such breach and any material adverse effect caused by such
breach is not cured within 60 days of such notice (or within such longer
period, not in excess of 120 days, as may be specified in such notice), and
upon those conditions the Transferor shall be obligated to accept such
reassignment on the terms set forth below; provided, however, that such
Receivables will not be reassigned to the Transferor if, on any day prior
to the end of such 60-day or longer period (i) the relevant representation
and warranty shall be true and correct in all material respects as if made
on such day and (ii) the Transferor shall have delivered to the Trustee a
certificate of an authorized officer describing the nature of such breach
and the manner in which the relevant representation and warranty has become
true and correct.
The Transferor shall deposit in the Collection Account in
immediately available funds not later than 1:00 P.M., New York City time,
on the first Transfer Date following the Monthly Period in which such
reassignment obligation arises, in payment for such reassignment, an amount
equal to the sum of the amounts specified therefor with respect to each
outstanding Series in the related Supplement. Notwithstanding anything to
the contrary in this Agreement, such amounts shall be distributed to the
Investor Securityholders on such Distribution Date in accordance with the
terms of each Supplement. If the Trustee or the Investor Securityholders
give notice directing the Transferor to accept a reassignment of the
Securityholders' Interest in the Receivables as provided above, the
obligation of the Transferor to accept such reassignment pursuant to this
Section and to make the deposit required to be made to the Collection
Account as provided in this paragraph shall constitute the sole remedy
respecting an event of the type specified in the first sentence of this
Section available to the Securityholders (or the Trustee on behalf of the
Securityholders) or any Series Enhancer.
Section 2.7 Covenants of the Transferor. The Transferor hereby
covenants that:
(a) Receivables Not To Be Evidenced by Promissory Notes. Except
in connection with its enforcement or collection of an Account, the
Transferor will take no action to cause any Receivable conveyed by it to
the Trust to be evidenced by any instrument (as defined in the UCC) and if
any such Receivable (or any underlying receivable) is so evidenced as a
result of any action of the Transferor it shall be deemed to be an
Ineligible Receivable in accordance with Section 2.5(a) and shall be
reassigned to the Transferor in accordance with Section 2.5(b).
(b) Security Interests. Except for the conveyances hereunder,
the Transferor will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on, any
Receivable or Participation Interest conveyed by it to the Trust, whether
now existing or hereafter created, or any interest therein, and the
Transferor shall defend the right, title and interest of the Trust in, to
and under the Receivables and any Participation Interest, whether now
existing or hereafter created, against all claims of third parties claiming
through or under the Transferor; provided, however, that nothing in this
Section 2.7(b) shall prevent or be deemed to prohibit the Transferor from
suffering to exist upon any of the Receivables or Participation Interests
any Liens for taxes if such taxes shall not at the time be due and payable
or if the Transferor shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its books
adequate reserves with respect thereto. Notwithstanding the foregoing,
nothing in this Section 2.7(b) shall be construed to prevent or be deemed
to prohibit the transfer of the Transferor Security and certain other
rights of the Transferor in accordance with the terms of this Agreement and
any related Supplement.
(c) Transferor's Interest. Except for the conveyances
hereunder, in connection with any transaction permitted by Section 7.2 and
Section 6.3 or any other transaction in connection with which the Rating
Agency Condition has been satisfied and the Transferor has delivered to the
Trustee a Tax Opinion, the Transferor agrees not to transfer, sell, assign,
exchange, participate or pledge, hypothecate or otherwise convey or grant a
security interest in the Transferor's Interest represented by the
Transferor Security and any such attempted transfer, assignment, exchange,
conveyance, pledge, hypothecation, grant or sale shall be void.
(d) Delivery of Collections or Recoveries. In the event that
the Transferor receives Collections or Recoveries, the Transferor agrees to
pay the Trustee all such Collections and Recoveries as soon as practicable
after its receipt thereof but in no event later than two business days
after a Responsible Officer of the Transferor has obtained actual knowledge
of such receipt by the Transferor.
(e) Notice of Liens. The Transferor shall notify the Trustee and
each Series Enhancer promptly after becoming aware of any Lien on any
Receivable (or on the underlying receivable) or Participation Interest
conveyed by it to the Trust other than the conveyances hereunder and under
each Receivables Purchase Agreement.
(f) Amendment of the Certificate of Formation. The Transferor
will not amend in any material respect the Transferor LLC Agreement or its
certificate of formation without providing the Rating Agency with notice no
later than the fifth Business Day prior to such amendment (unless the right
to such notice is waived by the Rating Agency) and satisfying the Rating
Agency Condition.
(g) Other Indebtedness. The Transferor shall not incur any
additional debt, unless the Rating Agency is provided with notice no later
than the fifth Business Day prior to the incurrence of such additional debt
(unless the right to such notice is waived by the Rating Agency) and the
Rating Agency Condition is satisfied with respect to the incurrence of such
debt.
(h) Separate Corporate Existence. The Transferor shall:
(i) maintain its corporate existence and remain in good standing
under the laws of the State of Delaware;
(ii) observe all procedures required by its certificate of
formation, the Transferor LLC Agreement and the laws of the State of
Delaware;
(iii) ensure that (x) the business and affairs of the Transferor
are at all times managed by or under the direction of its Board of
Directors, (y) its Board of Directors shall have duly authorized all
corporate actions requiring such authorization and, (z) when
necessary, the Transferor shall have obtained proper authorization for
corporate action from its stockholder;
(iv) at all times includes at least two Independent Managers (as
such term is defined in the Transferor LLC Agreement);
(v) maintain separate corporate records and books of account
from those of any Affiliate and keep correct and complete books and
records of account and minutes of the meetings and other proceedings
of its stockholder and Board of Directors;
(vi) pay the fair market rent for any office space located in
the office of any Affiliate and a fair share of any overhead costs;
(vii) maintain separate bank accounts and books of account from
those of its Affiliates and ensure that its funds and other assets
shall at all times be readily distinguishable from the funds and other
assets of its Affiliates and not be commingled with the funds or other
assets of its Affiliates;
(viii) pay from its own separate funds all material liabilities
incurred by it, including material operating and administrative
expenses; provided that the organizational expenses of the Transferor
and expenses relating to the preparation, negotiation, execution and
delivery of the documentation with respect to the issuance of the
Securities or notes that it may issue from time to time may be paid by
an Affiliate. No general overhead or administrative expenses of any
Affiliate shall be charged or otherwise allocated to the Transferor
unless such general overhead or administrative expenses are directly
attributable to services provided to or for the account of the
Transferor.
(ix) conduct its business solely in its own name so as not to
mislead others as to its identity or the identity of any Affiliate.
All oral and written communications of the Transferor, including
without limitation letters, invoices, purchase orders, contracts,
statements, and applications shall be made solely in the name of the
Transferor;
(x) not make any guaranty with respect to the obligations of any
Affiliate and no Affiliate shall make any guaranty with respect to the
obligations of the Transferor;
(xi) ensure that there will be no intercompany debt between the
Transferor and any Affiliate; provided, that the stockholder of the
Transferor may contribute capital to the Transferor in such amounts as
are necessary to assure that such Transfer has adequate capital for
its business and the Transferor may issue subordinated notes in the
amount and manner specified in the Receivables Purchase Agreement;
(xii) act solely in its own name and through its duly authorized
officers or agents in the conduct of its business and at all times
maintain an arm's length relationship with its Affiliates. The
Transferor shall not: (v) hold itself out as having agreed to pay or
become liable for the debts of any Affiliate; (w) fail to correct any
known misrepresentation with respect to the Transferor's agreement to
pay or become liable for the debts of any Affiliate; (x) operate or
purport to operate as an integrated, single economic unit with any
Affiliate in its dealings with any other Person; (y) seek or obtain
credit or incur any obligation to any Person based upon the assets of
an Affiliate or unaffiliated entity; or (z) induce any Person
reasonably to rely on the creditworthiness of any Affiliate in its
dealings with the Transferor;
(xiii) disclose in any financial statements the effects of the
transactions contemplated herein and in each Receivables Purchase
Agreement in accordance with generally accepted accounting principles.
Such financial statements shall (x) clearly indicate the separate
existence of the Transferor and its Affiliates, (y) reflect the
Transferor's separate assets and liabilities and (z) record the
purchase of the Receivables pursuant to the applicable Receivables
Purchase Agreement as a purchase under generally accepted accounting
principles;
(xiv) on or before December 31 of each year, commencing December
31, 1998, deliver to the Rating Agency a certificate of an auditor
(which may be an employee of Holdings or PFR) to the effect that the
Transferor has complied with all of the requirements of the foregoing
clauses (i) through (xiii) during the preceding year, or in the case
of the first such certificate, during the period commencing on the
Initial Series Issuance Date; provided, however, that the Transferor
shall not be required to deliver such certificate with respect to any
year, if the Transferor shall have delivered to the Rating Agency an
Officer's Certificate to the same effect on or after June 30 of the
applicable year in connection with the issuance of a Series.
(i) Interchange. The Transferor shall cause PFR to cause each
Account Originator and Account Owner to (i) pay all Interchange required to
be included by such Account Originator or Account Owner, as the case may
be, as Collections of Finance Charge Receivables with respect to the
preceding Business Day (or, if the Transferor cannot identify or cause to
be identified the amount of such Interchange, the amount reasonably
estimated by the Transferor as the amount of such Interchange) directly to
the Trustee for deposit into the Collection Account or (ii) deposit any
such Interchange directly into the Collection Account, in either case, in
immediately available funds on each Business Day, not later than 1:00 p.m.,
New York City time. The Trustee, upon receipt of any such Interchange,
shall deposit such amounts into the Collection Account.
Section 2.8 Covenants of the Transferor with Respect to
Receivables Purchase Agreement.
(a) The Transferor, in its capacity as purchaser of Receivables
from PFR or an Account Owner pursuant to a Receivables Purchase Agreement,
hereby covenants that the Transferor will at all times enforce the
covenants and agreements of PFR, or such Account Owner, as applicable, in
such Receivables Purchase Agreement, including, without limitation, the
covenants to the effect set forth below:
(i) Periodic Rate Finance Charges. (i) Except (x) as otherwise
required by any Requirements of Law or (y) as is deemed by the related
Account Owner to be necessary in order for it to maintain its credit
card business or a program operated by such credit card business on a
competitive basis based on a good faith assessment by it of the nature
of the competition with respect to the credit card business or such
program, it shall not at any time take any action which would have the
effect of reducing the Portfolio Yield to a level that could be
reasonably expected to cause any Series to experience any Pay Out
Event or Reinvestment Event based on the insufficiency of the
Portfolio Yield or any similar test and (ii) except as otherwise
required by any Requirements of Law, it shall not take any action
which would have the effect of reducing the Portfolio Yield to less
than the highest current Average Rate for any Group.
(ii) Credit Card Agreements and Guidelines. Subject to
compliance with all Requirements of Law and paragraph (a) above any
Account Owner may change the terms and provisions of the applicable
Credit Card Agreements or the applicable Credit Card Guidelines in any
respect (including the calculation of the amount or the timing of
charge-offs and the Periodic Rate Finance Charges to be assessed
thereon). Notwithstanding the above, unless required by Requirements
of Law or as permitted by Section 2.8(a), no Account Owner will take
any action with respect to the applicable Credit Card Agreements or
the applicable Credit Card Guidelines, which, at the time of such
action, the Account Owner reasonably believes will have a material
adverse effect on the Investor Securityholders.
(b) The Transferor further covenants that it will not enter into
any amendments to a Receivables Purchase Agreement or enter into a new
Receivables Purchase Agreement unless the Rating Agency Condition has been
satisfied.
Section 2.9 Addition of Accounts.
(a) Required Additional Accounts. (i) If, as of the close of
business on the last Business Day of any calendar month, (a) the total
amount of Principal Receivables is less than the Required Minimum Principal
Balance on such date or (b) the Transferor Amount is less than the Required
Transferor Amount on such date, the Transferor shall on or prior to the
close of business on the tenth Business Day of the next succeeding calendar
month (the "Required Designation Date"), cause to be designated additional
Eligible Accounts to be included as Accounts as of the Required Designation
Date or any earlier date in a sufficient amount (or such lesser amount as
shall represent all Eligible Accounts constituting VISA and MasterCard
consumer revolving credit card accounts then available to the Transferor
under the Receivables Purchase Agreements) such that, after giving effect
to such addition the aggregate principal balance of Principal Receivables,
conveyed to the Trust as of the close of business on the Addition Date is
at least equal to the Required Minimum Principal Balance on such date and
the Transferor Amount is at least equal to the Required Transferor Amount
on such date.
(ii) In lieu of, or in addition to, causing the designation of
Additional Accounts pursuant to clause (i) above, the Transferor may (but
shall not be required), subject to the conditions specified in paragraph
(c) below, convey to the Trust participations (including 100%
participations) representing undivided interests in a pool of assets
primarily consisting of revolving credit card receivables, consumer loan
receivables (secured and unsecured), charge card receivables, and any
interests in any of the foregoing, including securities representing or
backed by such receivables, and other self-liquidating financial assets
including any "Eligible Assets" as such term is defined in Rule 3a-7 under
the Investment Company Act (or any successor to such Rule) and collections,
together with all earnings, revenue, dividends, distributions, income,
issues and profits thereon ("Participation Interests"). Receivables shall
not be treated as a Participation Interest for purposes of this Agreement.
The addition of Participation Interests in the Trust pursuant to this
paragraph (a) or paragraph (b) below shall be effected by a Participation
Interest Supplement, dated the applicable Addition Date and entered into
pursuant to Section 13.1(a).
(iii) Any Additional Accounts or Participation Interests
designated to be included as Trust Assets pursuant to clauses (i) or (ii)
above may only be so included if (x) Standard & Poor's shall have notified
the Transferor, the Servicer and the Trustee in writing that such addition
will not result in a reduction or withdrawal of the then existing rating of
any outstanding Series or Class with respect to which Standard & Poor's is
a Rating Agency, (y) the applicable conditions specified in paragraph (c)
below have been satisfied and (z) Moody's shall have received prior written
notice of any such designation of Additional Accounts or Participation
Interests pursuant to clauses (i) or (ii) above..
(b) Permitted Aggregate Additions. The Transferor may from time
to time, at its sole discretion, subject to the conditions specified in
paragraph (c) below, voluntarily cause the designation of additional
Eligible Accounts to be included as Accounts or Participation Interests to
be included as Trust Assets, in either case as of a specified Additional
Cut-Off Date.
(c) Conditions to Aggregate Additions. On the Addition Date
with respect to any Aggregate Additions, the transfer of the Receivables in
Aggregate Addition Accounts (and such Aggregate Addition Accounts shall be
deemed to be Accounts for purposes of this Agreement) or Participation
Interests as of the close of business on the applicable Additional Cut-Off
Date, shall be subject to the satisfaction of the following conditions:
(i) on or before the eighth Business Day immediately preceding
the Addition Date, the Transferor shall have given the Trustee, the
Servicer and the Rating Agency notice (unless such notice requirement
is otherwise waived) that the Aggregate Addition Accounts or
Participation Interests will be included and specifying the applicable
Addition Date and Additional Cut-Off Date;
(ii) all Aggregate Addition Accounts shall be Eligible Accounts;
(iii) the Transferor shall have delivered to the Trustee copies
of UCC-1 financing statements covering such Aggregate Addition
Accounts, if necessary to perfect the Trust's interest in the
Receivables arising therein;
(iv) to the extent required by Section 4.3, the Transferor shall
have deposited in the Collection Account all Collections with respect
to such Aggregate Addition Accounts since the Additional Cut-Off Date;
(v) as of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the related Account Owner,
the Servicer, PFR or the Transferor shall have occurred nor shall the
transfer to the Trust of the Receivables arising in the Aggregate
Addition Accounts or of the Participation Interests have been made in
contemplation of the occurrence thereof;
(vi) solely with respect to Aggregate Additions designated
pursuant to subsection 2.9(b), the Rating Agency Condition shall have
been satisfied;
(vii) the Transferor shall have delivered to the Trustee an
Officer's Certificate, dated the Addition Date, confirming, to the
extent applicable, the items set forth in clauses (ii) through (vi)
above;
(viii) the addition to the Trust of the Receivables arising in
the Aggregate Addition Accounts or of the Participation Interests will
not result in an Adverse Effect and, in the case of Aggregate
Additions, the Transferor shall have delivered to the Trustee an
Officer's Certificate, dated the Addition Date, stating that the
Transferor reasonably believes that the addition to the Trust of the
Receivables arising in the Aggregate Addition Accounts or of the
Participation Interests will not have an Adverse Effect; and
(ix) the Transferor shall have delivered to the Trustee and the
Rating Agency an Opinion of Counsel, dated the Addition Date, in
accordance with subsection 13.2(d)(ii) or (iv), as applicable.
(d) New Accounts.
(i) The Transferor may from time to time, in its sole
discretion, subject to and in compliance with the limitations
specified in clause (ii) below and the conditions specified in
paragraph (e) below, voluntarily designate newly originated Eligible
Accounts to be included as New Accounts. For purposes of this
paragraph, Eligible Accounts shall be deemed to include only
MasterCard and VISA revolving credit card accounts of the same nature
as those included as Initial Accounts or which have previously been
included in any Aggregate Addition if the Assignment related to such
Aggregate Addition expressly provides that such type of revolving
credit card account is permitted to be designated as a New Account.
(ii) Unless and until the Rating Agency otherwise consents in
writing, the Transferor shall not be permitted to designate New
Accounts and, upon obtaining such consent, the number and balance of
New Accounts designated with respect to any period designated by the
Rating Agency shall not exceed the amounts designated by the Rating
Agency.
(e) Conditions to Addition of New Accounts. On the Addition
Date with respect to any New Accounts, the transfer of the Receivables in
such New Accounts as of the close of business on the applicable Additional
Cut-Off Date and the designation of such New Accounts as Accounts shall be
subject to the satisfaction of the following conditions:
(i) the New Accounts shall all be Eligible Accounts;
(ii) the Transferor shall have delivered to the Trustee copies
of UCC-1 financing statements covering such New Accounts, if necessary
to perfect the Trust's interest in the Receivables arising therein;
(iii) to the extent required by Section 4.3, the Transferor
shall have deposited in the Collection Account all Collections with
respect to such New Accounts since the Additional Cut-Off Date;
(iv) as of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the related Account Owner,
the Servicer, PFR or the Transferor, shall have occurred nor shall the
transfer to the Trust of the Receivables arising in the New Accounts
have been made in contemplation of the occurrence thereof; and
(v) the addition of the Receivables arising in the New Accounts
to the Trust will not result in the occurrence of a Pay Out Event or
Reinvestment Event.
(f) Representations and Warranties. The Transferor conveying
Additional Accounts or Participation Interests hereby represents and
warrants to the Trust as of the related Addition Date as to the matters set
forth in clauses (v) and (viii) of subsection 2.9(c) above and that, in the
case of Additional Accounts, the list delivered pursuant to paragraph (h)
below is, as of the applicable Additional Cut-Off Date, true and complete
in all material respects.
(g) Delivery of Documents. In the case of the designation of
Additional Accounts, the Transferor designating such Accounts shall deliver
to the Trustee (i) the computer file or microfiche list required to be
delivered pursuant to Section 2.1 with respect to such Additional Accounts
on the date such file or list is required to be delivered pursuant to
Section 2.1 (the "Document Delivery Date") and (ii) a duly executed,
written Assignment (including an acceptance by the Trustee for the benefit
of the Securityholders), substantially in the form of Exhibit B (the
"Assignment"), on the Document Delivery Date. In addition, in the case of
the designation of New Accounts, the Transferor shall deliver to the
Trustee on the Document Delivery Date an Officer's Certificate confirming,
to the extent applicable, the items set forth in clauses (i) through (v) of
subsection 2.9(e) above.
(h) The Transferor may determine, in its sole discretion, that
commencing on a specified date (the "Automatic Addition Commencement Date")
it shall designate that all Eligible Accounts shall be included as Accounts
subject to satisfaction of the following conditions:
(i) the number of Accounts the Receivables of which are
designated to be included in the Trust pursuant to this subsection
2.9(h) since (x) the first day of the eleventh preceding Monthly
Period (or, in the case of any date on which Additional Accounts are
to be added to the Trust which occurs on or before the last day of the
eleventh Monthly Period following the Automatic Addition Commencement
Date, the Automatic Addition Commencement Date) minus the number of
Accounts of the type described in clause (k) of the definition of
"Eligible Account" which have been added on the initial day of the
addition of such type of Account pursuant to such clause (k) since the
first day of such eleventh preceding Monthly Period (or Automatic
Addition Commencement Date, as the case may be) shall not exceed 20%
(or such other percentage as the Rating Agency may require) of the
number of Accounts on the first day of such eleventh preceding Monthly
Period (or Automatic Addition Commencement Date, as the case may be),
and (y) the first day of the second preceding Monthly Period (or, in
the case of any date on which Additional Accounts are to be added to
the Trust which occurs on or before the last day of the second Monthly
Period following the Automatic Addition Commencement Date, the
Automatic Addition Commencement Date) minus the number of Accounts of
the type described in clause (k) of the definition of "Eligible
Accounts" which have been added on the initial day of the addition of
such type of Account pursuant to such clause (k) since the first day
of such second preceding Monthly Period (or Automatic Addition
Commencement Date, as the case may be) shall not exceed 15% (or such
other percentage as the Rating Agency may require) of the number of
Accounts on the first day of such second preceding Monthly Period (or
Automatic Addition Commencement Date, as the case may be); and
(ii) on each Calculation Date, the aggregate Principal
Receivables in Accounts the Receivables of which are designated to be
included in the Trust pursuant to this subsection 2.9(h) since (x) the
corresponding Calculation Date occurring in the eleventh Monthly
Period preceding the Monthly Period in which such Calculation Date
occurs (or, in the case of any Calculation Date which occurs on or
before the last day of the eleventh Monthly Period following the
Automatic Addition Commencement Date, the Automatic Addition
Commencement Date) minus the aggregate Principal Receivables in
Accounts of the type described in clause (k) of the definition of
"Eligible Account" which have been added on the initial day of the
addition of such type of Account pursuant to such clause (k) since the
corresponding Calculation Date occurring in such eleventh preceding
Monthly Period (or the Automatic Addition Commencement Date, as the
case may be) shall not exceed 20% (or such other percentage as the
Rating Agency may require) of the aggregate Principal Receivables
included in the Trust on the corresponding Calculation Date occurring
in such eleventh preceding Monthly Period (or the Automatic Addition
Commencement Date, as the case may be), and (y) the corresponding
Calculation Date occurring in the second Monthly Period preceding the
Monthly Period in which such Calculation Date occurs (or, in the case
of any Calculation Date which occurs on or before the last day of the
second Monthly Period following the Automatic Addition Commencement
Date, the Automatic Addition Commencement Date) minus the aggregate
Principal Receivables in Accounts of the type described in clause (k)
of the definition of "Eligible Accounts" which have been added on the
initial day of the addition of such type of Account pursuant to such
clause (k) since the corresponding Calculation Date occurring in such
second preceding Monthly Period (or the Automatic Addition
Commencement Date, as the case may be) shall not exceed 15% (or such
other percentage as the Rating Agency may require) of the aggregate
Principal Receivables included in the Trust on the corresponding
Calculation Date occurring in such second preceding Monthly Period (or
the Automatic Addition Commencement Date, as the case may be).
For all purposes of this Agreement, all receivables of such
Additional Accounts shall be treated as Receivables upon their creation and
shall be subject to the eligibility criteria specified in the definitions
of "Eligible Receivable" and "Eligible Account." Notwithstanding the
foregoing, the Transferor may elect at any time, or may be required if the
percentages described above are exceeded, to suspend the automatic
inclusion in Accounts of new accounts which would otherwise be Additional
Accounts as of any Business Day (the "Automatic Addition Suspension Date"),
or terminate any such inclusion as of any Business Day (an "Automatic
Addition Termination Date") until a date (the "Restart Date") to be
identified in writing by the Transferor to the Trustee, the Servicer and
the Rating Agency at least 10 days prior to such Restart Date. Promptly
after an Automatic Addition Suspension Date or any Automatic Addition
Termination Date, or a Restart Date, the Transferor and the Trustee agree
to execute and the Transferor agrees to record and file at its own expense
an amendment to the financing statements referred to in Section 2.1 hereof
to specify the accounts then subject to this Agreement (which specification
may incorporate a list of accounts by reference) and may, except in
connection with any such filing made after a Restart Date, release any
security interest in any accounts created after the Automatic Addition
Suspension Date or any Automatic Addition Termination Date.
Section 2.10 Removal of Accounts and Participation Interests.
On any day of any Monthly Period the Transferor shall have the right to
require the reassignment to it or its designee of all the Trust's right,
title and interest in, to and under the Receivables then existing and
thereafter created, all monies due or to become due and all amounts
received thereafter with respect thereto and all proceeds thereof in or
with respect to the Accounts specified in a Receivables Purchase Agreement
(the "Removed Accounts") or Participation Interests conveyed to the Trust
by the Transferor (the "Removed Participation Interests") (unless otherwise
set forth in the applicable Participation Interest Supplement or Series
Supplement) and designated for removal by the Transferor, upon satisfaction
of the conditions in clauses (i), (iii), (iv), (v) and (vi) below:
(i) on or before the eighth Business Day immediately preceding
the Removal Date, the Transferor shall have given the Trustee, the
Servicer, the Rating Agency and each Series Enhancer notice (unless
such notice requirement is otherwise waived) of such removal and
specifying the date for removal of the Removed Accounts and removed
Participation Interests (the "Removal Date");
(ii) on or prior to the date that is five Business Days after
the Removal Date, the Transferor shall amend Schedule 1 by delivering
to the Trustee a computer file or microfiche list containing a true
and complete list of the Removed Accounts specifying for each such
Account, as of the date notice of the Removal Date is given, its
account number, the aggregate amount outstanding in such Account and
the aggregate amount of Principal Receivables outstanding in such
Account;
(iii) the Transferor shall have represented and warranted as of
the Removal Date that the list of Removed Accounts delivered pursuant
to paragraph (ii) above, as of the Removal Date, is true and complete
in all material respects;
(iv) the Rating Agency Condition shall have been satisfied with
respect to the removal of the Removed Accounts and removed
Participation Interests;
(v) the Transferor shall have delivered to the Trustee an
Officer's Certificate, with a copy to the Rating Agency, dated the
Removal Date, to the effect that the Transferor reasonably believes
that (a) such removal will not have an Adverse Effect, (b) (I) no
selection procedures believed by the Transferor to be materially
adverse to the interests of the Investor Securityholders have been
used in selecting the Removed Accounts or (II) a random selection
procedure was used by the Transferor in selecting the Removed Accounts
and (c) the Transferor Amount as of the Removal Date (determined after
giving effect to such Removal and to the Principal Receivables or
Participation Interests transferred to the Trust on such date) is
greater than or equal to the Required Transferor Amount; and
(vi) if on the applicable Removal Date, the long-term unsecured
debt obligations of Holdings or PFR are not rated at least in the
third highest rating category by the Rating Agency, the Transferor
shall have delivered to the Trustee, with a copy to the Rating Agency,
an Officer's Certificate which shall have attached to it the relevant
fraudulent conveyance statute, if any, and set forth the factual basis
for a conclusion that such Removal would not constitute a fraudulent
conveyance of the Transferor.
Upon satisfaction of the above conditions, the Trustee shall
execute and deliver to the Transferor a written reassignment in
substantially the form of Exhibit C (the "Reassignment") and shall, without
further action, be deemed to sell, transfer, assign, set over and otherwise
convey to the Transferor or its designee, effective as of the Removal Date,
without recourse, representation or warranty, all the right, title and
interest of the Trust in and to the Receivables arising in the Removed
Accounts and Removed Participation Interests, all monies due and to become
due and all amounts received with respect thereto and all proceeds thereof
and any Insurance Proceeds relating thereto. The Trustee may conclusively
rely on the Officer's Certificate delivered pursuant to this Section 2.10
and shall have no duty to make inquiries with regard to the matters set
forth therein and shall incur no liability in so relying.
In addition to the foregoing, on the date when any Receivable in
an Account becomes a Defaulted Receivable, the Trust shall automatically
and without further action or consideration be deemed to transfer, set over
and otherwise convey to the Transferor, without recourse, representation or
warranty, all right, title and interest of the Trust in and to the
Defaulted Receivables in such Account, all monies due or to become due with
respect thereto, all proceeds thereof and any Insurance Proceeds relating
thereto; provided, that Recoveries of such Account shall be applied as
provided herein.
The foregoing conditions may be amended with the consent of the
Rating Agency but without the consent of Securityholders if such amendment
is required to comply with any accounting or regulatory restrictions to
which the Trust, Holdings, the Transferor, PFR, any Account Originator or
any Account Owner may become subject.
Section 2.11 Account Allocations. In the event that the
Transferor is unable for any reason to transfer Receivables to the Trust in
accordance with the provisions of this Agreement, including by reason of
the application of the provisions of Section 9.1 or any order of any
Governmental Authority (a "Transfer Restriction Event"), then, in any such
event, (a) the Transferor and the Servicer agree (except as prohibited by
any such order) to allocate and pay to the Trust, after the date of such
inability, all Collections, including Collections of Receivables
transferred to the Trust prior to the occurrence of such event, and all
amounts which would have constituted Collections but for the Transferor's
inability to transfer Receivables (up to an aggregate amount equal to the
amount of Receivables transferred to the Trust by the Transferor in the
Trust on such date), (b) the Transferor and the Servicer agree that such
amounts will be applied as Collections in accordance with Article IV and
the terms of each Supplement and (c) for so long as the allocation and
application of all Collections and all amounts that would have constituted
Collections are made in accordance with clauses (a) and (b) above,
Principal Receivables and all amounts which would have constituted
Principal Receivables but for the Transferor's inability to transfer
Receivables to the Trust which are written off as uncollectible in
accordance with this Agreement shall continue to be allocated in accordance
with Article IV and the terms of each Supplement. For the purpose of the
immediately preceding sentence, the Transferor and the Servicer shall treat
the first received Collections with respect to the Accounts as allocable to
the Trust until the Trust shall have been allocated and paid Collections in
an amount equal to the aggregate amount of Principal Receivables in the
Trust as of the date of the occurrence of such event. If the Transferor
and the Servicer are unable pursuant to any Requirements of Law to allocate
Collections as described above, the Transferor and the Servicer agree that,
after the occurrence of such event, payments on each Account with respect
to the principal balance of such Account shall be allocated first to the
oldest principal balance of such Account and shall have such payments
applied as Collections in accordance with Article IV and the terms of each
Supplement. The parties hereto agree that Finance Charge Receivables,
whenever created, accrued in respect of Principal Receivables which have
been conveyed to the Trust shall continue to be a part of the Trust
notwithstanding any cessation of the transfer of additional Principal
Receivables to the Trust and Collections with respect thereto shall
continue to be allocated and paid in accordance with Article IV and the
terms of each Supplement.
Section 2.12 Discount Option.
(a) The Transferor shall have the option to designate at any
time and from time to time a percentage or percentages, which may be a
fixed percentage or a variable percentage based on a formula (the "Discount
Percentage"), of all or any specified portion of Principal Receivables
created after the Discount Option Date to be treated as Finance Charge
Receivables ("Discount Option Receivables"). The Transferor shall also
have the option of reducing or withdrawing the Discount Percentage, at any
time and from time to time, on and after such Discount Option Date;
provided, however, such reduction or withdrawal shall occur only if the
Transferor delivers to the Trustee and, in connection with certain Series,
the applicable Series Enhancers, a certificate of an authorized
representative to the effect that, in the reasonable belief of the
Transferor, such reduction or withdrawal would not have adverse regulatory
or other accounting implications for the Transferor. The Transferor shall
provide to the Servicer, the Trustee and any Rating Agency 30 days' prior
written notice of the Discount Option Date, and such designation shall
become effective on the Discount Option Date only if (a) the Transferor has
delivered to the Trustee and any such Series Enhancer a certificate of an
authorized representative to the effect that, based on the facts known to
such representative at the time, the Transferor reasonably believes that
such designation or reduction or withdrawal will not at the time of its
occurrence cause a Pay Out Event or Reinvestment Event or an event that,
with notice or the lapse of time or both, would constitute a Pay Out Event
or Reinvestment Event, to occur with respect to any Series and (b) the
Transferor has received written notice from the Rating Agency that such
designation, reduction or withdrawal will satisfy the Rating Agency
Condition .
(b) After the Discount Option Date, Discount Option Receivable
Collections shall be treated as Collections of Finance Charge Receivables.
Section 2.13 Premium Option.
(a) The Transferor shall have the option to designate at any
time and from time to time a percentage or percentages, which may be a
fixed percentage or a variable percentage based on a formula (the "Premium
Percentage"), of all or any specified portion of Finance Charge Receivables
created after the Premium Option Date to be treated as Principal
Receivables ("Premium Option Receivables"). The Transferor shall also have
the option of reducing or withdrawing the Premium Percentage, at any time
and from time to time, on and after such Premium Option Date; provided,
however, that such reduction or withdrawal may occur only if the Transferor
delivers to the Trustee and, in connection with certain Series, the
applicable Series Enhancers, a certificate of an authorized representative
to the effect that, in the reasonable belief of the Transferor, such
reduction or withdrawal would not have adverse regulatory or other
accounting implications for the Transferor. The Transferor shall provide
to the Servicer, the Trustee and any Rating Agency 30 days' prior written
notice of the Premium Option Date, and such designation shall become
effective on the Premium Option Date only if (a) the Transferor has
delivered to the Trustee and any such Series Enhancer a certificate of an
authorized representative to the effect that, based on the facts known to
such representative at the time, the Transferor reasonably believes that
such designation, reduction or withdrawal will not at the time of its
occurrence cause a Pay Out Event or Reinvestment Event or an event that,
with notice or the lapse of time or both, would constitute a Pay Out Event
or Reinvestment Event, to occur with respect to any Series, (b) the
Transferor has received written notice from the Rating Agency that such
designation, reduction or withdrawal will satisfy the Rating Agency
Condition and (c) the Transferor has delivered a Tax Opinion to the Trustee
and the Rating Agency
(b) After the Premium Option Date, Premium Option Receivables
Collections shall be treated as Collections of Principal Receivables.
Section 2.14 Covenant of Holdings with Respect to Account
Owners. Holdings hereby covenants that upon the discovery by it of any
actions taken by an Account Owner which in Holdings' reasonable belief
will, with the passage of time, result in a breach by such Account Owner of
any of the covenants referred to in Section 2.8, Holdings will designate
another federally insured financial institution to be the Account Owner
with respect to the related Accounts.
[END OF ARTICLE II]
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other Matters Relating
to the Servicer.
(a) Holdings agrees to act as the Servicer under this Agreement
and the Securityholders by their acceptance of Securities consent to
Holdings acting as Servicer. Notwithstanding the foregoing or any other
provisions of this Agreement or any Supplement, the Investor
Securityholders consent to any Account Owner acting as Servicer hereunder,
in full substitution for Holdings; provided that such Account Owner acting
as Servicer shall (i) be an Eligible Servicer and (ii) expressly assume in
writing (unless such assumption occurs by operation of law), by an
agreement supplemental hereto, executed and delivered to the Trustee, the
performance of every covenant and obligation of the Servicer, as applicable
hereunder, and shall in all respects be designated the Servicer under this
Agreement.
(b) As agent for the Transferor and the Trust, the Servicer
shall service and administer the Receivables and any Participation
Interests, shall collect and deposit into the Collection Account payments
due under the Receivables and any Participation Interests and shall charge-
off as uncollectible Receivables, all in accordance with its customary and
usual servicing procedures for servicing credit card receivables comparable
to the Receivables and in accordance with the Credit Card Guidelines. As
agent for the Transferor and the Trust, the Servicer shall have full power
and authority, acting alone or through any party properly designated by it
hereunder, to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable; provided, however,
that subject to the rights of the Trustee and the Securityholders
hereunder, PFRF shall have the absolute right to direct the Servicer with
respect to any power conferred on the Servicer hereunder in accordance with
any such direction. Without limiting the generality of the foregoing and
subject to Section 10.1, the Servicer or its designee is hereby authorized
and empowered, unless such power is revoked by the Trustee on account of
the occurrence of a Servicer Default pursuant to Section 10.1, (i) to
instruct the Trustee to make withdrawals and payments from the Collection
Account, the Special Funding Account and any Series Account, as set forth
in this Agreement or any Supplement, (ii) to take any action required or
permitted under any Series Enhancement, as set forth in this Agreement or
any Supplement, (iii) to execute and deliver, on behalf of the Trust for
the benefit of the Securityholders, any and all instruments of satisfaction
or cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable Requirements of Law, to commence collection
proceedings with respect to such Receivables and (iv) to make any filings,
reports, notices, applications and registrations with, and to seek any
consents or authorizations from, the Commission and any state securities
authority on behalf of the Trust as may be necessary or advisable to comply
with any Federal or state securities or reporting requirements or other
laws or regulations. The Trustee shall furnish the Servicer with any
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
(c) The Servicer shall not, and no Successor Servicer shall, be
obligated to use separate servicing procedures, offices, employees or
accounts for servicing the Receivables from the procedures, offices,
employees and accounts used by the Servicer or such Successor Servicer, as
the case may be, in connection with servicing other credit card
receivables.
(d) The Servicer shall comply with and perform its servicing
obligations with respect to the Accounts and Receivables in accordance with
the Credit Card Agreements relating to the Accounts and the Credit Card
Guidelines and all applicable rules and regulations of MasterCard and VISA,
except insofar as any failure to so comply or perform would not materially
and adversely affect the Trust or the Investor Securityholders.
(e) The Servicer shall pay out of its own funds, without
reimbursement, all expenses incurred in connection with the Trust and the
servicing activities hereunder including expenses related to enforcement of
the Receivables, fees and disbursements of the Trustee (including the
reasonable fees and expenses of its outside counsel) and independent
accountants and all other fees and expenses, including the costs of filing
UCC continuation statements, the costs and expenses relating to obtaining
and maintaining the listing of any Investor Securities on any stock
exchange and any stamp, documentary, excise, property (whether on real,
personal or intangible property) or any similar tax levied on the Trust or
the Trust's assets that are not expressly stated in this Agreement to be
payable by the Trust or the Transferor (other than federal, state, local
and foreign income and franchise taxes, if any, or any interest or
penalties with respect thereto, assessed on the Trust).
(f) The Servicer shall maintain all records and documents
relating to the Accounts on behalf of the Trust, in such a manner as shall
enable the Servicer to perform its duties hereunder, including without
limitation, the enforcement of the Accounts and the related Receivables.
The Servicer shall maintain or cause to be maintained such records and
documents for the period of time such records and documents are customarily
kept by servicers or originators of revolving consumer credit card accounts
and the Servicer shall not discard or destroy any such document or record
unless in the reasonable belief of the Servicer the destruction of any
such document or record would not result in an Adverse Effect.
Section 3.2 Servicing Compensation. As full compensation for
its servicing activities hereunder and as reimbursement for any expense
incurred by it in connection therewith, the Servicer shall be entitled to
receive a servicing fee (the "Servicing Fee") with respect to each Monthly
Period, payable monthly on the related Distribution Date, in an amount
equal to one-twelfth of the product of (a) the weighted average of the
Servicing Fee Rates with respect to each outstanding Series (based upon the
Servicing Fee Rate for each Series and the Invested Amount (or such other
amount as specified in the related Supplement) of such Series, in each case
as of the last day of the prior Monthly Period) and (b) the amount of
Principal Receivables on the last day of the prior Monthly Period. The
share of the Servicing Fee allocable to the Securityholders' Interest of a
particular Series with respect to any Monthly Period (the "Monthly
Servicing Fee") will be determined in accordance with the relevant
Supplement. For any Monthly Period, the portion of the Monthly Servicing
Fee with respect to any Series payable from Interchange shall be an amount
equal to the portion of collections of Finance Charge Receivables allocated
to the Securityholders' Interest of such Series with respect to such
Monthly Period that is attributable to Interchange (the "Servicer
Interchange"); provided, however, that Servicer Interchange for a Monthly
Period may not exceed one-twelfth of the product of the Series Adjusted
Investor Amount, as of the last day of such Monthly Period and the
percentage specified in the related Supplement. The portion of the
Servicing Fee with respect to any Monthly Period not so allocated to the
Securityholders' Interest of any particular Series shall be paid by the
Holders of the Transferor Securities on the related Distribution Date and
in no event shall the Trust, the Trustee, the Investor Securityholders of
any Series or any Series Enhancer be liable for the share of the Servicing
Fee with respect to any Monthly Period to be paid by the Holders of the
Transferor Securities.
Section 3.3 Representations, Warranties and Covenants of the
Servicer. Holdings, as initial Servicer, hereby makes, and any Successor
Servicer by its appointment hereunder shall make, with respect to itself,
on each Closing Date (and on the date of any such appointment), the
following representations, warranties and covenants on which the Trustee
shall be deemed to have relied in accepting the Receivables in trust and in
authenticating the Securities:
(a) Organization and Good Standing. The Servicer is a limited
liability company, corporation or other legal entity validly existing under
the applicable law of the jurisdiction of its organization or incorporation
and has, in all material respects, full power and authority to own its
properties and conduct its credit card servicing business as presently
owned or conducted, and to execute, deliver and perform its obligations
under this Agreement and each Supplement.
(b) Due Qualification. The Servicer is duly qualified to do
business and is in good standing as a foreign limited liability company or
other foreign entity (or is exempt from such requirements) and has obtained
all licenses and approvals required under the laws of each jurisdiction in
which the ownership or lease of its property or the conduct of its business
(other than the performance of its obligations hereunder) requires such
qualification, standing, license or approval, except to the extent that the
failure to so qualify, maintain such standing or be so licensed or approved
would not, in the aggregate, adversely effect the enforceability of the
Receivables. Either the Servicer is qualified to do business as a foreign
limited liability company, corporation or other foreign entity, is in good
standing, and has obtained all licenses and approvals as required under the
laws of all jurisdictions in which the performance of its obligations
pursuant to this Agreement requires such qualification, standing, license
or approval or the Servicer will have delegated its duties hereunder (in
accordance with subsection 8.7) to subservicers which, when taken together
with the Servicer are, in the aggregate, qualified to do business as a
foreign limited liability company, corporation or other foreign entity, are
in good standing, and have obtained all licenses and approvals as required
under the laws of all jurisdictions in which the performance by the
Servicer of its obligations pursuant to this Agreement requires such
qualification, standing, license or approval, except to the extent that the
failure to so qualify, maintain such standing or be so licensed or approved
would not, in the aggregate, materially and adversely affect the ability of
the Servicer to comply with this Agreement or to perform its obligations
hereunder or adversely effect the enforceability of the Receivables.
(c) Due Authorization. The execution, delivery, and performance
of this Agreement and each Supplement, and the other agreements and
instruments executed or to be executed by the Servicer as contemplated
hereby, have been duly authorized by the Servicer by all necessary action
on the part of the Servicer.
(d) Binding Obligation. This Agreement and each Supplement
constitutes a legal, valid and binding obligation of the Servicer,
enforceable in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally from time to
time in effect or by general principles of equity.
(e) No Conflict. The execution and delivery of this Agreement
and each Supplement by the Servicer, and the performance of the
transactions contemplated by this Agreement and each Supplement and the
fulfillment of the terms hereof and thereof applicable to the Servicer,
will not conflict with, violate or result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of time
or both) a default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which the Servicer is a party or by
which it or its properties are bound which would have an Adverse Effect.
(f) No Violation. The execution and delivery of this Agreement
and each Supplement by the Servicer, the performance of the transactions
contemplated by this Agreement and each Supplement and the fulfillment of
the terms hereof and thereof applicable to the Servicer will not conflict
with or violate any Requirements of Law applicable to the Servicer in a
manner which would have an Adverse Effect.
(g) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Servicer, threatened against the
Servicer before any Governmental Authority seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
any Supplement or seeking any determination or ruling that, in the
reasonable judgment of the Servicer, would materially and adversely affect
the performance by the Servicer of its obligations under this Agreement or
any Supplement.
(h) Compliance with Requirements of Law. The Servicer shall
duly satisfy all obligations on its part to be fulfilled under or in
connection with each Receivable (and the underlying receivable) and the
related Account, if any, will maintain in effect all qualifications
required under Requirements of Law in order to service properly each
Receivable and the related Account, if any, and will comply in all material
respects with all other Requirements of Law in connection with servicing
each Receivable and the related Account the failure to comply with which
would have an Adverse Effect.
(i) No Rescission or Cancellation. The Servicer shall not
permit any rescission or cancellation of any Receivable (or the underlying
receivable) except in accordance with the Credit Card Guidelines or as
ordered by a court of competent jurisdiction or other Governmental
Authority.
(j) Protection of Securityholders' Rights. The Servicer shall
take no action which, nor omit to take any action the omission of which,
would impair the rights of Securityholders in any Receivable (or the
underlying receivable) or the related Account, if any, nor shall it
reschedule, revise or defer payments due on any Receivable except in
accordance with the Credit Card Guidelines.
(k) Receivables Not To Be Evidenced by Promissory Notes. Except
in connection with its enforcement or collection of an Account, the
Servicer will take no action to cause any Receivable to be evidenced by any
instrument, other than an instrument that, taken together with one or more
other writings, constitutes chattel paper (as such terms are defined in the
UCC) and if any Receivable is so evidenced it shall be reassigned or
assigned to the Servicer as provided in this Section.
(l) All Consents. All authorizations, consents, orders or
approvals of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Servicer in
connection with the execution and delivery of this Agreement and each
Supplement by the Servicer and the performance of the transactions
contemplated by this Agreement and each Supplement by the Servicer, have
been duly obtained, effected or given and are in full force and effect;
provided, however, that the Servicer makes no representation or warranty
regarding state securities or "blue sky" laws in connection with the
distribution of the Securities.
(m) Computer Records. The Servicer shall update its computer
files with respect the Accounts on a daily basis.
In the event (x) any of the representations, warranties or
covenants of the Servicer contained in subsection 3.3 (h), (i), (j) or (l)
with respect to any Receivable or the related Account is breached, and such
breach has a material adverse effect on the Securityholders' Interest in
such Receivable (which determination shall be made without regard to
whether funds are then available to any Investor Securityholders pursuant
to any Series Enhancement) and is not cured within 60 days (or such longer
period, not in excess of 150 days, as may be agreed to by the Trustee and
the Transferor) of the earlier to occur of the discovery of such event by
the Servicer, or receipt by the Servicer of notice of such event given by
the Trustee or the Transferor, or (y) as provided in subsection 3.3(k) with
respect to any Receivable, all Receivables in the Account or Accounts to
which such event relates shall be assigned and transferred to the Servicer
on the terms and conditions set forth below.
The Servicer shall effect such assignment by making a deposit
into the Collection Account in immediately available funds on the Transfer
Date following the Monthly Period in which such assignment obligation
arises in an amount equal to the amount of such Receivables.
Upon each such reassignment or assignment to the Servicer, the
Trustee, on behalf of the Trust, shall automatically and without further
action be deemed to transfer, assign, set over and otherwise convey to the
Servicer, without recourse, representation or warranty, all right, title
and interest of the Trust in and to such Receivables, all monies due or to
become due and all amounts received with respect thereto and all proceeds
thereof. The Trustee shall execute such documents and instruments of
transfer or assignment and take such other actions as shall be reasonably
requested by the Servicer to effect the conveyance of any such Receivables
pursuant to this Section but only upon receipt of an Officer's Certificate
of the Servicer that states that all conditions set forth in this section
have been satisfied. The obligation of the Servicer to accept reassignment
or assignment of such Receivables, and to make the deposits, if any,
required to be made to the Collection Account as provided in the preceding
paragraph, shall constitute the sole remedy respecting the event giving
rise to such obligation available to Securityholders (or the Trustee on
behalf of Securityholders) or any Series Enhancer, except as provided in
Section 8.4.
Section 3.4 Reports and Records for the Trustee.
(a) Daily Records. On each Business Day, the Servicer shall
make or cause to be made available at the office of the Servicer for
inspection by the Trustee upon request a record setting forth (i) the
Collections in respect of Principal Receivables and in respect of Finance
Charge Receivables processed by the Servicer on the second preceding
Business Day in respect of each Account and (ii) the amount of Receivables
as of the close of business on the second preceding Business Day in each
Account. The Servicer shall, at all times, maintain its computer files
with respect to the Accounts in such a manner so that the Accounts may be
specifically identified and shall make available to the Trustee at the
office of the Servicer on any Business Day any computer programs necessary
to make such identification. The Trustee shall enter into such reasonable
confidentiality agreements as the Servicer shall deem necessary to protect
its interests and as are reasonably acceptable in form and substance to the
Trustee.
(b) Monthly Servicer's Certificate. Not later than the second
Business Day preceding each Distribution Date, the Servicer shall, with
respect to each outstanding Series, deliver to the Trustee and the Rating
Agency a certificate of a Servicing Officer in substantially the form set
forth in the related Supplement.
Section 3.5 Annual Certificate of Servicer. The Servicer shall
deliver to the Trustee and the Rating Agency on or before March 31 of each
calendar year, beginning with March 31, 1998, an Officer's Certificate
substantially in the form of Exhibit D.
Section 3.6 Annual Servicing Report of Independent Public
Accountants; Copies of Reports Available.
(a) On or before June 30 of each calendar year, beginning with
June 30, 1999, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor) to furnish a report (addressed to the Trustee)
to the Trustee, the Servicer and the Rating Agency to the effect such
accounting firm has made a study and evaluation of the Servicer's internal
accounting controls relative to the servicing of the Accounts and that, on
the basis of such examination, such firm is of the opinion that, assuming
the accuracy of reports by the Servicer's third party agents, the system of
internal accounting controls in effect on the date of such statement
relating to servicing procedures performed by the Servicer, taken as a
whole, was sufficient for the prevention and detection of errors and
irregularities in amounts that would be material to the financial
statements of the Servicer and that such servicing was conducted in
compliance with the sections of this Agreement during the period covered by
such report (which shall be the period from July 1) or for the initial
period, the relevant Closing Date) of the preceding calendar year to and
including June 30 of such calendar year), except for such exceptions or
errors as such firm shall believe to be immaterial and such other
exceptions as shall be set forth in such statement.
(b) On or before June 30 of each calendar year, beginning with
June 30, 1999, the Servicer shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferor) to furnish a report to the Trustee, the
Servicer and each Rating Agency, to the effect that they have compared the
amounts set forth in the monthly certificates forwarded by the Servicer
pursuant to subsection 3.4(b) during the period covered by such report
(which shall be the 12-month period ending on December 31 of the preceding
calendar year, or with respect to the initial period, from the Initial
Issuance Date until December 31, 1998) with the Servicer's computer
reports which were the source of such amounts and found them to be in
agreement or shall disclose any exceptions noted and that they have
recalculated the mathematical accuracy of amounts derived in such monthly
certificates; provided, however, that the Servicer may, upon written
confirmation by the Rating Agency, cause such accountants to furnish such
report with respect to a smaller number of months within such 12 month
period, which shall be randomly selected.
(c) A copy of each certificate and report provided pursuant to
subsection 3.4(b), or Section 3.5 or 3.6 may be obtained by any Investor
Securityholder or Security Owner by a request in writing to the Trustee
addressed to the Corporate Trust Office.
Section 3.7 Tax Treatment. The Transferor has entered into this
Agreement, and the Securities will be issued with the intention that,
unless otherwise specified in any Supplement, for Federal, state and local
income and franchise tax purposes, the Investor Securities (except any
Securities held by the Transferor) of each Series will qualify as debt
secured by the Receivables. The Transferor, by entering into this
Agreement, each Securityholder, by the acceptance of its Security (and each
Security Owner, by its acceptance of an interest in the applicable
Security), agree to treat the Investor Securities for Federal, state and
local income and franchise tax purposes as debt. Each Holder of an
Investor Security agrees that it will cause any Security Owner acquiring an
interest in an Investor Security through it to comply with this Agreement
as to treatment as debt under applicable tax law, as described in this
Section 3.7. Furthermore, subject to Section 11.11 or unless the
Transferor shall determine that the filing of returns is appropriate, the
Trustee shall treat the Trust as a security device only and shall not file
tax returns or obtain an employer identification number on behalf of the
Trust and none of the parties hereto shall make the election provided for
in Treasury Regulation Section 301.7701-3(c).
Section 3.8 Notices to Holdings. In the event that Holdings is
no longer acting as Servicer, any Successor Servicer shall deliver or make
available to Holdings each certificate and report required to be provided
thereafter pursuant to subsection 3.4(b) and Sections 3.5 and 3.6.
Section 3.9 Adjustments.
(a) If the Servicer adjusts downward the amount of any
Receivable because of a rebate, refund, unauthorized charge or billing
error to a cardholder, because such Receivable was created in respect of
merchandise which was refused or returned by a cardholder, or if the
Servicer otherwise adjusts downward the amount of any Receivable without
receiving Collections therefor or charging off such amount as
uncollectible, then, in any such case, the amount of Principal Receivables
used to calculate the Transferor Amount, the Transferor's Interest, and
(unless otherwise specified) any other amount required herein or in any
Supplement to be calculated by reference to the amount of Principal
Receivables, will be reduced by the amount of the adjustment. Similarly,
the amount of Principal Receivables used to calculate the Transferor Amount
and (unless otherwise specified) any other amount required herein or in any
Supplement to be calculated by reference to the amount of Principal
Receivables will be reduced by the principal amount of any Receivable which
was discovered as having been created through a fraudulent or counterfeit
charge or with respect to which the covenant contained in subsection 2.7(b)
was breached. Any adjustment required pursuant to either of the two
preceding sentences shall be made on or prior to the end of the Monthly
Period in which such adjustment obligation arises. In the event that,
following the exclusion of such Principal Receivables from the calculation
of the Transferor Amount, the Transferor Amount would be less than the
Required Transferor Amount, not later than 1:00 P.M., New York City time,
on the Distribution Date following the Monthly Period in which such
adjustment obligation arises, the Transferor shall make a deposit into the
Special Funding Account in immediately available funds in an amount equal
to the amount by which the Transferor Amount would be less than the
Required Transferor Amount, due to adjustments with respect to Receivables
conveyed by such the Transferor (up to the amount of such Principal
Receivables) (any such payment, an "Adjustment Payment"). Any amount
deposited into the Special Funding Account pursuant to the preceding
sentence shall be considered Collections of Principal Receivables and shall
be applied in accordance with Article IV and the terms of each Supplement;
provided, however, that any such amounts paid by the Transferor after the
time period specified in the preceding sentence, to the extent of any
related Adjustment Payment Shortfall, shall not be deposited in the Special
Funding Account but shall be considered Collections of Finance Charge
Receivables and shall be applied in accordance with Article IV and the
Supplement.
(b) If (i) the Servicer makes a deposit into the Collection
Account in respect of a Collection of a Receivable and such Collection was
received by the Servicer in the form of a check which is not honored for
any reason or (ii) the Servicer makes a mistake with respect to the amount
of any Collection and deposits an amount that is less than or more than the
actual amount of such Collection, the Servicer shall appropriately adjust
the amount subsequently deposited into the Collection Account to reflect
such dishonored check or mistake. Any Receivable in respect of which a
dishonored check is received shall be deemed not to have been paid.
Notwithstanding the first two sentences of this paragraph, adjustments made
pursuant to this Section shall not require any change in any report
previously delivered pursuant to subsection 3.4(a).
Section 3.10 Reports to the Commission. The Servicer shall, on
behalf of the Trust, cause to be filed with the Commission any periodic
reports required to be filed under the provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Commission thereunder. The Transferor shall, at the expense of the
Servicer, cooperate in any reasonable request of the Servicer in connection
with such filings.
[END OF ARTICLE III]
ARTICLE IV
RIGHTS OF SECURITYHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.1 Rights of Securityholders. The Investor Securities
shall represent undivided interests in the Trust, which, with respect to
each Series, shall consist of the right to receive, to the extent necessary
to make the required payments with respect to the Investor Securities of
such Series at the times and in the amounts specified in the related
Supplement, the portion of Collections allocable to Investor
Securityholders of such Series pursuant to this Agreement and such
Supplement, funds on deposit in the Collection Account and the Special
Funding Account allocable to Securityholders of such Series pursuant to
this Agreement and such Supplement, funds on deposit in any related Series
Account and funds available pursuant to any related Series Enhancement
(collectively, with respect to all Series, the "Securityholders'
Interest"), it being understood that, except as specifically set forth in
the Supplement with respect thereto, the Investor Securities of any Series
or Class shall not represent any interest in any Series Account or Series
Enhancement for the benefit of any other Series or Class. The Transferor
Securities shall represent the ownership interest in the Trust Assets not
allocated pursuant to this Agreement or any Supplement to the
Securityholders' Interest, and the right to receive Collections with
respect to the Receivables and other amounts at the times and in the
amounts specified in any Supplement to be paid to the Transferor on behalf
of all Holders of the Transferor Securities (the "Transferor's Interest");
provided, however, that the Transferor Securities shall not represent any
interest in the Collection Account, any Series Account or any Series
Enhancement, except as specifically provided in this Agreement or any
Supplement.
Section 4.2 Establishment of Collection Account and Special
Funding Account. The Servicer, for the benefit of the Securityholders,
shall establish and maintain in the name of the Trustee, on behalf of the
Trust, an Eligible Deposit Account bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the
Securityholders (the "Collection Account"). The Trustee shall possess all
right, title and interest in all monies, instruments, securities,
documents, certificates of deposit and other property on deposit from time
to time in the Collection Account and in all proceeds, earnings, income,
revenue, dividends and distributions thereof for the benefit of the
Securityholders.
The Collection Account shall be under the sole dominion and
control of the Trustee for the benefit of the Securityholders. Except as
expressly provided in this Agreement, the Servicer agrees that it shall
have no right of setoff or banker's lien against, and no right to otherwise
deduct from, any funds held in the Collection Account for any amount owed
to it by the Trustee, the Trust, any Securityholder or any Series Enhancer.
If, at any time, the Collection Account ceases to be an Eligible Deposit
Account, the Servicer shall provide written notice thereof to the Rating
Agency, and the Trustee (or the Servicer on its behalf) shall within 10
Business Days (or such longer period, not to exceed 30 calendar days, as to
which the Rating Agency may consent) establish a new Collection Account
meeting the conditions specified above, transfer any monies, documents,
instruments, securities, certificates of deposit and other property to such
new Collection Account and from the date such new Collection Account is
established, it shall be the "Collection Account." Pursuant to the
authority granted to the Servicer in subsection 3.1(b), the Servicer shall
have the power, revocable by the Trustee, to make withdrawals and payments
from the Collection Account and to instruct the Trustee to make withdrawals
and payments from the Collection Account for the purposes of carrying out
the Servicer's or the Trustee's duties hereunder. The Servicer shall
reduce deposits into the Collection Account payable by the Transferor on
any Deposit Date to the extent the Transferor is entitled to receive funds
from the Collection Account on such Deposit Date, but only to the extent
such reduction would not reduce the Transferor Amount to an amount less
than the Required Transferor Amount.
Funds on deposit in the Collection Account (other than investment
earnings and amounts deposited pursuant to Sections 2.6, 9.1, 10.1 or 12.2)
shall at the written direction of the Servicer be invested by the Trustee
in Eligible Investments selected by the Servicer. All such Eligible
Investments shall be held by the Trustee for the benefit of the
Securityholders. The Trustee shall maintain for the benefit of the
Securityholders possession of the instruments, documents, certificates of
deposit or securities, if any, evidencing such Eligible Investments.
Investments of funds representing Collections collected during any Monthly
Period shall be invested in Eligible Investments that will mature so that
such funds will be available no later than the close of business on each
monthly Transfer Date following such Monthly Period. No such Eligible
Investment shall be disposed of prior to its maturity; provided, however,
that the Trustee may sell, liquidate or dispose of any such Eligible
Investment before its maturity, at the written direction of the Servicer,
if such sale, liquidation or disposal would not result in a loss of all or
part of the principal portion of such Eligible Investment or if, prior to
the maturity of such Eligible Investment, a default occurs in the payment
of principal, interest or any other amount with respect to such Eligible
Investment. Unless directed by the Servicer, funds deposited in the
Collection Account on a Transfer Date with respect to the immediately
succeeding Distribution Date are not required to be invested overnight. On
each Distribution Date, all interest and other investment earnings (net of
losses and investment expenses) on funds on deposit in the Collection
Account shall be treated as Collections of Finance Charge Receivables with
respect to the last day of the related Monthly Period, except as otherwise
specified in any Supplement. The Trustee shall bear no responsibility or
liability for any losses resulting from investment or reinvestment of any
funds in accordance with this Section 4.2 nor for the selection of Eligible
Investments in accordance with the provisions of this Agreement.
The Servicer, for the benefit of the Securityholders, shall
establish and maintain in the name of the Trustee, on behalf of the Trust,
an Eligible Deposit Account bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Securityholders
(the "Special Funding Account"). The Trustee shall possess all right,
title and interest in all monies, instruments, securities, documents,
certificates of deposit and other property on deposit from time to time in
the Special Funding Account and in all proceeds, dividends, distributions,
earnings, income and revenue thereof for the benefit of the
Securityholders. The Special Funding Account shall be under the sole
dominion and control of the Trustee for the benefit of the Securityholders.
Except as expressly provided in this Agreement, the Servicer agrees that it
shall have no right of setoff or banker's lien against, and no right to
otherwise deduct from, any funds held in the Special Funding Account for
any amount owed to it by the Trustee, the Trust, any Securityholder or any
Series Enhancer. If, at any time, the Special Funding Account ceases to be
an Eligible Deposit Account, the Trustee (or the Servicer on its behalf)
shall within 10 Business Days (or such longer period, not to exceed 30
calendar days, as to which the Rating Agency may consent) establish a new
Special Funding Account meeting the conditions specified above, transfer
any monies, documents, instruments, securities, certificates of deposit and
other property to such new Special Funding Account and from the date such
new Special Funding Account is established, it shall be the "Special
Funding Account."
Funds on deposit in the Special Funding Account shall at the
written direction of the Servicer (who may be directed by the Transferor,
at its option) be invested by the Trustee in Eligible Investments selected
by the Servicer. All such Eligible Investments shall be held by the
Trustee for the benefit of the Securityholders. The Trustee shall maintain
for the benefit of the Securityholders possession of the instruments,
documents, certificates of deposit or securities, if any, evidencing such
Eligible Investments. Funds on deposit in the Special Funding Account on
any Distribution Date will be invested in Eligible Investments that will
mature so that such funds will be available no later than the next
succeeding Business Day. No such Eligible Investment shall be disposed of
prior to its maturity; provided, however, that the Trustee may sell,
liquidate or dispose of an Eligible Investment before its maturity, at the
written direction of the Servicer (who may be directed by the Transferor,
at its option) or if, prior to the maturity of such Eligible Investment, a
default occurs in the payment of principal, interest or any other amount
with respect to such Eligible Investment. Unless directed by the Servicer,
funds deposited in the Special Funding Account on a Transfer Date with
respect to the immediately succeeding Distribution Date are not required to
be invested overnight. On each Distribution Date, all interest and other
investment earnings (net of losses and investment expenses) on funds on
deposit in the Special Funding Account shall be treated as Collections of
Finance Charge Receivables with respect to the last day of the related
Monthly Period except as otherwise specified in the related Supplement. On
each Business Day on which funds are on deposit in the Special Funding
Account and on which no Series is in an Accumulation Period or Amortization
Period, the Servicer shall determine the amount (if any) by which the
Transferor Amount exceeds the Required Transferor Amount on such date and
shall instruct the Trustee to withdraw any such excess from the Special
Funding Account and pay such amount to the Holders of the Transferor
Securities; provided, however, that, if an Accumulation Period or
Amortization Period has commenced and is continuing with respect to one or
more outstanding Series, any funds on deposit in the Special Funding
Account shall be treated as Shared Principal Collections and shall be
allocated and distributed in accordance with Section 4.4 and the terms of
each Supplement.
Section 4.3 Collections and Allocations.
(a) The Servicer will apply or will instruct the Trustee to
apply all funds on deposit in the Collection Account as described in this
Article IV and in each Supplement. Except as otherwise provided below, the
Servicer shall deposit Collections into the Collection Account as promptly
as possible after the Date of Processing of such Collections, but in no
event later than the second Business Day following the Date of Processing.
Subject to the express terms of any Supplement, but notwithstanding
anything else in this Agreement to the contrary, for so long as either (i)
Holdings remains the Servicer and Holdings or an Affiliate of Holdings,
which has guaranteed the obligation of Holdings to deposit Collections into
the Collection Account and is other wise acceptable to the Rating Agency,
maintains a short-term rating of not less than A-1 by Standard & Poor and
P-1 by Moody's and a certificate of deposit rating of not less than A-1 by
Standard & Poor's and P-1 by Moody's and no Pay Out Event or Reinvestment
Event shall have occurred or (ii) Holdings shall have otherwise made
arrangements which satisfy the Rating Agency Condition, the Servicer need
not make the daily deposits of Collections into the Collection Account as
provided in the preceding sentence, but may make a single deposit in the
Collection Account in immediately available funds not later than 1:00 P.M.,
New York City time, on the Transfer Date following the Monthly Period with
respect to which such deposit relates. In the event that neither of the
foregoing conditions is satisfied, then Holdings shall commence making
daily deposits of Collections into the Collection Account as provided
above, within five Business Days of the date on which neither of such
conditions shall have been satisfied. Subject to the first proviso in
Section 4.4, but notwithstanding anything else in this Agreement to the
contrary, with respect to any Monthly Period, whether the Servicer is
required to make deposits of Collections pursuant to the first or the
second preceding sentence, (i) the Servicer will only be required to
deposit Collections into the Collection Account up to the aggregate amount
of Collections required to be deposited into any Series Account or, without
duplication, distributed on or prior to the related Distribution Date to
Investor Securityholders or to any Series Enhancer pursuant to the terms of
any Supplement or Enhancement Agreement and (ii) if at any time prior to
such Distribution Date the amount of Collections deposited in the
Collection Account exceeds the amount required to be deposited pursuant to
clause (i) above, the Servicer will be permitted to withdraw the excess
from the Collection Account. Subject to the immediately preceding
sentence, the Servicer may retain its Servicing Fee with respect to a
Series and shall not be required to deposit it in the Collection Account.
(b) Collections of Finance Charge Receivables and Principal
Receivables and Defaulted Amounts will be allocated to each Series on the
basis of the Series Allocable Finance Charge Collections of such Series,
Series Allocable Principal Collections of such Series and Series Allocable
Defaulted Amount of such Series and amounts so allocated to any Series will
not, except as specified in the related Supplement, be available to the
Investor Securityholders of any other Series. Allocations of the foregoing
amounts between the Securityholders' Interest and the Transferor's
Interest, among the Series and among the Classes in any Series, shall be
set forth in the related Supplement or Supplements.
Section 4.4 Shared Principal Collections. On each Distribution
Date, (a) the Servicer shall allocate Shared Principal Collections (as
described below) to each Principal Sharing Series, pro rata, in proportion
to the Principal Shortfalls, if any, with respect to each such Series and
(b) the Servicer shall withdraw from the Collection Account and pay to the
Holders of the Transferor Securities an amount equal to the excess, if any,
of (x) the aggregate amount for all outstanding Series of Collections of
Principal Receivables which the related Supplements specify are to be
treated as "Shared Principal Collections" for such Distribution Date over
(y) the aggregate amount for all outstanding Series which the related
Supplements specify are "Principal Shortfalls" for such Series and for such
Distribution Date; provided, however, that if the Transferor Amount as of
such Distribution Date (determined after giving effect to the Principal
Receivables or Participation Interests transferred to the Trust on such
date) is less than the Required Transferor Amount, the Servicer will not
distribute to the Holders of the Transferor Securities any such amounts
that otherwise would be distributed to the Holders of the Transferor
Securities, but shall deposit such funds in the Special Funding Account.
The Transferor may, at its option, instruct the Trustee to deposit Shared
Principal Collections which are otherwise payable to the Holders of the
Transferor Securities pursuant to the provisions set forth above into the
Special Funding Account.
Section 4.5 Additional Withdrawals from the Collection Account.
On or before the Determination Date with respect to any Monthly Period, the
Servicer shall determine the amounts payable to each Account Owner with
respect to such Monthly Period under the applicable Receivables Purchase
Agreement in respect of amounts on deposit in the Collection Account that
were not transferred to the Trust hereunder, and the Servicer shall
withdraw such amounts from the Collection Account and pay such amount to
the applicable Account Owner.
Section 4.6 Allocation of Trust Assets to Series or Groups. To
the extent so provided in the Supplement for any Series or in an amendment
to this Agreement executed pursuant to subsection 13.1(a), Receivables
conveyed to the Trust pursuant to Section 2.1 and Receivables or
Participation Interests conveyed to the Trust pursuant to Section 2.9 or
any Participation Interest Supplement, and all Collections received with
respect to thereto may be allocated or applied in whole or in part to one
or more Series or Groups as may be provided in such Supplement or
amendment, provided, however, that any such allocation or application shall
be effective only upon satisfaction of the following conditions:
(i) on or before the fifth Business Day immediately preceding
such allocation, the Servicer shall have given the Trustee and the
Rating Agency written notice of such allocation;
(ii) the Rating Agency Condition shall have been satisfied with
respect to such allocation; and
(iii) the Servicer shall have delivered to the Trustee an
Officer's Certificate, dated the date of such allocation, to the
effect that the Servicer reasonably believes that such allocation will
not have an Adverse Effect.
Any such Supplement or amendment may provide that (i) such
allocation to one or more particular Series or Groups may terminate upon
the occurrence of certain events specified therein and (ii) that upon the
occurrence of any such event, such assets and any Collections with respect
thereto, shall be reallocated to other Series or Groups or to all Series,
all as shall be provided in such Supplement or amendment.
[END OF ARTICLE IV]
ARTICLE V
DISTRIBUTIONS AND REPORTS TO
SECURITYHOLDERS
Distributions shall be made to, and reports shall be provided to,
Securityholders as set forth in the applicable Supplement. The identity of
the Securityholders with respect to distributions and reports shall be
determined according to the immediately preceding Record Date.
[END OF ARTICLE V]
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Securities. The Investor Securities of any
Series or Class shall be issued in fully registered form (including any
uncertificated Series or Class which is registered in the Security
Register, the "Registered Securities") unless the applicable Supplement
provides, in accordance with then applicable laws, that such Securities be
issued in bearer form ("Bearer Securities") with attached interest coupons
and a special coupon (collectively the "Coupons"). Such Registered
Securities or Bearer Securities, as the case may be, shall be substantially
in the form of the exhibits with respect thereto attached to the applicable
Supplement. The Transferor Security will be issued in registered form,
substantially in the form of Exhibit A, and shall upon issue, be executed
and delivered by the Transferor to the Trustee for authentication and
redelivery as provided in Section 6.2. If specified in any Supplement, the
Investor Securities of any Series or Class shall be issued upon initial
issuance as one or more securities evidencing the aggregate original
principal amount of such Series or Class as described in Section 6.10. The
Transferor Security shall be issued as a single security. Each Security
shall be executed by manual or facsimile signature on behalf of the
Transferor by its President or any Vice President or by any attorney-in-
fact duly authorized to execute such Security on behalf of any such
officer. Securities bearing the manual or facsimile signature of an
individual who was, at the time when such signature was affixed, authorized
to sign on behalf of the Transferor shall not be rendered invalid,
notwithstanding that such individual ceased to be so authorized prior to
the authentication and delivery of such Securities or does not hold such
office at the date of such Securities. No Securities shall be entitled to
any benefit under this Agreement, or be valid for any purpose, unless there
appears on such Security a certificate of authentication substantially in
the form provided for herein executed by or on behalf of the Trustee by the
manual signature of a duly authorized signatory, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder. Bearer
Securities shall be dated the Series Issuance Date. All Registered
Securities and Transferor's Securities shall be dated the date of their
authentication.
Section 6.2 Authentication of Securities. The Trustee shall,
at the written direction of the Transferor, authenticate and deliver the
Investor Securities of each Series and Class that are issued upon original
issuance to or upon the order of the Transferor against payment to the
Transferor of the purchase price therefor. The Trustee shall authenticate
and deliver the Transferor Security to the Transferor simultaneously with
the execution of this Agreement. If specified in the related Supplement
for any Series or Class, the Trustee shall authenticate and deliver outside
the United States the Global Security that is issued upon original issuance
thereof.
Section 6.3 New Issuances.
(a) The Transferor may from time to time direct the Trustee, on
behalf of the Trust, to issue one or more new Series of Investor
Securities. The Investor Securities of all outstanding Series shall be
equally and ratably entitled as provided herein to the benefits of this
Agreement without preference, priority or distinction, all in accordance
with the terms and provisions of this Agreement and the applicable
Supplement except, with respect to any Series or Class, as provided in the
related Supplement.
(b) On or before the Series Issuance Date relating to any new
Series, the parties hereto will execute and deliver a Supplement which will
specify the Principal Terms of such new Series. The Trustee shall execute
the Supplement and the Transferor shall execute the Investor Securities of
such Series and deliver such Investor Securities to the Trustee for
authentication. In connection with the issuance of a new Series of
Investor Securities or at any other time, a Transferor may surrender its
Transferor Security to the Trustee in exchange for a newly issued
Transferor Security and a second security (a "Supplemental Security"), the
terms of which shall be defined in a supplement (a "Supplemental Security
Supplement") to this Agreement (which Supplemental Security Supplement
shall be subject to Section 13.1 to the extent that it amends any of the
terms of this Agreement) to be delivered to or upon the order of the
Transferor. In addition, to the extent permitted for any Series of
Investor Securities as specified in the related Supplement, the Investor
Securityholders of such Series may tender their Investor Securities and the
Transferor may tender the Transferor Security to the Trustee pursuant to
the terms and conditions set forth in such Supplement in exchange for (i)
one or more newly issued Series of Investor Securities and (ii) a reissued
Transferor Security (an "Investor Exchange"). The issuance of any such
Investor Securities or Supplemental Security shall be subject to
satisfaction of the following conditions:
(i) on or before the fifth day immediately preceding the Series
Issuance Date or Transferor Security surrender and exchange, as the
case may be, the Transferor shall have given the Trustee, the Servicer
and the Rating Agency notice (unless such notice requirement is
otherwise waived) of such issuance and the Series Issuance Date or the
Transferor Security surrender and exchange, as the case may be;
(ii) the Transferor shall have delivered to the Trustee the
related Supplement or Supplemental Security Supplement, as applicable,
in form satisfactory to the Trustee, executed by each party hereto
(other than the Trustee and the Holder of the Supplemental Security,
if any);
(iii) the Transferor shall have delivered to the Trustee any
related Enhancement Agreement executed by each of the parties thereto,
other than the Trustee;
(iv) the Trustee shall have received confirmation from the
Rating Agency that the Rating Agency Condition shall have been
satisfied with respect to such issuance or the Transferor Security
surrender and exchange, as the case may be;
(v) such issuance or surrender and exchange, as the case may be,
will not result in any Adverse Effect and the Transferor shall have
delivered to the Trustee an Officer's Certificate, dated the Series
Issuance Date or the date of such surrender and exchange, as the case
may be, to the effect that the Transferor reasonably believes that
such issuance or such surrender and exchange, as the case may be, will
not, based on the facts known to such officer at the time of such
certification, have an Adverse Effect;
(vi) the Transferor shall have delivered to the Trustee (with a
copy to the Rating Agency) a Tax Opinion, dated the Series Issuance
Date or the date of such surrender and exchange, as the case may be,
with respect to such issuance or surrender and exchange, respectively;
and
(vii) the aggregate amount of Principal Receivables theretofore
conveyed to the Trust as of the Series Issuance Date or the date of
such surrender and exchange, as the case may be, shall be greater than
the Required Minimum Principal Balance as of the Series Issuance Date
or the date of such surrender and exchange, as the case may be, and
after giving effect to such issuance or such surrender and exchange,
respectively and the Transferor Amount shall be greater than or equal
to the Required Transferor Amount.
Any Supplemental Security held by any Person, and any Investor
Security held by the Transferor at any time after the date of its initial
issuance, may be transferred or exchanged only upon the delivery to the
Trustee of a Tax Opinion dated as of the date of such transfer or exchange,
as the case may be, with respect to such transfer or exchange.
Section 6.4 Registration of Transfer and Exchange of Securities.
(a) The Trustee shall cause to be kept at the Corporate Trust
Office a register (the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, a transfer agent and registrar
(which may be the Trustee) (the "Transfer Agent and Registrar") shall
provide for the registration of the Registered Securities and of transfers
and exchanges of the Registered Securities as herein provided. The
Transfer Agent and Registrar shall initially be the Trustee and any
co-transfer agent and co-registrar chosen by the Transferor and acceptable
to the Trustee, including, if and so long as any Series or Class is listed
on the Luxembourg Stock Exchange and such exchange shall so require, a
co-transfer agent and co-registrar in Luxembourg. Any reference in this
Agreement to the Transfer Agent and Registrar shall include any co-transfer
agent and registrar unless the context requires otherwise.
The Trustee may revoke such appointment and remove any Transfer
Agent and Registrar if the Trustee determines in its sole discretion that
such transfer Agent and Registrar failed to perform its obligations under
this Agreement in any material respect. Any Transfer Agent and Registrar
shall be permitted to resign as Transfer Agent and Registrar upon 30 days'
notice to the Transferor, the Trustee and the Servicer; provided, however,
that such resignation shall not be effective and such Transfer Agent and
Registrar shall continue to perform its duties as Transfer Agent and
Registrar until the Trustee has appointed a successor Transfer Agent and
Registrar reasonably acceptable to the Transferor.
Subject to subsection (c) below, upon surrender for registration
of transfer or exchange of any Registered Security at any office or agency
of the Transfer Agent and Registrar maintained for such purpose, one or
more new Registered Securities (of the same Series and Class) in authorized
denominations of like aggregate fractional undivided interests in the
Securityholders' Interest shall be executed, authenticated and delivered,
in the name of the designated transferee or transferees.
At the option of a Registered Securityholder, subject to
subsection (c) below and subject to the provisions of any Supplement or
other agreement establishing the terms of an instrument, Registered
Securities (of the same Series and Class) may be exchanged for other
Registered Securities of authorized denominations of like aggregate
fractional undivided interests in the Securityholders' Interest, upon
surrender of the Registered Securities to be exchanged at any such office
or agency; Registered Securities, including Registered Securities received
in exchange for Bearer Securities, may not be exchanged for Bearer
Securities. At the option of the Holder of a Bearer Security, subject to
applicable laws and regulations, Bearer Securities may be exchanged for
other Bearer Securities or Registered Securities (of the same Series and
Class) of authorized denominations of like aggregate fractional undivided
interests in the Securityholders' Interest, upon surrender of the Bearer
Securities to be exchanged at an office or agency of the Transfer Agent and
Registrar located outside the United States. Each Bearer Security
surrendered pursuant to this Section shall have attached thereto all
unmatured Coupons; provided that any Bearer Security so surrendered after
the close of business on the Record Date preceding the relevant payment
date or distribution date after the expected final payment date need not
have attached the Coupon relating to such payment date or distribution date
(in each case, as specified in the applicable Supplement).
The preceding provisions of this Section notwithstanding, the
Trustee or the Transfer Agent and Registrar, as the case may be, shall not
be required to register the transfer of or exchange any Security for a
period of 15 days preceding the due date for any payment with respect to
the Security.
Whenever any Investor Securities are so surrendered for exchange,
the Transferor shall execute, the Trustee shall authenticate and the
Transfer Agent and Registrar shall deliver (in the case of Bearer
Securities, outside the United States) the Investor Securities which the
Investor Securityholder making the exchange is entitled to receive. Every
Investor Security presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer in a form
satisfactory to the Trustee or the Transfer Agent and Registrar duly
executed by the Investor Securityholder or the attorney-in-fact thereof
duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Investor Securities, but the Transfer Agent and Registrar
may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any such transfer or
exchange.
All Investor Securities (together with any Coupons) surrendered
for registration of transfer and exchange or for payment shall be canceled
and disposed of in a manner satisfactory to the Trustee. The Trustee shall
cancel and destroy any Global Security upon its exchange in full for
Definitive Euro-Securities and shall deliver a certificate of destruction
to the Transferor. Such certificate shall also state that a certificate or
certificates of a Foreign Clearing Agency to the effect referred to in
Section 6.13 was received with respect to each portion of the Global
Security exchanged for Definitive Euro-Securities.
The Transferor shall execute and deliver to the Trustee Bearer
Securities and Registered Securities in such amounts and at such times as
are necessary to enable the Trustee to fulfill its responsibilities under
this Agreement, each Supplement and the Securities.
The interest of any Investor Securityholder in any Receivable
shall not be transferable other than through the transfer of an Investor
Security, and except as provided in this Article VI, a Security shall not
be transferable or divisible.
(b) The Transfer Agent and Registrar will maintain at its
expense in the Borough of Manhattan, The City of New York, and, if and so
long as any Series or Class is listed on the Luxembourg Stock Exchange,
Luxembourg, an office or agency where Investor Securities may be
surrendered for registration of transfer or exchange (except that Bearer
Securities may not be surrendered for exchange at any such office or agency
in the United States or its territories and possessions).
(c) (i) Registration of transfer of Investor Securities
containing a legend substantially to the effect set forth on Exhibit
G-1 shall be effected only if such transfer (x) is made pursuant to an
effective registration statement under the Act, or is exempt from the
registration requirements under the Act, and (y) is made to a Person
which is not an employee benefit plan, trust or account, including an
individual retirement account, that is subject to ERISA or that is
described in Section 4975(e)(1) of the Code or an entity whose
underlying assets include plan assets by reason of a plan's investment
in such entity (a "Benefit Plan"). In the event that registration of
a transfer is to be made in reliance upon an exemption from the
registration requirements under the Act, the transferor or the
transferee shall deliver, at its expense, to the Transferor, the
Servicer and the Trustee, an investment letter from the transferee,
substantially in the form of the investment and ERISA representation
letter attached hereto as Exhibit G-2, and no registration of transfer
shall be made until such letter is so delivered.
Investor Securities issued upon registration or transfer of, or
Investor Securities issued in exchange for, Investor Securities
bearing the legend referred to above shall also bear such legend
unless the Transferor, the Servicer, the Trustee and the Transfer
Agent and Registrar receive an Opinion of Counsel, satisfactory to
each of them, to the effect that such legend may be removed.
Whenever an Investor Security containing the legend referred to
above is presented to the Transfer Agent and Registrar for
registration of transfer, the Transfer Agent and Registrar shall
promptly seek instructions from the Servicer regarding such transfer
and shall be entitled to receive instructions signed by a Servicing
Officer prior to registering any such transfer. The Transferor hereby
agrees to indemnify the Transfer Agent and Registrar and the Trustee
and to hold each of them harmless against any loss, liability or
expense incurred without negligence or bad faith on their part arising
out of or in connection with actions taken or omitted by them in
relation to any such instructions furnished pursuant to this clause
(i).
(ii) Registration of transfer of Investor Securities containing
a legend to the effect set forth on Exhibit G-3 shall be effected only
if such transfer is made to a Person which is not a Benefit Plan. By
accepting and holding any such Investor Security, an Investor
Securityholder shall be deemed to have represented and warranted that
it is not a Benefit Plan. By acquiring any interest in a Book-Entry
Security which contains such legend, a Security Owner shall be deemed
to have represented and warranted that it is not a Benefit Plan.
(iii) If so requested by the Transferor, the Trustee will make
available to any prospective purchaser of Investor Securities who so
requests, a copy of a letter provided to the Trustee by or on behalf
of the Transferor relating to the transferability of any Series or
Class to a Benefit Plan.
Section 6.5 Mutilated, Destroyed, Lost or Stolen Securities. If
(a) any mutilated Security (together, in the case of Bearer Securities,
with all unmatured Coupons (if any) appertaining thereto) is surrendered to
the Transfer Agent and Registrar, or the Transfer Agent and Registrar
receives evidence to its satisfaction of the destruction, loss or theft of
any Security and (b) there is delivered to the Transfer Agent and Registrar
and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Trustee
that such Security has been acquired by a bona fide purchaser, the
Transferor shall execute, the Trustee shall authenticate and the Transfer
Agent and Registrar shall deliver (in the case of Bearer Securities,
outside the United States), in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Security, a new Security of like tenor
and aggregate fractional undivided interest. In connection with the
issuance of any new Security under this Section, the Trustee or the
Transfer Agent and Registrar may require the payment by the Securityholder
of a sum sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto and any other expenses (including the fees
and expenses of the Trustee and Transfer Agent and Registrar) connected
therewith. Any duplicate Security issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the Trust, as
if originally issued, whether or not the lost, stolen or destroyed Security
shall be found at any time.
Section 6.6 Persons Deemed Owners. The Trustee, the Paying
Agent, the Transfer Agent and Registrar, the Transferor, the Servicer and
any agent of any of them may (a) prior to due presentation of a Registered
Security for registration of transfer, treat the Person in whose name any
Registered Security is registered as the owner of such Registered Security
for the purpose of receiving distributions pursuant to the terms of the
applicable Supplement and for all other purposes whatsoever, and (b) treat
the bearer of a Bearer Security or Coupon as the owner of such Bearer
Security or Coupon for the purpose of receiving distributions pursuant to
the terms of the applicable Supplement and for all other purposes
whatsoever; and, in any such case, neither the Trustee, the Paying Agent,
the Transfer Agent and Registrar, the Transferor, the Servicer nor any
agent of any of them shall be affected by any notice to the contrary.
Notwithstanding the foregoing, in determining whether the Holders of the
requisite Investor Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities
owned by any of the Transferor, the Servicer, any other Holder of the
Transferor Security or any Affiliate thereof, shall be disregarded and
deemed not to be outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which
a Responsible Officer of the Trustee actually knows to be so owned shall be
so disregarded. Securities so owned which have been pledged in good faith
shall not be disregarded and may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Securities and that the pledgee is not the
Transferor, the Servicer, any other Holder of the Transferor Security or
any Affiliate thereof. None of the Transferor, the Servicer, the Trustee,
the Registrar or the Paying Agent will have any responsibility or liability
for any of the records relating to or on account of beneficial ownership in
Book-Entry Securities or for maintaining, supervising or reviewing records
relating thereto.
Section 6.7 Appointment of Paying Agent. The Paying Agent shall
make distributions to Investor Securityholders from the Collection Account
or applicable Series Account pursuant to the provisions of the applicable
Supplement and shall report the amounts of such distributions to the
Trustee. Any Paying Agent shall have the revocable power to withdraw funds
from the Collection Account or applicable Series Account for the purpose of
making the distributions referred to above. The Trustee may revoke such
power and remove the Paying Agent if the Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement or any Supplement in any material respect.
The Paying Agent shall initially be the Trustee and any co-paying agent
chosen by the Transferor and acceptable to the Trustee, including, if and
so long as any Series or Class is listed on the Luxembourg Stock Exchange
and such exchange so requires, a co-paying agent in Luxembourg or another
western European city. In the event that any Paying Agent shall resign,
the Trustee shall appoint a successor to act as Paying Agent. The Trustee
shall act as Paying Agent until a successor is appointed. The Trustee
shall cause each successor or additional Paying Agent to execute and
deliver to the Trustee an instrument in which such successor or additional
Paying Agent shall agree with the Trustee that it will hold all sums, if
any, held by it for payment to the Investor Securityholders in trust for
the benefit of the Investor Securityholders entitled thereto until such
sums shall be paid to such Investor Securityholders. The Paying Agent
shall return all unclaimed funds to the Trustee and upon removal shall also
return all funds in its possession to the Trustee. The provisions of
Sections 11.1, 11.2, 11.3 and 11.5 shall apply to the Trustee also in its
role as Paying Agent, for so long as the Trustee shall act as Paying Agent.
Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
Section 6.8 Access to List of Registered Securityholders' Names
and Addresses. The Trustee will furnish or cause to be furnished by the
Transfer Agent and Registrar to the Servicer or the Paying Agent, within
five Business Days after receipt by the Trustee of a request therefor, a
list in such form as the Servicer or the Paying Agent may reasonably
require, of the names and addresses of the Registered Securityholders. If
any Holder or group of Holders of Investor Securities of any Series or all
outstanding Series, as the case may be, evidencing not less than 10% of the
aggregate unpaid principal amount of such Series or all outstanding Series,
as applicable (the "Applicants"), apply to the Trustee, and such
application states that the Applicants desire to communicate with other
Investor Securityholders with respect to their rights under this Agreement
or any Supplement or under the Investor Securities and is accompanied by a
copy of the communication which such Applicants propose to transmit, then
the Trustee, after having been adequately indemnified by such Applicants
for its costs and expenses, shall afford or shall cause the Transfer Agent
and Registrar to afford such Applicants access during normal business hours
to the most recent list of Registered Securityholders of such Series or all
outstanding Series, as applicable, held by the Trustee, within five
Business Days after the receipt of such application. Such list shall be as
of a date no more than 45 days prior to the date of receipt of such
Applicants' request.
With respect to any Series of Registered Securities, every
Registered Securityholder, by receiving and holding a Registered Security,
agrees with the Trustee that neither the Trustee, the Transfer Agent and
Registrar, nor any of their respective agents, shall be held accountable by
reason of the disclosure of any such information as to the names and
addresses of the Registered Securityholders hereunder, regardless of the
sources from which such information was derived.
Section 6.9 Authenticating Agent.
(a) The Trustee may appoint one or more authenticating agents
with respect to the Securities which shall be authorized to act on behalf
of the Trustee in authenticating the Securities in connection with the
issuance, delivery, registration of transfer, exchange or repayment of the
Securities. Whenever reference is made in this Agreement to the
authentication of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an authenticating agent and certificate of
authentication executed on behalf of the Trustee by an authenticating
agent. Each authenticating agent must be acceptable to the Transferor and
the Servicer.
(b) Any institution succeeding to the corporate agency business
of an authenticating agent shall continue to be an authenticating agent
without the execution or filing of any power or any further act on the part
of the Trustee or such authenticating agent. An authenticating agent may
at any time resign by giving notice of resignation to the Trustee and to
the Transferor. The Trustee may at any time terminate the agency of an
authenticating agent by giving notice of termination to such authenticating
agent and to the Transferor. Upon receiving such a notice of resignation
or upon such a termination, or in case at any time an authenticating agent
shall cease to be acceptable to the Trustee or the Transferor, the Trustee
promptly may appoint a successor authenticating agent. Any successor
authenticating agent upon acceptance of its appointment hereunder shall
become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating
agent. No successor authenticating agent shall be appointed unless
acceptable to the Trustee and the Transferor. The Transferor agrees to pay
to each authenticating agent from time to time reasonable compensation for
its services under this Section. The provisions of Sections 11.1, 11.2 and
11.3 shall be applicable to any authenticating agent.
(c) Pursuant to an appointment made under this Section, the
Securities may have endorsed thereon, in lieu of the Trustee's certificate
of authentication, an alternate certificate of authentication in
substantially the following form:
This is one of the Securities described in the Pooling and
Servicing Agreement.
____________________________
____________________________
as Authenticating Agent
for the Trustee,
By _________________________
Authorized Officer
Section 6.10 Book-Entry Securities. Unless otherwise specified
in the related Supplement for any Series or Class, the Investor Securities,
upon original issuance, shall be issued in the form of one or more master
Investor Securities representing the Book-Entry Securities, to be delivered
to the Clearing Agency, by, or on behalf of, the Transferor. The Investor
Securities shall initially be registered on the Security Register in the
name of the Clearing Agency or its nominee, and no Security Owner will
receive a definitive security representing such Security Owner's interest
in the Investor Securities, except as provided in Section 6.12. Unless and
until definitive, fully registered Investor Securities ("Definitive
Securities") have been issued to the applicable Security Owners pursuant to
Section 6.12 or as otherwise specified in any such Supplement:
(a) the provisions of this Section shall be in full force and
effect;
(b) the Transferor, the Servicer and the Trustee may deal with
the Clearing Agency and the Clearing Agency Participants for all purposes
(including the making of distributions) as the authorized representatives
of the respective Security Owners;
(c) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this Section
shall control; and
(d) the rights of the respective Security Owners shall be
exercised only through the Clearing Agency and the Clearing Agency
Participants and shall be limited to those established by law and
agreements between such Security Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Depository Agreement, unless
and until Definitive Securities are issued pursuant to Section 6.12, the
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and
interest on the related Investor Securities to such Clearing Agency
Participants.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Investor
Securityholders evidencing a specified percentage of the aggregate unpaid
principal amount of Investor Securities, such direction or consent may be
given by Security Owners (acting through the Clearing Agency and the
Clearing Agency Participants) owning Investor Securities evidencing the
requisite percentage of principal amount of Investor Securities.
Section 6.11 Notices to Clearing Agency. Whenever any notice or
other communication is required to be given to Investor Securityholders of
any Series or Class with respect to which Book-Entry Securities have been
issued, unless and until Definitive Securities shall have been issued to
the related Security Owners, the Trustee shall give all such notices and
communications to the applicable Clearing Agency.
Section 6.12 Definitive Securities. If Book-Entry Securities
have been issued with respect to any Series or Class and (a) the Transferor
advises the Trustee that the Clearing Agency is no longer willing or able
to discharge properly its responsibilities under the Depository Agreement
with respect to such Series or Class and the Trustee or the Transferor is
unable to locate a qualified successor, (b) the Transferor, at its option,
advises the Trustee that it elects to terminate the book-entry system with
respect to such Series or Class through the Clearing Agency or (c) after
the occurrence of a Servicer Default, Security Owners of such Series or
Class evidencing not less than 50% of the aggregate unpaid principal amount
of such Series or Class advise the Trustee and the Clearing Agency through
the Clearing Agency Participants that the continuation of a book-entry
system with respect to the Investor Securities of such Series or Class
through the Clearing Agency is no longer in the best interests of the
Security Owners with respect to such Securities, then the Trustee shall
notify all Security Owners of such Securities, through the Clearing Agency,
of the occurrence of any such event and of the availability of Definitive
Securities to Security Owners requesting the same. Upon surrender to the
Trustee of any such Securities by the Clearing Agency, accompanied by
registration instructions from the Clearing Agency for registration, the
Trustee shall authenticate and deliver such Definitive Securities. Neither
the Transferor nor the Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of such Definitive
Securities all references herein to obligations imposed upon or to be
performed by the Clearing Agency shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Securities and the Trustee shall recognize the Holders of such
Definitive Securities as Investor Securityholders hereunder.
Section 6.13 Global Security; Exchange Date.
(a) If specified in the related Supplement for any Series or
Class, the Investor Securities for such Series or Class initially will be
issued in the form of a single temporary global security (the "Global
Security") in bearer form, without interest coupons, in the denomination of
the entire aggregate principal amount of such Series or Class and
substantially in the form set forth in the exhibit with respect thereto
attached to the related Supplement. The Global Security will be executed
by the Transferor and authenticated and delivered by the Trustee or its
agent to the Common Depositary outside the United States for credit to the
respective accounts of the Foreign Clearing Agencies and may be exchanged
as described in this Section 6.13 for Definitive Euro- Securities in
definitive form substantially in the form set forth in the exhibit with
respect thereto attached to the related Supplement (the "Definitive Euro-
Securities"). The "Definitive-Euro-Securities" shall be Bearer Securities
for all purposes of this Agreement and the provisions of this Agreement and
the related Supplement relating to Definitive Euro-Securities shall apply
to the Definitive Euro-Securities in all respects. The Definitive Euro-
Securities shall be issued in the minimum denominations specified in the
related Supplement.
(b) No interest will be paid in respect of any beneficial
interest in the Global Securities and no exchange of an interest in the
Global Securities for a Definitive Euro- Security may occur until the
person entitled to receive such Definitive Euro- Security provides
certification as to non-U.S. beneficial ownership as provided in this
Section 6.13. Until the Global Security with respect to a Series or Class
is exchanged for a Definitive Euro-Security for such Series or Class, any
holder thereof shall be entitled to receive payments of interest thereon
only to the extent that the person appearing in the records of the Foreign
Clearing Agency as the beneficial owner thereof or a portion thereof has
delivered to such Foreign Clearing Agency a certification and the Foreign
Clearing Agency has delivered to the Trustee a certification, in each case
pursuant to this Section 6.13 hereof on or prior to the date of
distribution.
(c) The Manager shall, upon its determination of the Global
Security Exchange Date, so advise the Trustee, the Transferor, the Common
Depositary and each Foreign Clearing Agency forthwith. Without unnecessary
delay, but in any event not later than the Global Security Exchange Date,
the Transferor will execute and deliver to the Trustee at its London office
or its designated office outside the United States Definitive Euro-
Securities in an aggregate principal amount equal to the entire Initial
Invested Amount of such Series or Class. All Definitive Euro- Securities so
issued and delivered will have Coupons attached. The Global Security may
be exchanged for an equal aggregate amount of Bearer Securities only on or
after the Global Security Exchange Date. Notwithstanding the foregoing, no
holder of an interest in a Global Security will have any right to receive a
Bearer Security in exchange for such interest prior to the Global Security
Exchange Date and prior to certification (in the manner provided in this
Section 6.13) that either such holder is not a United States person or is
otherwise a permitted holder.
(d) The Bearer Securities shall be authenticated and delivered
by the Trustee or its agent in exchange for only that portion of the Global
Security, in respect of which there shall have been presented to the
Trustee by the applicable Foreign Clearing Agency, a certificate,
substantially in the form set forth in the exhibit with respect thereto
attached to the related Supplement, that the Trustee does not know to be
false, to the effect that such Foreign Clearing Agency has received from or
in respect of a person entitled to a particular principal amount of the
Investor Securities of the applicable Series or Class (as shown by its
records), a certificate from such person in or substantially in the form
set forth in the exhibit with respect thereto attached to the related
Supplement. Upon receipt of such certification, the Trustee shall cause
the Global Securities to be endorsed in accordance with subsection 6.13(d)
below.
(e) On an exchange of the whole of a Global Security, such
Global Security shall be surrendered to the Trustee or its agent at its
office in London, England for cancellation and shall be returned by the
Trustee or its agent to the Transferor. On an exchange of only part of a
Global Security, details of such exchange shall be entered by the Paying
Agent with respect to the Series on behalf of the Trust, and further
exchanges may be effected, without the issue of a new Global Security, by
the Trust or its agent endorsing the schedule attached to the Global
Security previously issued to reflect a decrease in the aggregate principal
amount of the Global Security.
(f) Upon any such exchange of all or a portion of a Global
Security for a Bearer Security or Bearer Securities, such Global Security
shall be endorsed by or on behalf of the Trustee to reflect the reduction
in the principal amount by an amount equal to the aggregate principal
amount of such Bearer Security or Bearer Securities. Until so exchanged in
full, the Global Securities will in all respects be entitled to the same
benefits under this Agreement and the related Supplement as Bearer
Securities authenticated and delivered pursuant to this Agreement and the
related Supplement except that the beneficial owners of such Global
Security will not be entitled to receive payments of interest until they
have exchanged their beneficial interests in such Global Security for
Bearer Securities.
(g) The delivery to the Trustee by a Foreign Clearing Agency of
any written statement referred to above may be relied upon by the
Transferor and the Trustee as conclusive evidence that a corresponding
certification or certifications has or have been delivered to such Foreign
Clearing Agency pursuant to the terms of the related Supplement.
(h) The Bearer Securities to be delivered in exchange for the
Global Securities shall be delivered only outside the United States.
(i) Any exchange as provided for in this Section shall be made
free of charge to the holders and the beneficial owners of the Global
Securities and to the beneficial owners of the Bearer Securities issued in
exchange, except that a person receiving a Bearer Security must bear the
cost of insurance, postage, transportation and the like in the event that
such person does not receive such Bearer Security in person at the offices
of the applicable Foreign Clearing Agency.
(j) Until the exchange of the Global Securities as aforesaid,
the bearer thereof shall in all respects be entitled to the same benefits
as if it were the bearer of Bearer Securities and the Coupons attached
thereto.
Section 6.14 Meetings of Securityholders.
(a) If at the time any Bearer Securities are issued and
outstanding with respect to any Series or Class to which any meeting
described below relates, the Servicer or the Trustee may at any time call a
meeting of Investor Securityholders of any Series or Class or of all
Series, to be held at such time and at such place as the Servicer or the
Trustee, as the case may be, shall determine, for the purpose of approving
a modification of or amendment to, or obtaining a waiver of any covenant or
condition set forth in, this Agreement, any Supplement or the Investor
Securities or of taking any other action permitted to be taken by Investor
Securityholders hereunder or under any Supplement. Notice of any meeting
of Investor Securityholders, setting forth the time and place of such
meeting and in general terms the action proposed to be taken at such
meeting, shall be given in accordance with Section 13.5, the first mailing
and publication to be not less than 20 nor more than 180 days prior to the
date fixed for the meeting. To be entitled to vote at any meeting of
Investor Securityholders a Person shall be (i) a Holder of one or more
Investor Securities of the applicable Series or Class or (ii) a person
appointed by an instrument in writing as proxy by the Holder of one or more
such Investor Securities. The only persons who shall be entitled to be
present or to speak at any meeting of Investor Securityholders shall be the
persons entitled to vote at such meeting and their counsel and any
representatives of the Transferor, the Servicer and the Trustee and their
respective counsel.
(b) At a meeting of Investor Securityholders, persons entitled
to vote Investor Securities evidencing a majority of the aggregate unpaid
principal amount of the applicable Series or Class or all outstanding
Series, as the case may be, shall constitute a quorum. No business shall
be transacted in the absence of a quorum, unless a quorum is present when
the meeting is called to order. In the absence of a quorum at any such
meeting, the meeting may be adjourned for a period of not less than 10
days; in the absence of a quorum at any such meeting, such adjourned
meeting may be further adjourned for a period of not less than 10 days; at
the reconvening of any meeting further adjourned for lack of a quorum, the
persons entitled to vote Investor Securities evidencing at least 25% of the
aggregate unpaid principal amount of the applicable Series or Class or all
outstanding Series, as the case may be, shall constitute a quorum for the
taking of any action set forth in the notice of the original meeting.
Notice of the reconvening of any adjourned meeting shall be given as
provided above except that such notice must be given not less than five
days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly the
percentage of the aggregate principal amount of the outstanding applicable
Investor Securities which shall constitute a quorum.
(c) Any Investor Securityholder who has executed an instrument
in writing appointing a person as proxy shall be deemed to be present for
the purposes of determining a quorum and be deemed to have voted; provided
that such Investor Securityholder shall be considered as present or voting
only with respect to the matters covered by such instrument in writing.
Subject to the provisions of Section 13.1, any resolution passed or
decision taken at any meeting of Investor Securityholders duly held in
accordance with this Section shall be binding on all Investor
Securityholders whether or not present or represented at the meeting.
(d) The holding of Bearer Securities shall be proved by the
production of such Bearer Securities or by a certificate, satisfactory to
the Servicer, executed by any bank, trust company or recognized securities
dealer, wherever situated, satisfactory to the Servicer. Each such
certificate shall be dated and shall state that on the date thereof a
Bearer Security bearing a specified serial number was deposited with or
exhibited to such bank, trust company or recognized securities dealer by
the Person named in such certificate. Any such certificate may be issued
in respect of one or more Bearer Securities specified therein. The holding
by the Person named in any such certificate of any Bearer Security
specified therein shall be presumed to continue for a period of one year
from the date of such certificate unless at the time of any determination
of such holding (i) another certificate bearing a later date issued in
respect of the same Bearer Security shall be produced, (ii) the Bearer
Security specified in such certificate shall be produced by some other
Person or (iii) the Bearer Security specified in such certificate shall
have ceased to be outstanding. The appointment of any proxy shall be
proved by having the signature of the Person executing the proxy guaranteed
by any bank, trust company or recognized securities dealer satisfactory to
the Trustee.
(e) The Trustee shall appoint a temporary chair of the meeting.
A permanent chair and a permanent secretary of the meeting shall be elected
by vote of the Holders of Investor Securities evidencing a majority of the
aggregate unpaid principal amount of Investor Securities of the applicable
Series or Class or all outstanding Series, as the case may be, represented
at the meeting. No vote shall be cast or counted at any meeting in respect
of any Investor Security challenged as not outstanding and ruled by the
chair of the meeting to be not outstanding. The chair of the meeting shall
have no right to vote except as an Investor Securityholder or proxy. Any
meeting of Investor Securityholders duly called at which a quorum is
present may be adjourned from time to time, and the meeting may be held as
so adjourned without further notice.
(f) The vote upon any resolution submitted to any meeting of
Investor Securityholders shall be by written ballot on which shall be
subscribed the signatures of Investor Securityholders or proxies and on
which shall be inscribed the serial number or numbers of the Investor
Securities held or represented by them. The permanent chair of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of
each meeting of Investor Securityholders shall be prepared by the secretary
of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that said notice was
published as provided above. The record shall be signed and verified by
the permanent chair and secretary of the meeting and one of the duplicates
shall be delivered to the Servicer and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting. Any record so signed and verified shall be
conclusive evidence of the matters therein stated.
Section 6.15 Uncertificated Classes. Notwithstanding anything
to the contrary contained in this Article VI or in Article XII, unless
otherwise specified in any Supplement any provisions contained in this
Article VI and in Article XII relating to the registration, form,
execution, authentication, delivery, presentation, cancellation and
surrender of Securities shall not be applicable to any uncertificated
Securities.
[END OF ARTICLE VI]
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 Liability of the Transferor. The Transferor shall
be severally, and not jointly, liable for all obligations, covenants,
representations and warranties of the Transferor arising under or related
to this Agreement or any Supplement. Except as provided in the preceding
sentence, the Transferor shall be liable only to the extent of the
obligations specifically undertaken by it in its capacity as the
Transferor.
Section 7.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor.
(a) The Transferor shall not dissolve, liquidate, consolidate
with or merge into any other entity or convey, transfer or sell its
properties and assets substantially as an entirety to any Person unless:
(i) (x) the entity formed by such consolidation or into which the
Transferor is merged or the Person which acquires by conveyance,
transfer or sale the properties and assets of the Transferor
substantially as an entirety shall be, if the Transferor is not the
surviving entity, organized and existing under the laws of the United
States of America or any State or the District of Columbia, and shall
be a savings association, a national banking association, a bank or
other entity which is not eligible to be a debtor in a case under
Title 11 of the United States Code or is a special purpose entity
whose powers and activities are limited to substantially the same
degree as provided in the Transferor LLC Agreement and, if the
Transferor is not the surviving entity, shall expressly assume, by an
agreement supplemental hereto, executed and delivered to the Trustee,
in form reasonably satisfactory to the Trustee, the performance of
every covenant and obligation of the Transferor hereunder; and (y) the
Transferor or the surviving entity, as the case may be, has delivered
to the Trustee (with a copy to the Rating Agency) an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or sale and such
supplemental agreement comply with this Section, that such
supplemental agreement is a valid and binding obligation of such
surviving entity enforceable against such surviving entity in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
from time to time in effect or general principles of equity, and that
all conditions precedent herein provided for relating to such
transaction have been complied with; and
(ii) the Rating Agency Condition shall have been satisfied with
respect to such consolidation, merger, conveyance or transfer.
(b) Except as permitted by subsection 2.7(c) and subsection
6.3(b), the obligations, rights or any part thereof of the Transferor
hereunder shall not be assignable nor shall any Person succeed to such
obligations or rights of the Transferor hereunder except (i) for
conveyances, mergers, consolidations, assumptions, sales or transfers in
accordance with the provisions of the foregoing paragraph and (ii) for
conveyances, mergers, consolidations, assumptions, sales or transfers to
other entities (1) which the Transferor and the Servicer determine will not
result in an Adverse Effect, (2) which meet the requirements of clause (ii)
of the preceding paragraph and (3) for which such purchaser, transferee,
pledgee or entity shall expressly assume, in an agreement supplemental
hereto, executed and delivered to the Trustee in writing in form
satisfactory to the Trustee, the performance of every covenant and
obligation of the Transferor thereby conveyed.
Section 7.3 Limitations on Liability of the Transferor. Subject
to Section 7.1, neither the Transferor nor any of the directors, officers,
employees, incorporators or agents of the Transferor acting in such
capacities shall be under any liability to the Trust, the Trustee, the
Securityholders, any Series Enhancer or any other Person for any action
taken or for refraining from the taking of any action in good faith in such
capacities pursuant to this Agreement, it being expressly understood that
such liability is expressly waived and released as a condition of, and
consideration for, the execution of this Agreement and any Supplement and
the issuance of the Security; provided, however, that this provision shall
not protect the Transferor or any such person against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Transferor and any
director, officer, employee or agent of the Transferor may rely in good
faith on any document of any kind prima facie properly executed and
submitted by any Person (other than the Transferor) respecting any matters
arising hereunder.
Section 7.4 Transferor Authorized to Execute Registration
Statements and Reports on Behalf of the Trust. The Trustee hereby
authorizes the Transferor to execute, on behalf of the Trust and file or
cause to be filed with the Securities and Exchange Commission any
registration statements prepared in connection with the issuance of
Investor Securities and any periodic or annual reports prepared in
connection with the issuance of Investor Securities or the delivery of the
monthly servicer's certificates required by Section 3.4.
[END OF ARTICLE VII]
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
Section 8.1 Liability of the Servicer. The Servicer shall be
liable under this Article only to the extent of the obligations
specifically undertaken by the Servicer in its capacity as Servicer.
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer. The Servicer shall not consolidate with or
merge into any other entity or, except as provided herein, convey, transfer
or sell its properties and assets substantially as an entirety to any
Person, unless:
(a) the entity formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance,
transfer or sale the properties and assets of the Servicer
substantially as an entirety shall be, if the Servicer is not the
surviving entity, an entity organized and existing under the laws of
the United States of America or any State or the District of Columbia,
and, if the Servicer is not the surviving entity, such entity shall
expressly assume, by an agreement supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
performance of every covenant and obligation of the Servicer
hereunder;
(b) the Servicer has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance, transfer or sale comply with this
Section and that all conditions precedent herein provided for relating
to such transaction have been complied with;
(c) the Servicer shall have given the Rating Agencies
notice of such consolidation, merger or transfer or assets; and
(d) the entity formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Servicer substantially as an entirety
shall be an Eligible Servicer.
Section 8.3 Limitation on Liability of the Servicer and Others.
Except as provided in Section 8.4 and Section 11.5, neither the Servicer
nor any of the managers, directors, officers, employees or agents of the
Servicer in its capacity as Servicer shall be under any liability to the
Trust, the Trustee, the Securityholders, any Series Enhancer or any other
Person for any action taken or for refraining from the taking of any action
in good faith in its capacity as Servicer pursuant to this Agreement;
provided, however, that this provision shall not protect the Servicer or
any such Person against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Servicer and any member, director, officer, employee
or agent of the Servicer may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person (other than the
Servicer) respecting any matters arising hereunder. The Servicer shall not
be under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its duties as Servicer in accordance with this
Agreement and which in its reasonable judgment may involve it in any
expense or liability. The Servicer may, in its sole discretion, undertake
any such legal action which it may deem necessary or desirable for the
benefit of the Securityholders with respect to this Agreement and the
rights and duties of the parties hereto and the interests of the
Securityholders hereunder.
Section 8.4 Servicer Indemnification of the Trust and the
Trustee. The Servicer shall indemnify and hold harmless the Trust and the
Trustee (including the Trustee in its capacity as Transfer Agent and
Registrar or as Paying Agent) and its directors, officers, employees and
agents from and against any loss, liability, expense, damage or injury
suffered or sustained by reason of (a) any acts or omissions of the
Servicer with respect to the Trust pursuant to this Agreement or (b) the
administration by the Trustee of the Trust (in the case of clause (a) or
(b), other than any such loss, liability, expense, damage, or injury as may
arise from the negligence or wilful misconduct of the Trustee), including
any judgment, award, settlement, reasonable attorneys' fees and other costs
or expenses incurred in connection with the defense of any action,
proceeding or claim. Indemnification pursuant to this Section shall not be
payable from the Trust Assets. The Servicer's obligations under this
Section 8.4 shall survive the termination of this Agreement or the Trust or
the earlier removal or resignation of the Trustee.
Section 8.5 Resignation of the Servicer. The Servicer shall not
resign from the obligations and duties hereby imposed on it except (a) upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action
which the Servicer could take to make the performance of its duties
hereunder permissible under applicable law or (b) upon the assumption, by
an agreement supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, of the obligations and duties of the
Servicer hereunder by any of its Affiliates or by any other entity the
appointment of which shall have satisfied the Rating Agency Condition and,
in either case, qualifies as an Eligible Servicer. Any determination
permitting the resignation of the Servicer shall be evidenced (i) as to
clause (a) above, by an Opinion of Counsel to such effect delivered to the
Trustee and (ii) as to clause (b) above, by an Officer's Certificate and an
Opinion of Counsel delivered to the Trustee (with a copy to the Rating
Agency) each stating that such assignment by Holdings and assumption by
such Affiliate and such supplemental agreement comply with this Section,
that such supplemental agreement is a valid and binding obligation of such
Affiliate enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally from time to time in effect or general principles of
equity, and that all conditions precedent herein relating to such
transaction have been complied with. No resignation shall become effective
until the Trustee or a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
10.2 hereof. If within 120 days of the date of the determination that the
Servicer may no longer act as Servicer under clause (a) above the Trustee
is unable to appoint a Successor Servicer, the Trustee shall serve as
Successor Servicer. Notwithstanding the foregoing, the Trustee shall, if
it is legally unable so to act, petition a court of competent jurisdiction
to appoint any established institution qualifying as an Eligible Servicer
as the Successor Servicer hereunder. The Trustee shall give prompt notice
to the Rating Agency and each Series Enhancer upon the appointment of a
Successor Servicer.
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables. The Servicer shall provide to the Trustee
access to the documentation regarding the Accounts and the Receivables in
such cases where the Trustee is required in connection with the enforcement
of the rights of Securityholders or by applicable statutes or regulations
to review such documentation, such access being afforded without charge but
only (a) upon reasonable request, (b) during normal business hours, (c)
subject to the Servicer's normal security and confidentiality procedures
and (d) at reasonably accessible offices in the continental United States
designated by the Servicer. Nothing in this Section shall derogate from
the obligation of the Transferor, the Trustee and the Servicer to observe
any applicable law prohibiting disclosure of information regarding the
Obligors and the failure of the Servicer to provide access as provided in
this Section as a result of such obligation shall not constitute a breach
of this Section.
Section 8.7 Delegation of Duties. The Servicer may enter into
servicing agreements with one or more subservicers (including any Affiliate
of the Servicer and any Account Originator) to perform all or a portion of
the servicing functions on behalf of the Servicer with respect to the
Accounts and the Receivables in accordance with the Credit Card Guidelines
and this Agreement; provided that the Servicer shall remain obligated and
be liable to the Trustee for the benefit of the Securityholders for
servicing and administering the Accounts and the Receivables in accordance
with the provisions of this Agreement without diminution of such obligation
and liability by virtue of the appointment of such subservicer, to the same
extent and under the same terms and conditions as if the Servicer alone
were servicing and administering such Receivables. The fees and expenses
of the subservicer (if any) will be as agreed between the Servicer and its
subservicer and neither the Trustee nor the Securityholders will have any
responsibility therefor. All actions of a subservicer taken pursuant to
such a subservicer agreement will be taken as an agent of the Servicer with
the same force and effect as though performed by the Servicer. Any
delegation of duties by the Servicer permitted hereunder shall not relieve
the Servicer of its liability and responsibility with respect to such
duties, and shall not constitute a resignation of the Servicer within the
meaning of subsection 8.5. It is understood and agreed by the parties
hereto that the Servicer may delegate certain of its duties hereunder to
First Data Resources, Inc. ("FDR").
Section 8.8 Examination of Records. The Transferor and the
Servicer shall indicate generally in their computer files or other records
that the Receivables arising in the Accounts have been conveyed to the
Trustee, on behalf of the Trust, pursuant to this Agreement for the benefit
of the Securityholders. The Transferor and the Servicer shall, prior to
the sale or transfer to a third party of any receivable held in its
custody, examine its computer records and other records to determine that
such receivable is not, and does not include, a Receivable.
[END OF ARTICLE VIII]
ARTICLE IX
INSOLVENCY EVENTS
Section 9.1 Rights upon the Occurrence of an Insolvency Event.
(a) If either PFR or PFRF shall consent or fail to object to the
appointment of a bankruptcy trustee or conservator, receiver or liquidator
in any bankruptcy proceeding or other insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating
to PFR or PFRF, as applicable, of or relating to all or substantially all
of PFR's or PFRF's property, as applicable, or the commencement of an
action seeking a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
bankruptcy trustee or conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up, insolvency, bankruptcy,
reorganization, conservatorship, receivership or liquidation of such
entity's affairs, or notwithstanding an objection by PFR or PFRF, as
applicable, any such action shall have remained undischarged or unstayed
for a period of 60 days; or PFR or PFRF, as applicable, shall admit in
writing its inability to pay its debts generally as they become due, file,
or consent or fail to object (or object without dismissal of any such
filing within 60 days of such filing) to the filing of, a petition to take
advantage of any applicable bankruptcy, insolvency or reorganization,
receivership or conservatorship statute, make an assignment for the benefit
of its creditors or voluntarily suspend payment of its obligations (any
such act or occurrence with respect to any Person being an "Insolvency
Event"), the Transferor shall on the day any such Insolvency Event occurs
(the "Appointment Date"), immediately cease to transfer Principal
Receivables to the Trust and shall promptly give notice to the Trustee
thereof. Notwithstanding any cessation of the transfer to the Trust of
additional Principal Receivables, Principal Receivables transferred to the
Trust prior to the occurrence of such Insolvency Event, Collections in
respect of such Principal Receivables and Finance Charge Receivables
(whenever created) accrued in respect of such Principal Receivables shall
continue to be a part of the Trust Assets. Upon the Appointment Date, this
Agreement and the Trust shall terminate, subject to the liquidation,
winding-up, insolvency, bankruptcy, reorganization and dissolution
procedures described below. Within 15 days of the Appointment Date, the
Trustee shall (i) publish a notice in an Authorized Newspaper that an
Insolvency Event has occurred, that the Trust has terminated and that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables
on commercially reasonable terms and in a commercially reasonable manner
and (ii) give notice to Securityholders describing the provisions of this
Section and requesting instructions from such Holders. Unless the Trustee
shall have received instructions within 90 days from the date notice
pursuant to clause (i) above is first published from (x) Holders of
Investor Securities evidencing more than 50% of the aggregate unpaid
principal amount of each Series or, with respect to any Series with two or
more Classes, of each Class, (y) the Transferor, and any Holder of a
Supplemental Security and any permitted assignee or successor under Section
7.2, and (z) any other Person specified in any related Supplement to the
effect that such Persons disapprove of the liquidation of the Receivables
and wish to reconstitute the Trust pursuant to the terms of this Agreement
(as amended in connection with such reconstitution), the Trustee shall
promptly sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable terms, which
may include the solicitation of competitive bids. The Trustee may obtain a
prior determination from any such conservator, receiver or liquidator of
the Transferor that the terms and manner of any proposed sale, disposition
or liquidation are commercially reasonable. The provisions of this Section
9.1 and any provisions in a Supplement regarding an Insolvency Event shall
not be deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of
the Receivables and any Participation Interests pursuant to paragraph (a)
("Insolvency Proceeds") shall be immediately deposited in the Collection
Account. The Trustee shall determine conclusively the amount of the
Insolvency Proceeds which are deemed to be Finance Charge Receivables and
Principal Receivables, allocating Insolvency Proceeds to Finance Charge
Receivables and Principal Receivables in the same proportion as the amount
of Finance Charge Receivables and Principal Receivables bear to one another
on the prior Determination Date. The Insolvency Proceeds shall be
allocated and distributed to Investor Securityholders in accordance with
the terms of each Supplement.
[END OF ARTICLE IX]
ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults. If any one of the following
events (a "Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or to give notice to the Trustee to make
such payment, transfer or deposit on or before the date occurring five
Business Days after the date such payment, transfer or deposit or such
instruction or notice is required to be made or given, as the case may be,
under the terms of this Agreement or any Supplement;
(b) failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or any Supplement which has an Adverse
Effect and which continues unremedied for a period of 60 days after the
date on which notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee, or to the Servicer
and the Trustee by Holders of Investor Securities evidencing not less than
10% of the aggregate unpaid principal amount of all Investor Securities
(or, with respect to any such failure that does not relate to all Series,
10% of the aggregate unpaid principal amount of all Series to which such
failure relates); or the Servicer shall assign or delegate its duties under
this Agreement, except as permitted by Sections 3.1(a), 8.2, 8.5 or 8.7;
(c) any representation, warranty or certification made by the
Servicer in this Agreement or any Supplement or in any certificate
delivered pursuant to this Agreement or any Supplement shall prove to have
been incorrect when made, which has an Adverse Effect on the rights of the
Investor Securityholders of any Series (which determination shall be made
without regard to whether funds are then available pursuant to any Series
Enhancement) and which Adverse Effect continues for a period of 60 days
after the date on which notice thereof, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee, or to the Servicer
and the Trustee by the Holders of Investor Securities evidencing not less
than 10% of the aggregate unpaid principal amount of all Investor
Securities (or, with respect to any such representation, warranty or
certification that does not relate to all Series, 10% of the aggregate
unpaid principal amount of all Series to which such representation,
warranty or certification relates); or
(d) the Servicer shall consent to the appointment of a
bankruptcy trustee or conservator or receiver or liquidator in any
bankruptcy proceeding or other insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating
to the Servicer or of or relating to all or substantially all its property,
or a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a bankruptcy trustee or
a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or the
winding-up or liquidation of its affairs, shall have been entered against
the Servicer and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or the Servicer shall
admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable bankruptcy,
insolvency or reorganization statute, make any assignment for the benefit
of its creditors or voluntarily suspend payment of its obligations;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied, either the Trustee, or the Holders of
Investor Securities evidencing more than 50% of the aggregate unpaid
principal amount of all Investor Securities, by notice then given to the
Servicer (and to the Trustee if given by the Investor Securityholders) (a
"Termination Notice"), may terminate all but not less than all the rights
and obligations of the Servicer as Servicer under this Agreement; provided,
however, if within 60 days of receipt of a Termination Notice the Trustee
does not receive any bids from Eligible Servicers in accordance with
subsection 10.2(c) to act as a Successor Servicer and receives an Officer's
Certificate of the Transferor to the effect that the Servicer cannot in
good faith cure the Servicer Default which gave rise to the Termination
Notice, the Trustee shall grant a right of first refusal to the Transferor
which would permit the Transferor at its option to purchase the
Securityholders' Interest on the Distribution Date in the next calendar
month.
The purchase price for the Securityholders' Interest shall be
equal to the sum of the amounts specified therefor with respect to each
outstanding Series in the related Supplement. The Transferor shall notify
the Trustee and the Rating Agency prior to the Record Date for the
Distribution Date of the purchase if it is exercising such right of first
refusal. If the Transferor exercises such right of first refusal, the
Transferor shall deposit the purchase price into the Collection Account not
later than 1:00 P.M., New York City time, on such Distribution Date in
immediately available funds. The purchase price shall be allocated and
distributed to Investor Securityholders in accordance with the terms of
each Supplement. The Transferor shall provide notice to the Rating Agency
of the exercise by it of such right of first refusal.
After receipt by the Servicer of a Termination Notice, and on the
date that a Successor Servicer is appointed by the Trustee pursuant to
Section 10.2, all authority and power of the Servicer under this Agreement
shall pass to and be vested in the Successor Servicer (a "Service
Transfer"); and, without limitation, the Trustee is hereby authorized and
empowered (upon the failure of the Servicer to cooperate) to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of the Servicer to execute
or deliver such documents or instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of
such Service Transfer. The Servicer agrees to cooperate with the Trustee
and such Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing hereunder,
including the transfer to such Successor Servicer of all authority of the
Servicer to service the Receivables provided for under this Agreement,
including all authority over all Collections which shall on the date of
transfer be held by the Servicer for deposit, or which have been deposited
by the Servicer, in the Collection Account, or which shall thereafter be
received with respect to the Receivables, and in assisting the Successor
Servicer. The Servicer shall within 20 Business Days transfer its
electronic records relating to the Receivables to the Successor Servicer in
such electronic form as the Successor Servicer may reasonably request and
shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of the
Receivables in the manner and at such times as the Successor Servicer shall
reasonably request. To the extent that compliance with this Section shall
require the Servicer to disclose to the Successor Servicer information of
any kind which the Servicer deems to be confidential, the Successor
Servicer shall be required to enter into such customary licensing and
confidentiality agreements as the Servicer shall deem reasonably necessary
to protect its interests.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in paragraph (a) above for a period of 10 Business
Days after the applicable grace period or under paragraph (b) or (c) above
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 be
prevented by the exercise of reasonable diligence by the Servicer and such
delay or failure was caused by an act of God or the public enemy, acts of
declared or undeclared war, public disorder, rebellion or sabotage,
epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods or
similar causes. The preceding sentence shall not relieve the Servicer from
using its reasonable best efforts to perform its obligations in a timely
manner in accordance with the terms of this Agreement and the Servicer
shall provide the Trustee, the Transferor and any Series Enhancer with an
Officer's Certificate giving prompt notice of such failure or delay by it,
together with a description of its efforts so to perform its obligations.
Section 10.2 Trustee To Act; Appointment of Successor.
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 10.1, the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Trustee or until a date
mutually agreed upon by the Servicer and Trustee. The Trustee shall as
promptly as possible after the giving of a Termination Notice appoint an
Eligible Servicer as a successor servicer (the "Successor Servicer"), and
such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Trustee. In the event that a
Successor Servicer has not been appointed or has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the
Trustee without further action shall automatically be appointed the
Successor Servicer. The Trustee may delegate any of its servicing
obligations to an Affiliate or agent in accordance with Sections 3.1(b) and
8.7. Notwithstanding the foregoing, the Trustee shall, if it is legally
unable so to act, petition a court of competent jurisdiction to appoint any
established institution qualifying as an Eligible Servicer as the Successor
Servicer hereunder. The Trustee shall give prompt notice to the Rating
Agency and each Series Enhancer upon the appointment of a Successor
Servicer.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing
functions under this Agreement and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof, and all references in this
Agreement to the Servicer shall be deemed to refer to the Successor
Servicer.
(c) In connection with any Termination Notice, the Trustee will
review any bids which it obtains from Eligible Servicers and shall be
permitted to appoint any Eligible Servicer submitting such a bid as a
Successor Servicer for servicing compensation not in excess of the
aggregate Servicing Fees for all Series plus the sum of the amounts with
respect to each Series and with respect to each Distribution Date equal to
any Collections of Finance Charge Receivables allocable to Investor
Securityholders of such Series which are payable to the Holders of the
Transferor Securities after payment of all amounts owing to the Investor
Securityholders of such Series with respect to such Distribution Date or
required to be deposited in the applicable Series Accounts with respect to
such Distribution Date and any amounts required to be paid to any Series
Enhancer for such Series with respect to such Distribution Date pursuant to
the terms of any Enhancement Agreement; provided, however, that the Holders
of the Transferor Securities shall be responsible for payment of their
portion of such aggregate Servicing Fees and all other such amounts in
excess of such aggregate Servicing Fees. Each holder of any of the
Transferor's Securities agrees that, if Holdings (or any Successor
Servicer) is terminated as Servicer hereunder, the portion of the
Collections in respect of Finance Charge Receivables that the Transferor is
entitled to receive pursuant to this Agreement or any Supplement shall be
reduced by an amount sufficient to pay the Transferor's share of the
compensation of the Successor Servicer.
(d) All authority and power granted to the Successor Servicer
under this Agreement shall automatically cease and terminate upon
termination of the Trust pursuant to Section 12.1, and shall pass to and be
vested in the Transferor and, without limitation, the Transferor is hereby
authorized and empowered to execute and deliver, on behalf of the Successor
Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights.
The Successor Servicer agrees to cooperate with the Transferor in effecting
the termination of the responsibilities and rights of the Successor
Servicer to conduct servicing of the Receivables. The Successor Servicer
shall transfer its electronic records relating to the Receivables to
Holdings or its designee in such electronic form as it may reasonably
request and shall transfer all other records, correspondence and documents
to it in the manner and at such times as it shall reasonably request. To
the extent that compliance with this Section shall require the Successor
Servicer to disclose to Holdings information of any kind which the
Successor Servicer deems to be confidential, Holdings shall be required to
enter into such customary licensing and confidentiality agreements as the
Successor Servicer shall deem necessary to protect its interests.
Section 10.3 Notification to Securityholders. Within five
Business Days after the Servicer becomes aware of any Servicer Default, the
Servicer shall give notice thereof to the Trustee, the Rating Agency and
each Series Enhancer and the Trustee shall give notice to the Investor
Securityholders. Upon any termination or appointment of a Successor
Servicer pursuant to this Article, the Trustee shall give prompt notice
thereof to the Investor Securityholders.
[END OF ARTICLE X]
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee.
(a) The Trustee, prior to the occurrence of a Servicer Default
of which a Responsible Officer of the Trustee has actual knowledge and
after the curing of all Servicer Defaults which may have occurred,
undertakes to perform such duties and only such duties as are specifically
set forth in this Agreement and no implied duties or covenants by the
Trustee shall be read into this Agreement. If a Servicer Default to the
actual knowledge of a Responsible Officer of the Trustee has occurred
(which has not been cured or waived) the Trustee shall exercise such of the
rights and powers vested in it by this Agreement and use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.
(b) The Trustee may conclusively rely on and shall be fully
protected in acting on, or in refraining from acting in accord with, any
resolution, certificate, statement, instrument, Officer's Certificate,
opinion, report, notice, request, consent, order, appraisal, approval, bond
or other paper or document furnished to the Trustee pursuant to this
Agreement and believed by it to be genuine and to have been signed or
presented to it pursuant to this Agreement by the proper party or parties.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
substantially conform to the requirements of this Agreement. The Trustee
shall give prompt written notice to the Transferor and the Servicer of any
material lack of conformity of any such instrument to the applicable
requirements of this Agreement discovered by the Trustee which would
entitle a specified percentage of Investor Securityholders to take any
action pursuant to this Agreement. If within 5 Business Days the
Transferor or the Servicer shall not have cured such material lack of
conformity, the Trustee shall provide notice of such material lack of
conformity to the Investor Securityholders.
(c) Subject to paragraph (a), no provision of this Agreement
shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct. Consistent with the foregoing and for purposes of
clarification, it is understood and agreed by the parties hereto that:
(i) the Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer or Responsible Officers of
the Trustee, unless it shall be proved that the Trustee was negligent
in ascertaining the pertinent facts;
(ii) the Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Holders of Investor Securities
evidencing more than 50% of the aggregate unpaid principal amount of
all Investor Securities (or, with respect to any such action that does
not relate to all Series, 50% of the aggregate unpaid principal amount
of the Investor Securities of all Series to which such action relates)
relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement; and
(iii) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in subsection 10.1 (a) or (b) nor with knowledge of a Pay
Out Event or Reinvestment Event unless a Responsible Officer of the
Trustee obtains actual knowledge of such failure or event or the
Trustee receives written notice of such failure or event from the
Servicer or any Holders of Investor Securities evidencing not less
than 10% of the aggregate unpaid principal amount of all Investor
Securities (or, with respect to any such failure that does not relate
to all Series, 10% of the aggregate unpaid principal amount of the
Investor Securities of all Series to which such failure relates).
(d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of
its duties hereunder or in the exercise of any of its rights or powers, if
there is reasonable ground for believing that the repayment of such funds
or adequate indemnity against such risk or liability is not reasonably
assured to it, and none of the provisions contained in this Agreement shall
in any event require the Trustee to perform, or be responsible for the
manner of performance of, any obligations of the Servicer under this
Agreement except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges
of, the Servicer in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement,
the Trustee shall take no actions reasonably likely to impair the interests
of the Trust in any Receivable now existing or hereafter created or to
impair the value of any Receivable now existing or hereafter created.
(f) Except as expressly provided in this Agreement, the Trustee
shall have no power to vary the corpus of the Trust including by (i)
accepting any substitute obligation for a Receivable initially assigned to
the Trust under Section 2.1 or 2.9, (ii) adding any other investment,
obligation or security to the Trust or (iii) withdrawing from the Trust any
Receivables.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall fail to perform any obligation, duty or agreement in the
manner or on the day required to be performed by the Paying Agent or the
Transfer Agent and Registrar, as the case may be, under this Agreement, the
Trustee shall be obligated promptly upon its knowledge thereof to perform
such obligation, duty or agreement in the manner so required.
Section 11.2 Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 11.1:
(a) the Trustee may consult with counsel and any written advice
of counsel or an Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such written
advice of counsel or an Opinion of Counsel;
(b) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at the
request, order or direction of any of the Securityholders, pursuant to the
provisions of this Agreement, unless such Securityholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby;
provided, however, that nothing contained herein shall relieve the Trustee
of the obligations, upon the occurrence of a Servicer Default (which has
not been cured or waived) to exercise such of the rights and powers vested
in it by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs;
(c) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;
(d) the Trustee shall not be bound to make any investigation
into the facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
approval, bond or other paper or document believed by it to be genuine,
unless requested in writing so to do by Holders of Investor Securities
evidencing more than 25% of the aggregate unpaid principal amount of all
Investor Securities (or, with respect to any such matters that do not
relate to all Series, 25% of the aggregate unpaid principal amount of the
Investor Securities of all Series to which such matters relate); provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses, or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such cost,
expense, or liability as a condition to so proceed;
(e) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian, nominee and the Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent,
attorney, custodian or nominee appointed with due care by it hereunder;
(f) except as may be required by subsection 11.1(a), the Trustee
shall not be required to make any initial or periodic examination of any
documents or records related to the Receivables or the Accounts for the
purpose of establishing the presence or absence of defects, the compliance
by the Transferor with its representations and warranties or for any other
purpose;
(g) whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to the
provisions of this Section 11.2;
(h) the Trustee shall have no liability with respect to the acts
or omissions of the Servicer (except and to the extent the Servicer is the
Trustee), including, acts or omissions in connection with the servicing,
management or administration of Receivables; calculations made by the
Servicer whether or not reported to the Trustee; and deposits into or
withdrawals from any accounts or funds established pursuant to the terms of
this Agreement; and
(i) in the event that the Trustee is also acting as Paying Agent
or Transfer Agent and Registrar hereunder, the rights and protections
afforded to the Trustee pursuant to this Article XI shall also be afforded
to such Paying Agent, Transfer Agent and Registrar.
Section 11.3 Trustee Not Liable for Recitals in Securities. The
Trustee assumes no responsibility for the correctness of the recitals
contained herein and in the Securities (other than the certificate of
authentication on the Securities). Except as set forth in Section 11.15,
the Trustee makes no representations as to the validity or sufficiency of
this Agreement or any Supplement or of the Securities (other than the
certificate of authentication on the Securities) or of any Receivable or
related document or as to the perfection or priority of any security
interest therein or as to the efficacy of the Trust. The Trustee shall not
be accountable for the use or application by the Transferor of any of the
Securities or of the proceeds of such Securities, or for the use or
application of any funds paid to the Transferor in respect of the
Receivables or deposited in or withdrawn from the Collection Account, any
Series Accounts or any other accounts hereafter established to effectuate
the transactions contemplated by this Agreement and in accordance with the
terms of this Agreement.
Section 11.4 Trustee May Own Securities. Subject to any
restrictions that may otherwise be imposed by Section 406 of ERISA or
Section 4975(e) of the Code, the Trustee in its individual or any other
capacity may become the owner or pledgee of Investor Securities with the
same rights as it would have if it were not the Trustee.
Section 11.5 The Servicer To Pay Trustee's Fees and Expenses.
The Servicer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to receive, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by
it in the execution of the trust hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and
the Servicer will pay or reimburse the Trustee upon its request for all
reasonable expenses (including, without limitation, expenses incurred in
connection with notices or other communications to Securityholders),
disbursements and advances incurred or made by the Trustee in accordance
with any of the provisions of this Agreement or any Enhancement Agreement
(including the reasonable fees and expenses of its agents, any co-trustee
and counsel) except any such expense, disbursement or advance as may arise
from its negligence or bad faith and except as provided in the following
sentence. If the Trustee is appointed Successor Servicer pursuant to
Section 10.2, the provisions of this Section shall not apply to expenses,
disbursements and advances made or incurred by the Trustee in its capacity
as Successor Servicer, which shall be paid out of the Servicing Fee. The
Servicer's covenant to pay the expenses, disbursements and advances
provided for in this Section shall survive the termination of this
Agreement or the earlier resignation or removal of the Trustee.
Section 11.6 Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business
under the laws of the United States or any state thereof authorized under
such laws to exercise corporate trust powers, have a net worth of at least
$50,000,000, be subject to supervision or examination by Federal or state
authority and maintain any credit or deposit rating required by any Rating
Agency (which shall be Baa3, in the case of Moody's unless otherwise
notified, BBB- in the case of Standard & Poor's unless otherwise notified
and BBB- in the case of Fitch unless otherwise notified) or any higher
credit or deposit rating required in connection with the issuance of a
particular Series. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then, for the purpose of this Section,
the combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee
shall resign immediately in the manner and with the effect specified in
Section 11.7. The Trustee shall not be an Affiliate of the Transferor or
the Servicer.
Section 11.7 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the Transferor
and the Servicer. Upon receiving such notice of resignation, the
Transferor shall promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered
to the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for
the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.6 and shall fail to resign
after request therefor by the Servicer, or if at any time the Trustee shall
be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
if a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer may remove the Trustee and promptly appoint
a successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee.
(c) Any resignation or removal of the Trustee and appointment of
successor trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor
trustee as provided in Section 11.8.
(d) No Trustee under this Agreement shall be personally liable
for any action or omission of any successor trustee.
Section 11.8 Successor Trustee.
(a) Any successor trustee appointed as provided in Section 11.7
shall execute, acknowledge and deliver to the Transferor, to the Servicer
and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor
Trustee shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as Trustee herein. The predecessor
Trustee shall deliver, at the expense of the Servicer, to the successor
trustee all documents or copies thereof and statements held by it
hereunder; and the Transferor and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the successor
trustee all such rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 11.6.
(c) Notwithstanding any other provisions herein, the appointment
of a successor trustee shall not be effective unless the Rating Agency
Condition shall have been satisfied.
(d) Upon acceptance of appointment by a successor trustee as
provided in this Section, such successor trustee shall provide notice of
such succession hereunder to all Securityholders and the Servicer shall
provide such notice to the Rating Agency and each Series Enhancer.
Section 11.9 Merger or Consolidation of Trustee. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such corporation shall be
eligible under the provisions of Section 11.6, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
Section 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at
any time, for the purpose of meeting any Requirements of Law of any
jurisdiction in which any part of the Trust may at the time be located, the
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more persons to act as a co-trustee or co-trustees, or
separate trustee or separate trustees, of all or any part of the Trust, and
to vest in such Person or Persons, in such capacity and for the benefit of
the Securityholders, such title to the Trust, or any part thereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 11.6
and no notice to Securityholders of the appointment of any co-trustee or
separate trustee shall be required under Section 11.8; provided that the
Trustee, or the Servicer on behalf of the Trustee, shall provide written
notice to the Rating Agency of the appointment of any co-trustee or
separate trustee pursuant to the Section within five Business Days of any
such appointment.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act) except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as Successor Servicer) the Trustee
shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the
holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no co-trustee or separate trustee hereunder shall be liable
by reason of any act or omission of any other trustee hereunder and
the Trustee shall not be liable by reason of any act or omission of
any co-trustee or separate trustee appointed by the Trustee with due
care; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article. Each separate trustee
and co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument of
appointment, either jointly with the Trustee or separately, as may be
provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the
conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee and a copy
thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Agreement on its behalf and in its name. If any
separate trustee or co-trustee shall die, become incapable of acting,
resign or be removed, all its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
Section 11.11 Tax Returns. In the event the Trust shall be
required to file tax returns, the Servicer shall prepare or shall cause to
be prepared any tax returns required to be filed by the Trust and shall
remit such returns to the Trustee for signature (if it is determined that
the Trustee is required to sign such returns) at least five days before
such returns are due to be filed; the Trustee shall promptly sign such
returns and deliver such returns after signature to the Servicer and such
returns shall be filed by the Servicer. The Servicer in accordance with
the terms of each Supplement shall also prepare or shall cause to be
prepared all tax information required by law to be distributed to Investor
Securityholders. The Trustee upon request, will furnish the Servicer with
all such information known to the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust. In no
event shall the Trustee or the Servicer (except as provided in Section 8.4)
be liable for any liabilities, costs or expenses of the Trust or the
Holders of Investor Securities arising under any tax law, including without
limitation Federal, state, local or foreign income or excise taxes or any
other tax imposed or measured by income (or any interest or penalty with
respect thereto or arising from a failure to comply therewith).
Section 11.12 Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Agreement or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, be for the ratable benefit of the Securityholders in
respect of which such judgment has been obtained.
Section 11.13 Suits for Enforcement.
(a) If a Servicer Default shall occur and be continuing, the
Trustee, in its discretion may, subject to the provisions of Sections 11.1
and 11.14, proceed to protect and enforce its rights and the rights of the
Securityholders under this Agreement by suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the
execution of any power granted in this Agreement or for the enforcement of
any other legal, equitable or other remedy as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights
of the Trustee or the Securityholders.
(b) Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Investor Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.
Section 11.14 Rights of Securityholders To Direct Trustee.
Except as otherwise provided in the applicable Supplement, holders of
Investor Securities evidencing more than 50% of the aggregate unpaid
principal amount of all Investor Securities (or, with respect to any
remedy, trust or power that does not relate to all Series, 50% of the
aggregate unpaid principal amount of the Investor Securities of all Series
to which such remedy, trust or power relates) shall have the right to
direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee; provided, however, that, subject to Section 11.1, the
Trustee shall have the right to decline to follow any such direction if the
Trustee after being advised by counsel determines that the action so
directed may not lawfully be taken, or if a Responsible Officer or Officers
of the Trustee in good faith shall determine that the proceedings so
directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Investor Securityholders not parties to such
direction; and provided further, that nothing in this Agreement shall
impair the right of the Trustee to take any action deemed proper by the
Trustee and which is not inconsistent with such direction of the Investor
Securityholders.
Section 11.15 Representations and Warranties of Trustee. The
Trustee represents and warrants that:
(i) the Trustee is a banking corporation organized, existing and
in good standing under the laws of State of New York;
(ii) the Trustee has full power, authority and right to
execute, deliver and perform this Agreement and each Supplement, and
has taken all necessary action to authorize the execution, delivery
and performance by it of this Agreement and each Supplement;
(iii) this Agreement and each Supplement has been duly executed
and delivered by the Trustee;
(iv) the Trustee meets the eligibility requirements set forth in
Section 11.6; and
(v) the Trustee will not use any office, place of business,
agents or employees of the Trustee in the State of Florida to act for, or
on behalf of, the Trust or the Trustee (in its capacity as Trustee of the
Trust), except to the extent that the Trustee first provides an opinion (at
the sole expense of the Transferor) of counsel satisfactory to the Servicer
stating that any such activities proposed to be carried on in Florida will
not cause the Trust to be subject to any Florida income or franchise tax.
Section 11.16 Maintenance of Office or Agency. The Trustee will
maintain at its expense an office or agency (the "Corporate Trust Office")
where notices and demands to or upon the Trustee in respect of the
Securities and this Agreement may be served in the State of New York. The
Trustee maintains its Corporate Trust Office at 101 Barclay Street 12E, New
York, NY 10286, as such office and will give prompt notice to the Servicer
and to Investor Securityholders of any change in the location of the
Security Register or any such office or agency.
[END OF ARTICLE XI]
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust. The Trust and the respective
obligations and responsibilities of the Transferor, the Servicer and the
Trustee created hereby (other than the obligation of the Trustee to make
payments to Investor Securityholders as hereinafter set forth) shall
terminate, except with respect to the duties described in Section 8.4 and
subsection 12.2(b), upon the earlier of (i) December 31, 2059, (ii) at the
option of the Transferor, the day following the Distribution Date on which
the Invested Amount for each Series is zero and (iii) the time provided in
Section 9.1.
Section 12.2 Final Distribution.
(a) The Servicer shall give the Trustee at least 30 days' prior
notice of the Distribution Date on which the Investor Securityholders of
any Series or Class may surrender their Investor Securities for payment of
the final distribution on and cancellation of such Investor Securities (or,
in the event of a final distribution resulting from the application of
Section 2.6, 9.1 or 10.1, notice of such Distribution Date promptly after
the Servicer has determined that a final distribution will occur, if such
determination is made less than 30 days prior to such Distribution Date).
Such notice shall be accompanied by an Officer's Certificate setting forth
the information specified in Section 3.5 covering the period during the
then-current calendar year through the date of such notice. Not later than
the fifth day of the month in which the final distribution in respect of
such Series or Class is payable to Investor Securityholders, the Trustee
shall provide notice to Investor Securityholders of such Series or Class
specifying (i) the date upon which final payment of such Series or Class
will be made upon presentation and surrender of Investor Securities of such
Series or Class at the office or offices therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such payment date is not applicable, payments being made only
upon presentation and surrender of such Investor Securities at the office
or offices therein specified (which, in the case of Bearer Securities,
shall be outside the United States). The Trustee shall give such notice to
the Transfer Agent and Registrar and the Paying Agent at the time such
notice is given to Investor Securityholders.
(b) Notwithstanding a final distribution to the Investor
Securityholders of any Series or Class (or the termination of the Trust),
except as otherwise provided in this paragraph, all funds then on deposit
in the Collection Account and any Series Account allocated to such Investor
Securityholders shall continue to be held in trust for the benefit of such
Investor Securityholders and the Paying Agent or the Trustee shall pay such
funds to such Investor Securityholders upon surrender of their Investor
Securities, if certificated (and any excess shall be paid in accordance
with the terms of any Enhancement Agreement). In the event that all such
Investor Securityholders shall not surrender their Investor Securities for
cancellation within six months after the date specified in the notice from
the Trustee described in paragraph (a), the Trustee shall give a second
notice to the remaining such Investor Securityholders to surrender their
Investor Securities for cancellation and receive the final distribution
with respect thereto (which surrender and payment, in the case of Bearer
Securities, shall be outside the United States). If within one year after
the second notice all such Investor Securities shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or
may appoint an agent to take appropriate steps, to contact the remaining
such Investor Securityholders concerning surrender of their Investor
Securities, and the cost thereof shall be paid out of the funds in the
Collection Account or any Series Account held for the benefit of such
Investor Securityholders. The Trustee and the Paying Agent shall pay to
the Transferor any monies held by them for the payment of principal or
interest that remains unclaimed for two years. After payment to the
Transferor, Investor Securityholders entitled to the money must look to the
Transferor for payment as general creditors unless an applicable abandoned
property law designates another Person.
(c) In the event that the Invested Amount with respect to any
Series is greater than zero on its Series Termination Date (after giving
effect to deposits and distributions otherwise to be made on such Series
Termination Date), the Trustee will sell or cause to be sold on such Series
Termination Date an amount of Principal Receivables (or interests therein)
equal to 110% of the Invested Amount with respect to such Series on such
Series Termination Date plus related Finance Charge Receivables (after
giving effect to such deposits and distributions); provided, however, that
in no event shall such amount exceed the product of (i) the aggregate
Principal Receivables on such Series Termination Date and (ii) a fraction
the numerator of which is the product of (x) the Adjusted Invested Amount
for such Series and (y) the Transferor's Percentage for such Series and the
denominator of which is the sum of the numerators with respect to all
Series. The proceeds (the "Termination Proceeds") from such sale shall be
immediately deposited into the Collection Account for such Series. The
Termination Proceeds shall be allocated and distributed to Investor
Securityholders of such Series in accordance with the terms of the
applicable Supplement.
Section 12.3 The Transferor's Termination Rights. Upon the
termination of the Trust pursuant to Section 12.1 and the surrender of the
Transferor Securities, the Trustee shall sell, assign and convey to the
Holders of the Transferor Securities or any of their designees, without
recourse, representation or warranty, all right, title and interest of the
Trust in the Receivables, whether then existing or thereafter created, all
monies due or to become due and all amounts received with respect thereto
(including all moneys then held in the Collection Account or any Series
Account) and all proceeds thereof, except for amounts held by the Trustee
pursuant to subsection 12.2(b). The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without recourse, as
shall be reasonably requested by the Transferor to vest in the Holders of
the Transferor Securities or any of their designees all right, title and
interest which the Trust had in the Receivables.
[END OF ARTICLE XII]
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment; Waiver of Past Defaults.
(a) This Agreement or any Supplement may be amended from time to
time (including in connection with the issuance of a Supplemental Security,
conveyance of a Participation Interest, allocation of assets pursuant to
Section 4.6, or to change the definition of Monthly Period, Determination
Date or Distribution Date) by the Servicer, the Transferor and the Trustee,
by a written instrument signed by each of them, without the consent of any
of the Securityholders, provided that (i) an Opinion of Counsel for the
Transferor (which Opinion of Counsel may, as to factual matters, rely upon
Officer's Securities of the Transferor or the Servicer) is addressed and
delivered to the Trustee, dated the date of any such amendment, to the
effect that the conditions precedent to any such amendment have been
satisfied, (ii) the Transferor shall have delivered to the Trustee an
Officer's Certificate, dated the date of any such Amendment, stating that
the Transferor reasonably believes that such amendment will not have an
Adverse Effect and (iii) the Rating Agency Condition shall have been
satisfied with respect to any such amendment.
(b) This Agreement or any Supplement may also be amended from
time to time (including in connection with the issuance of a Supplemental
Security) by the Servicer, the Transferor and the Trustee, with the
consent of the Holders of Investor Securities evidencing not less than 66-
2/3% of the aggregate unpaid principal amount of the Investor Securities of
all affected Series for which the Transferor has not delivered an Officer's
Certificate stating that there is no Adverse Effect, for the purpose of
adding any provisions to or changing in any manner or eliminating any of
the provisions of this Agreement or any Supplement or of modifying in any
manner the rights of the Securityholders; provided, however, that no such
amendment shall (i) reduce in any manner the amount of or delay the timing
of any distributions to (changes in Pay Out Events or Reinvestment Events
that decrease the likelihood of the occurrence thereof shall not be
considered delays in the timing of distributions for purposes of this
clause) be made to Investor Securityholders or deposits of amounts to be so
distributed or the amount available under any Series Enhancement without
the consent of each affected Securityholder, (ii) change the definition of
or the manner of calculating the interest of any Investor Securityholder
without the consent of each affected Investor Securityholder, (iii) reduce
the aforesaid percentage required to consent to any such amendment without
the consent of each Investor Securityholder, or (iv) adversely affect the
rating of any Series or Class by any Rating Agency without the consent of
the Holders of Investor Securities of such Series or Class evidencing not
less than 66-2/3% of the aggregate unpaid principal amount of the Investor
Securities of such Series or Class; provided, further however, that the
Transferor shall have delivered to the Trustee a Tax Opinion to the Trustee
with respect to any such amendment prior to the effectiveness thereof.
(c) Promptly after the execution of any such amendment or
consent (other than an amendment pursuant to paragraph (a)), the Trustee
shall furnish notification of the substance of such amendment to each
Investor Securityholder, and the Servicer shall furnish notification of the
substance of such amendment to the Rating Agency and each Series Enhancer.
(d) It shall not be necessary for the consent of Investor
Securityholders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Investor
Securityholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(e) Notwithstanding anything in this Section to the contrary, no
amendment may be made to this Agreement or any Supplement which would
adversely affect in any material respect the interests of any Series
Enhancer without the consent of such Series Enhancer.
(f) Any Supplement executed in accordance with the provisions of
Section 6.3 shall not be considered an amendment to this Agreement for the
purposes of this Section.
(g) The Holders of Investor Securities evidencing more than 66-
2/3% of the aggregate unpaid principal amount of the Investor Securities of
each Series or, with respect to any Series with two or more Classes, of
each Class (or, with respect to any default that does not relate to all
Series, 66-2/3% of the aggregate unpaid principal amount of the Investor
Securities of each Series to which such default relates or, with respect to
any such Series with two or more Classes, of each Class) may, on behalf of
all Securityholders, waive any default by the Transferor or the Servicer in
the performance of their obligations hereunder and its consequences, except
the failure to make any distributions required to be made to Investor
Securityholders or to make any required deposits of any amounts to be so
distributed. Upon any such waiver of a past default, such default shall
cease to exist, and any default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon except to the extent expressly so waived. The Servicer shall
provide written notice to the Rating Agencies of any waiver pursuant to
this subsection 13.1(g).
(h) The Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Trustee's rights, duties or immunities
under this Agreement or otherwise. In connection with the execution of any
amendment hereunder, the Trustee shall be entitled to receive the Opinion
of Counsel described in subsection 13.2(d).
Section 13.2 Protection of Right, Title and Interest to Trust.
(a) The Servicer shall cause this Agreement, all amendments and
supplements hereto and all financing statements and continuation statements
and any other necessary documents covering the Securityholders' and the
Trustee's right, title and interest to the Trust to be promptly recorded,
registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law
fully to preserve and protect the right, title and interest of the
Securityholders and the Trustee hereunder to all property comprising the
Trust. The Servicer shall deliver to the Trustee file-stamped copies of,
or filing receipts for, any document recorded, registered or filed as
provided above, as soon as available following such recording, registration
or filing. The Transferor shall cooperate fully with the Servicer in
connection with the obligations set forth above and will execute any and
all documents reasonably required to fulfill the intent of this paragraph.
(b) Within 30 days after the Transferor makes any change in its
name, identity or corporate structure which would make any financing
statement or continuation statement filed in accordance with paragraph (a)
seriously misleading within the meaning of Section 9-402(7) (or any
comparable provision) of the UCC, such Transferor shall give the Trustee
notice of any such change and shall file such financing statements or
amendments as may be necessary to continue the perfection of the Trust's
security interest or ownership interest in the Receivables and the proceeds
thereof.
(c) The Transferor and the Servicer shall give the Trustee
prompt notice of any relocation of any office from which it services
Receivables or keeps records concerning the Receivables or of its principal
executive office and whether, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement and shall file such financing statements or amendments
as may be necessary to perfect or to continue the perfection of the Trust's
security interest in the Receivables and the proceeds thereof. The
Transferor and the Servicer shall at all times maintain each office from
which it services Receivables and its principal executive offices within
the United States.
(d) The Servicer shall deliver to the Trustee (i) upon the
execution and delivery of each amendment of this Agreement or any
Supplement, an Opinion of Counsel to the effect specified in Exhibit E-1;
(ii) on each date specified in subsection 2.9(c)(ix) with respect to
Aggregate Additions to be designated as Accounts, an Opinion of Counsel
substantially in the form of Exhibit E-2, (iii) semiannually, with respect
to any New Accounts included as Accounts, an Opinion of Counsel
substantially in the form of Exhibit E-2, (iv) on each Addition Date on
which any Participation Interests are to be included in the Trust pursuant
to subsection 2.9(a) or (b), an Opinion of Counsel covering the same
substantive legal issues addressed by Exhibits E-1 and E-2 but conformed to
the extent appropriate to relate to Participation Interests; and (v) on or
before March 31 of each year, beginning with March 31, 1998, an Opinion of
Counsel substantially in the form of Exhibit E-3.
Section 13.3 Limitation on Rights of Securityholders.
(a) The death or incapacity of any Investor Securityholder shall
not operate to terminate this Agreement or the Trust, nor shall such death
or incapacity entitle such Securityholder's legal representatives or heirs
to claim an accounting or to take any action or commence any proceeding in
any court for a partition or winding up of the Trust, nor otherwise affect
the rights, obligations and liabilities of the parties hereto or any of
them.
(b) No Investor Securityholder shall have any right to vote
(except as expressly provided in this Agreement) or in any manner otherwise
control the operation and management of the Trust, or the obligations of
the parties hereto, nor shall any Investor Securityholder be under any
liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(c) No Investor Securityholder shall have any right by virtue of
any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Investor Securityholder previously shall have made,
and unless the Holders of Investor Securities evidencing more than 50% of
the aggregate unpaid principal amount of all Investor Securities (or, with
respect to any such action, suit or proceeding that does not relate to all
Series, 50% of the aggregate unpaid principal amount of the Investor
Securities of all Series to which such action, suit or proceeding relates)
shall have made, a request to the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to
the Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the
Trustee, for 60 days after such request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding; it
being understood and intended, and being expressly covenanted by each
Investor Securityholder with every other Investor Securityholder and the
Trustee, that no one or more Investor Securityholders shall have any right
in any manner whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb or prejudice the rights of
the holders of any other of the Investor Securities, or to obtain or seek
to obtain priority over or preference to any other such Investor
Securityholder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Investor Securityholders except as otherwise expressly provided in this
Agreement. For the protection and enforcement of the provisions of this
Section, each and every Investor Securityholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
SECTION 13.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 13.5 Notices; Payments.
(a) All demands, notices, instructions, directions and
communications (collectively, "Notices") under this Agreement shall be in
writing and shall be deemed to have been duly given if personally delivered
at, mailed by registered mail, return receipt requested, or sent by
facsimile transmission (i) in the case of the Transferor, to Partners First
Receivables Funding, LLC, at 900 Elkridge Landing Road, Suite 300,
Linthicum, Maryland 21090 -- Attention: John R. Soderlund (facsimile no.
(410) 855-8599), (ii) in the case of the Servicer, to Partners First
Holdings, LLC, at 900 Elkridge Landing Road, Suite 300, Linthicum, Maryland
21090 -- Attention: John R. Soderlund (facsimile no. (410) 855-8599), (iii)
in the case of the Trustee, the Paying Agent or Transfer Agent and
Registrar, to The Bank of New York at 101 Barclay Street 12E, New York, NY
10286, Attention: Corporate Trust Department (facsimile no (212) 815-5544
), (iv) in the case of Moody's, to 99 Church Street, New York, New York
10007, Attention: ABS Monitoring Department, 4th Floor (facsimile no. (212)
553-4600), (v) in the case of Standard & Poor's, to 26 Broadway, New York,
New York 10004, Attention: Asset Backed Group, 15th Floor (facsimile no.
(212) 412-0323), (vi) in the case of Fitch, to One State Street Plaza, New
York, New York, Attention: Structured Finance Department (facsimile no.
(212) 480-4438), and (vii) to any other Person as specified in any
Supplement; or, as to each party, at such other address or facsimile number
as shall be designated by such party in a written notice to each other
party.
(b) Any Notice required or permitted to be given to a Holder of
Registered Securities shall be given by first-class mail, postage prepaid,
at the address of such Holder as shown in the Security Register. No Notice
shall be required to be mailed to a Holder of Bearer Securities or Coupons
but shall be given as provided below. Any Notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Investor Securityholder receives such
Notice. In addition, (a) if and so long as any Series or Class is listed
on the Luxembourg Stock Exchange and such Exchange shall so require, any
Notice to Investor Securityholders shall be published in an Authorized
Newspaper of general circulation in Luxembourg within the time period
prescribed in this Agreement and (b) in the case of any Series or Class
with respect to which any Bearer Securities are outstanding, any Notice
required or permitted to be given to Investor Securityholders of such
Series or Class shall be published in an Authorized Newspaper within the
time period prescribed in this Agreement.
Section 13.6 Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall for
any reason whatsoever be held invalid, then such provisions shall be deemed
severable from the remaining provisions of this Agreement and shall in no
way affect the validity or enforceability of the remaining provisions or of
the Securities or the rights of the Securityholders.
Section 13.7 Securities Nonassessable and Fully Paid. It is
the intention of the parties to this Agreement that the Securityholders
shall not be personally liable for obligations of the Trust, that the
interests in the Trust represented by the Securities shall be nonassessable
for any losses or expenses of the Trust or for any reason whatsoever and
that the Securities upon authentication and delivery thereof by the Trustee
pursuant to Section 6.2 are and shall be deemed fully paid.
Section 13.8 Further Assurances. The Transferor and the
Servicer agree to do and perform, from time to time, any and all acts and
to execute any and all further instruments required or reasonably requested
by the Trustee more fully to effect the purposes of this Agreement,
including the execution of any financing statements or continuation
statements relating to the Receivables for filing under the provisions of
the UCC of any applicable jurisdiction.
Section 13.9 Nonpetition Covenant. Notwithstanding any prior
termination of this Agreement, the Investor Securityholders, the Servicer,
the Trustee, the Transferor, the Paying Agent, the Authenticating Agent,
the Transfer Agent, the Registrar, the Series Enhancers and each Holder of
a Supplemental Security shall not, prior to the date which is one year and
one day after the termination of this Agreement with respect to the Trust
or the Transferor, acquiesce, petition or otherwise invoke or cause the
Trust or the Transferor to invoke the process of any Governmental Authority
for the purpose of commencing or sustaining a case against the Trust or the
Transferor under any Federal or state bankruptcy, insolvency or similar law
or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Trust or the Transferor or
any substantial part of its property or ordering the winding-up or
liquidation of the affairs of the Trust or the Transferor.
Section 13.10 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee or the
Securityholders, any right, remedy, power or privilege under this Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
provided under this Agreement are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 13.11 Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.
Section 13.12 Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Securityholders, any Series Enhancer and their respective successors and
permitted assigns. Except as otherwise expressly provided in this
Agreement (including Section 7.4), no other Person will have any right or
obligation hereunder.
Section 13.13 Actions by Securityholders.
(a) Wherever in this Agreement a provision is made that an
action may be taken or a Notice given by Securityholders, such action or
Notice may be taken or given by any Securityholder, unless such provision
requires a specific percentage of Securityholders.
(b) Any Notice, request, authorization, direction, consent,
waiver or other act by the Holder of a Security shall bind such Holder and
every subsequent Holder of such Security and of any Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done or omitted to be done by the Trustee or
the Servicer in reliance thereon, whether or not notation of such action is
made upon such Security.
Section 13.14 Rule 144A Information. For so long as any of the
Investor Securities of any Series or Class are "restricted securities"
within the meaning of Rule 144(a)(3) under the Act, each of the Transferor,
the Trustee, the Servicer and any Series Enhancer agree to cooperate with
each other to provide to any Investor Securityholders of such Series or
Class and to any prospective purchaser of Securities designated by such an
Investor Securityholder, upon the request of such Investor Securityholder
or prospective purchaser, any information required to be provided to such
holder or prospective purchaser to satisfy the condition set forth in Rule
144A(d)(4) under the Act.
Section 13.15 Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding
of the parties relating to the subject matter hereof, and all prior
understandings, written or oral, are superseded by this Agreement. This
Agreement may not be modified, amended, waived or supplemented except as
provided herein.
Section 13.16 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
[END OF ARTICLE XIII]
IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee
have caused this Amended and Restated Pooling and Servicing Agreement to be
duly executed by their respective officers as of the day and year first
above written.
PARTNERS FIRST RECEIVABLES
FUNDING, LLC,
Transferor,
by /s/ Mark J. Norwicz
---------------------------
Name: Mark J. Norwicz
Title: Treasurer
PARTNERS FIRST HOLDINGS, LLC
Servicer,
by /s/ John R. Soderlund
---------------------------
Name: John R. Soderlund
Title: President and Chief
Executive Officer
THE BANK OF NEW YORK,
Trustee
by /s/ Wuhan Dansby
---------------------------
Name: Wuhan Dansby
Title: Assistant Vice President
EXHIBIT A
FORM OF TRANSFEROR SECURITY
THIS TRANSFEROR SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS TRANSFEROR SECURITY NOR
ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM SUCH REGISTRATION PROVISIONS.
THIS TRANSFEROR SECURITY IS NOT PERMITTED TO BE TRANSFERRED,
ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE
WITH THE TERMS OF THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
No. R-1 One Unit
PARTNERS FIRST CREDIT CARD MASTER TRUST
TRANSFEROR SECURITY
THIS SECURITY REPRESENTS AN INTEREST
IN CERTAIN ASSETS OF THE
PARTNERS FIRST CREDIT CARD MASTER TRUST
Evidencing an interest in a trust, the corpus of which consists primarily
of an interest in receivables generated from time to time in the ordinary
course of business in a portfolio of revolving credit card accounts
transferred by Partners First Receivables Funding, LLC (the "Transferor").
(Not an interest in or obligation of the Transferor
or any affiliate thereof)
This certifies that PARTNERS FIRST RECEIVABLES FUNDING, LLC
("PFRF") is the registered owner of a fractional interest in the assets of
Partners First Credit Card Master Trust, a trust organized under the laws
of Delaware (the "Trust") not allocated to the Securityholders' Interest or
the interest of any Holder of a Supplemental Security pursuant to the
Pooling and Servicing Agreement dated as of January 29, 1998 (as amended
and supplemented, the "Agreement"), among PFRF, a Delaware limited
liability company, as Transferor, Partners First Holdings, LLC, as servicer
(the "Servicer"), and The Bank of New York, a New York banking corporation,
as trustee (the "Trustee"). The corpus of the Trust consists of (i) the
Transferor's fractional undivided interest in a portfolio of certain
receivables (the "Receivables") existing in the revolving credit card
accounts identified under the Agreement from time to time (the "Accounts"),
(ii) certain Receivables generated under the Accounts from time to time
thereafter, (iii) certain funds collected or to be collected from
accountholders in respect of the Receivables, (iv) all funds which are from
time to time on deposit in the Collection Account, Special Funding Account
and in the Series Accounts, (v) the benefits of any Series Enhancements
issued and to be issued by Series Enhancers with respect to one or more
Series of Investor Securities and (vi) all other assets and interests
constituting the Trust, including Interchange and Recoveries allocated to
the Trust pursuant to the Agreement and any Supplement. Although a summary
of certain provisions of the Agreement is set forth below, this Security
does not purport to summarize the Agreement and reference is made to the
Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties
and obligations of the Trustee. A copy of the Agreement may be requested
from the Trustee by writing to the Trustee at the Corporate Trust Office.
To the extent not defined herein, the capitalized terms used herein have
the meanings ascribed to them in the Agreement.
This Security is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended
and supplemented from time to time, the Transferor by virtue of the
acceptance hereof assents and is bound.
The Receivables consist of Principal Receivables which arise
generally from the purchase of merchandise and services and amounts
advanced to cardholders as cash advances and Finance Charge Receivables
which arise generally from Periodic Finance Charges, Late Fees and other
fees and charges with respect to the Accounts.
This Security is the Transferor Security, which represents the
Transferor's interest in certain assets of the Trust, including the right
to receive a portion of the Collections and other amounts at the times and
in the amounts specified in the Agreement. The aggregate interest
represented by the Transferor Security at any time in the Receivables in
the Trust shall not exceed the Transferor's Interest at such time. In
addition to the Transferor Security, (i) Investor Securities will be issued
to investors pursuant to the Agreement, which will represent the
Securityholders' Interest, and (ii) Supplemental Securities may be issued
pursuant to the Agreement, which will represent that portion of the
Transferor's Interest not allocated to the Transferor. This Transferor
Security shall not represent any interest in the Collection Account, the
Special Funding Account or the Series Accounts, except as expressly
provided in the Agreement, or any Series Enhancements.
Unless otherwise specified in a Supplement with respect to a
particular Series the Transferor has entered into the Agreement, and this
Security is issued, with the intention that, for federal, state and local
income and franchise tax purposes, (i) the Investor Securities of each
Series which are characterized as indebtedness at the time of their
issuance will qualify as indebtedness of the Transferor secured by the
Receivables and (ii) the Trust shall not be treated as an association
taxable as a corporation. The Transferor, by entering into the Agreement
and by the acceptance of this Transferor Security, agrees to treat the
Investor Securities for federal, state and local income and franchise tax
purposes as indebtedness of the Transferor.
Subject to certain conditions and exceptions specified in the
Agreement, the obligations created by the Agreement and the Trust created
thereby shall terminate upon the earlier of (i) December 31, 2059, (ii) the
day following the Distribution Date on which the Invested Amount and
Enhancement Invested Amount for each Series is zero (provided the
Transferor has delivered a written notice to the Trustee electing to
terminate the Trust) and (iii) the time provided in Section 12.1 of the
Agreement.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Security shall
not be entitled to any benefit under the Agreement or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused this Security to be
duly executed.
PARTNERS FIRST RECEIVABLES
FUNDING, LLC
By ___________________________
Name:
Title:
Dated: [_________ __, ____]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Transferor Security described in the within-mentioned
Agreement.
The Bank of New York,
as Trustee,
By _______________________
Authorized Signatory
or
By [_______________________],
as Authenticating Agent
for the Trustee,
By ________________________
Authorized Signatory
EXHIBIT B
FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS
(As required by Section 2.9 of
the Pooling and Servicing Agreement)
ASSIGNMENT No. OF RECEIVABLES IN ADDITIONAL ACCOUNTS dated
as of ,1/ , by and among PARTNERS FIRST RECEIVABLES FUNDING, LLC, a
Delaware limited liability company, as Transferor (the "Transferor"),
PARTNERS FIRST HOLDINGS, LLC, as servicer (the "Servicer"), and THE BANK OF
NEW YORK, a New York banking corporation not in its individual capacity but
solely as trustee (the "Trustee"), pursuant to the Pooling and Servicing
Agreement referred to below.
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1/ To be dated as of the applicable Addition Date.
WITNESSETH
WHEREAS the Transferor and the Trustee are parties to the Pooling
and Servicing Agreement dated as of January 29, 1998 (as amended and
supplemented, the "Agreement");
WHEREAS, pursuant to the Agreement, the Transferor wishes to
designate Additional Accounts owned by the Transferor to be included as
Accounts and to convey the Receivables of such Additional Accounts, whether
now existing or hereafter created, to the Trust as part of the corpus of
the Trust (as each such term is defined in the Agreement); and
WHEREAS the Trustee is willing to accept such designation and
conveyance subject to the terms and conditions hereof;
NOW, THEREFORE, the Transferor and the Trustee hereby agree as
follows:
1. Defined Terms. All capitalized terms used herein shall have
the meanings ascribed to them in the Agreement unless otherwise defined
herein.
"Addition Date" shall mean, with respect to the Additional
Accounts designated hereby, , .
"Addition Cut-Off Date" shall mean, with respect to the
Additional Accounts designated hereby, , .
2. Designation of Additional Accounts. On or before the
Document Delivery Date, the Transferor will deliver to the Trustee a
computer file, microfiche list or printed list containing a true and
complete schedule identifying all such Additional Accounts specifying for
each such Account, as of the Addition Cut-Off Date, its account number, the
aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables outstanding in such Account, which computer file,
microfiche list or printed list shall supplement Schedule I to the
Agreement.
3. Conveyance of Receivables. (a) The Transferor does hereby
sell, transfer, assign, set over and otherwise convey, without recourse
except as set forth in the Pooling and Servicing Agreement, to the Trustee,
on behalf of the Trust, for the benefit of the Securityholders, all its
right, title and interest in, to and under the Receivables of such
Additional Accounts existing at the close of business on the Addition Date
and thereafter created from time to time until the termination of the
Trust, all monies due or to become due and all amounts received with
respect thereto and all proceeds (including "proceeds" as defined in the
UCC) thereof. The foregoing does not constitute and is not intended to
result in the creation or assumption by the Trust, the Trustee, any
Investor Securityholder or any Series Enhancer of any obligation of the
Servicer, the Transferor or any other Person in connection with the
Accounts, the Receivables or under any agreement or instrument relating
thereto, including any obligation to Obligors, merchant banks, merchants
clearance systems, VISA, MasterCard or insurers.
(b) The Transferor agrees to record and file, at its own
expense, financing statements (and continuation statements when applicable)
with respect to the Receivables now in Additional Accounts, meeting the
requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect, and maintain perfection of, the
sale and assignment of its interest in such Receivables to the Trust, and
to deliver a file-stamped copy of each such financing statement or other
evidence of such filing to the Trustee on or prior to the Addition Date.
The Trustee shall be under no obligation whatsoever to file such financing
or continuation statements or to make any other filing under the UCC in
connection with such sale and assignment.
(c) In connection with such sale, the Transferor further
agrees, at its own expense, on or prior to the date of this Assignment, to
indicate in the appropriate computer files that Receivables created in
connection with the Additional Accounts and designated hereby have been
conveyed to the Trust pursuant to the Agreement and this Assignment for the
benefit of the Securityholders.
(d) The Transferor does hereby grant to the Trustee a
security interest in all of its right, title and interest, whether now
owned or hereafter acquired, in and to the Receivables now existing and
hereafter created in the Additional Accounts, all monies due or to become
due and all amounts received with respect thereto and all "proceeds"
(including "proceeds" as defined in the UCC) thereof. This Assignment
constitutes a security agreement under the UCC.
4. Acceptance by Trustee. The Trustee hereby acknowledges its
acceptance on behalf of the Trust of all right, title and interest to the
property, now existing and hereafter created, conveyed to the Trust
pursuant to Section 3(a) of this Assignment, and declares that it shall
maintain such right, title and interest, upon the trust set forth in the
Agreement for the benefit of all Securityholders. The Trustee further
acknowledges that, prior to or simultaneously with the execution and
delivery of this Assignment, the Transferor delivered to the Trustee the
computer file, microfiche list or printed list described in Section 2 of
this Assignment.
5. Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, as of the date of this Assignment and as of the Addition Date that:
(a) Legal Valid and Binding Obligation. This Assignment
constitutes a legal, valid and binding obligation of the Transferor
enforceable against the Transferor in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in
equity);
(b) Eligibility of Accounts. As of the Addition Cut-Off
Date, each Additional Account designated hereby is an Eligible
Account;
(c) Insolvency. As of each of the Addition Cut-Off Date
and the Addition Date, no Insolvency Event with respect to the
Transferor has occurred and the transfer by the Transferor of
Receivables arising in the Additional Accounts to the Trust has not
been made in contemplation of the occurrence thereof;
(d) Pay Out Event. The Transferor reasonably believes that
(A) the addition of the Receivables arising in the Additional Accounts
will not, based on the facts known to the Transferor, then or
thereafter cause a Pay Out Event to occur with respect to any Series
and (B) no selection procedure was utilized by the Transferor which
would result in the selection of Additional Accounts (from among the
available Eligible Accounts owned by the Transferor) that would be
materially adverse to the interests of the Investor Securityholders of
any Series as of the Addition Date;
(e) Security Interest. This Assignment constitutes a valid
sale, transfer and assignment to the Trust of all right, title and
interest, whether now owned or hereafter acquired, of the Transferor
in the Receivables now existing or hereafter created in the Additional
Accounts, all monies due or to become due and all amounts received
with respect thereto and the "proceeds" (including "proceeds" as
defined in the UCC as in effect in the State of Delaware and other
applicable states) thereof, or, if this Assignment does not constitute
a sale of such property, it constitutes a grant of a "security
interest" (as defined in the UCC as in effect in the State of
Delaware, and other applicable states) in such property to the Trust,
which, in the case of existing Receivables and the proceeds thereof,
is enforceable upon execution and delivery of this Assignment, and
which will be enforceable with respect to such Receivables hereafter
created and the proceeds thereof upon such creation. Upon the filing
of the financing statements described in Section 3 of this Assignment
and, in the case of the Receivables hereafter created and the proceeds
thereof, upon the creation thereof, the Trust shall have a first
priority perfected security or ownership interest in such property;
(f) No Conflict. The execution and delivery by the
Transferor of this Assignment, the performance of the transactions
contemplated by this Assignment and the fulfillment of the terms
hereof applicable to the Transferor, will not conflict with or violate
any Requirements of Law applicable to the Transferor or conflict with,
result in any breach of any of the material terms and provisions of,
or constitute (with or without notice or lapse of time or both) a
material default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which the Transferor is a party
or by which it or its properties are bound;
(g) No Proceedings. There are no proceedings or
investigations, pending or, to the best knowledge of the Transferor,
threatened against the Transferor before any court, regulatory body,
administrative agency or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Assignment, (ii)
seeking to prevent the consummation of any of the transactions
contemplated by this Assignment, (iii) seeking any determination or
ruling that, in the reasonable judgment of the Transferor, would
materially and adversely affect the performance by the Transferor of
its obligations under this Assignment or (iv) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of this Assignment; and
(h) All Consents. All authorizations, consents, orders or
approvals of any court or other governmental authority required to be
obtained by the Transferor in connection with the execution and
delivery of this Assignment by the Transferor and the performance of
the transactions contemplated by this Assignment by the Transferor,
have been obtained.
(i) No Adverse Effect. The assignment by the Transfer will
not result in an Adverse Effect.
6. Ratification of Agreement. As supplemented by this
Assignment, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Assignment shall be read, taken and
construed as one and the same instrument.
7. Counterparts. This Assignment may be executed in two or more
counterparts, and by different parties on separate counterparts, each of
which shall be an original, but all of which shall constitute one and the
same instrument.
8. GOVERNING LAW. THIS ASSIGNMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Transferor and the Trustee have caused
this Assignment to be duly executed by their respective officers as of the
day and year first above written.
PARTNERS FIRST RECEIVABLES
FUNDING, LLC
Transferor,
By ________________________________
Name:
Title:
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee,
By ________________________________
Name:
Title:
EXHIBIT C
FORM OF REASSIGNMENT OF RECEIVABLES IN REMOVED ACCOUNTS
(As required by Section 2.10 of
the Pooling and Servicing Agreement)
REASSIGNMENT No. OF RECEIVABLES dated as of ,1/ by and
among PARTNERS FIRST RECEIVABLES FUNDING, LLC, a Delaware limited liability
company, as Transferor (the "Transferor"), and THE BANK OF NEW YORK, a New
York banking corporation not in its individual capacity but solely as
trustee (the "Trustee"), pursuant to the Pooling and Servicing Agreement
referred to below.
- --------------------
1/ To be dated as of the Removal Date.
WITNESSETH:
WHEREAS the Transferor and the Trustee are parties to the Pooling
and Servicing Agreement dated as of January 29, 1998 (as amended and
supplemented, the "Agreement");
WHEREAS pursuant to the Agreement, the Transferor wishes to
remove from the Trust all Receivables owned by the Trust in certain
designated Accounts owned by the Transferor (the "Removed Accounts") and to
cause the Trustee to reconvey the Receivables of such Removed Accounts,
whether now existing or hereafter created, from the Trust to the
Transferor; and
WHEREAS the Trustee on behalf of the Trust is willing to accept
such designation and to reconvey the Receivables in the Removed Accounts
subject to the terms and conditions hereof;
NOW, THEREFORE, the Transferor and the Trustee hereby agree as
follows:
1. Defined Terms. All terms defined in the Agreement and used
herein shall have such defined meanings when used herein, unless otherwise
defined herein.
"Removal Date" shall mean, with respect to the Removed Accounts
designated hereby, , .
"Removal Notice Date" shall mean, with respect to the Removed
Accounts, , .
2. Designation of Removed Accounts. On or before the date that
is five Business Days after the Removal Date, the Transferor will deliver
to the Trustee a computer file, microfiche list or printed list containing
a true and complete schedule identifying all Accounts the Receivables of
which are being removed from the Trust, specifying for each such Account,
as of the Removal Notice Date, its account number, the aggregate amount
outstanding in such Account and the aggregate amount of Principal
Receivables in such Account, which computer file, microfiche list or
printed list shall supplement Schedule 1 to the Agreement.
3. Conveyance of Receivables. (a) The Trustee does hereby
transfer, assign, set over and otherwise convey to the Transferor, without
recourse, on and after the Removal Date, all right, title and interest of
the Trust in, to and under the Receivables existing at the close of
business on the Removal Date and thereafter created from time to time in
the Removed Accounts designated hereby, all monies due or to become due and
all amounts received with respect thereto and all proceeds thereof.
(b) In connection with such transfer, the Trustee agrees to
execute and deliver to the Transferor on or prior to the date this
Reassignment is delivered, applicable termination statements prepared by
the Transferor with respect to the Receivables existing at the close of
business on the Removal Date and thereafter created from time to time in
the Removed Accounts reassigned hereby and the proceeds thereof evidencing
the release by the Trust of its interest in the Receivables in the Removed
Accounts, and meeting the requirements of applicable state law, in such
manner and such jurisdictions as are necessary to terminate such interest.
4. Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, as of the Removal Date:
(a) Legal Valid and Binding Obligation. This Reassignment
constitutes a legal, valid and binding obligation of the Transferor
enforceable against the Transferor, in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and except as
such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity); and
(b) Pay Out Event. The Transferor reasonably believes that
(A) the removal of the Receivables existing in the Removed Accounts will
not, based on the facts known to the Transferor, then or thereafter cause a
Pay Out Event to occur with respect to any Series and (B) no selection
procedure was utilized by the Transferor which would result in a selection
of Removed Accounts that would be materially adverse to the interests of
the Investor Securityholders of any Series as of the Removal Date.
(c) List of Removed Accounts. The list of Removed Accounts
delivered pursuant to subsection 2.10(ii) of the Agreement, as of the
Removal Date, is true and complete in all material respects.
5. Ratification of Agreement. As supplemented by this
Reassignment, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Reassignment shall be read, taken
and construed as one and the same instrument.
6. Counterparts. This Reassignment may be executed in two or
more counterparts, and by different parties on separate counterparts, each
of which shall be an original, but all of which shall constitute one and
the same instrument.
7. GOVERNING LAW. THIS REASSIGNMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Transferor and the Trustee have caused
this Reassignment to be duly executed by their respective officers as of
the day and year first above written.
PARTNERS FIRST RECEIVABLES
FUNDING, LLC
Transferor
By ________________________________
Title:
THE BANK OF NEW YORK,
not in its individual capacity
but solely as Trustee,
By ________________________________
Title:
EXHIBIT D
FORM OF ANNUAL SERVICER'S CERTIFICATE
(To be delivered on or before June 30, of
each calendar year beginning with June 30, 1999,
pursuant to Section 3.5 of the Pooling and
Servicing Agreement referred to below)
PARTNERS FIRST HOLDINGS, LLC
PARTNERS FIRST CREDIT CARD MASTER TRUST
The undersigned, a duly authorized representative of Partners
First Holdings, LLC, as Servicer ("Holdings"), pursuant to the Pooling and
Servicing Agreement dated as of January 29, 1998 (as amended and
supplemented, the "Agreement"), among Partners First Receivables Funding,
LLC, as Transferor, Holdings, as Servicer, and The Bank of New York, as
Trustee, does hereby certify that:
1. Holdings is, as of the date hereof, the Servicer under the
Agreement. Capitalized terms used in this Certificate have their
respective meanings as set forth in the Agreement.
2. The undersigned is a Servicing Officer who is duly authorized
pursuant to the Agreement to execute and deliver this Certificate to the
Trustee.
3. A review of the activities of the Servicer during the year
ended December 31, ____, and of its performance under the Agreement was
conducted under my supervision.
4. Based on such review, the Servicer has, to the best of my
knowledge, performed in all material respects its obligations under the
Agreement throughout such year and no default in the performance of such
obligations has occurred or is continuing except as set forth in paragraph
5 below.
5. The following is a description of each default in the
performance of the Servicer's obligations under the provisions of the
Agreement known to me to have been made by the Servicer during the year
ended December 31, ____ which sets forth in detail (i) the nature of each
such default, (ii) the action taken by the Servicer, if any, to remedy each
such default and (iii) the current status of each such default: [If
applicable, insert "None."]
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate this ____ day of ________, 19____.
PARTNERS FIRST HOLDINGS, LLC
Servicer,
By ___________________________
Name:
Title:
EXHIBIT E-1
FORM OF OPINION OF COUNSEL
WITH RESPECT TO AMENDMENTS
Provisions to be included in
Opinion of Counsel to be delivered pursuant
to Section 13.2(d)(i
--------------------
The opinions set forth below may be subject to all the
qualifications, assumptions, limitations and exceptions taken or made in
the Opinions of Counsel delivered on any applicable Closing Date.
(i) The amendment to the [Pooling and Servicing Agreement],
[Supplement], attached hereto as Schedule 1 (the "Amendment" ), has
been duly authorized, executed and delivered by the Transferor and
constitutes the legal, valid and binding agreement of the Transferor,
enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws from time to time in effect
affecting creditors' rights generally. The enforceability of the
Transferor's obligations is also subject to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law)
(ii) The Amendment has been entered into in accordance with the
terms and provisions of Section 13.1 of the Pooling and Servicing
Agreement.
EXHIBIT E-2
FORM OF OPINION OF COUNSEL
WITH RESPECT TO ACCOUNTS
Provisions to be included in
Opinion of Counsel to be
delivered pursuant to
subsection 13.2(d)(ii) or (iii
------------------------------
The opinions set forth below may be subject to all the
qualifications, assumptions, limitations and exceptions taken or made in
the Opinions of Counsel delivered on any applicable Closing Date.
1. Except for any Receivable that is evidenced by an instrument,
the Receivables constitute either general intangibles or accounts under
Article 9 of the UCC.
2. The Pooling and Servicing Agreement creates in favor of the
Trustee a security interest in the rights of the relevant Transferor in
such of the Receivables identified in Schedule 1 to the Pooling and
Servicing Agreement as constitute accounts. To the extent that such
security interest is not an interest of a buyer of accounts, then the
Pooling and Servicing Agreement creates in favor of the Trustee a security
interest in the rights of such Transferor in the proceeds of such
Receivables.
3. To extent that transactions contemplated by the Pooling and
Servicing Agreement do not constitute a sale by the relevant Transferor to
the Trustee of such of the Receivables as constitute general intangibles or
the proceeds thereof, the Pooling and Servicing Agreement creates in favor
of the Trustee a security interest in the rights of such Transferor in such
of the Receivables as constitute general intangibles and the proceeds
thereof.
4. The Receivables Purchase Agreements create in favor of the
Transferor a security interest in the rights of the Account Owner in such
of the Receivables identified in Schedule 1 to the Receivables Purchase
Agreements as constitute accounts.
5. To the extent that transactions contemplated by the
Receivables Purchase Agreements do not constitute a sale by the Account
Owner to the Transferor of such of the Receivables as constitute general
intangibles or the proceeds thereof, the Receivables Purchase Agreements
create in favor of the Transferor a security interest in the rights of the
Account Owner in such of the Receivables as constitute general intangibles
and the proceeds thereof.
6. The security interests described in paragraphs 2, 3, 4 and 5
above are perfected and of first priority.
EXHIBIT E-3
PROVISIONS TO BE INCLUDED IN
ANNUAL OPINION OF COUNSEL
The opinions set forth below may be subject to all the
qualifications, assumptions, limitations and exceptions taken or made in
the Opinions of Counsel delivered on any applicable Closing Date. Unless
otherwise indicated, all capitalized terms used herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement and in the
Assignment.
1. The Pooling and Servicing Agreement, together with the Assignments,
create in favor of the Trustee a security interest in the relevant
Transferor's rights in the Receivables identified in Schedule 1 to the
Pooling and Servicing Agreement. Such security interest is perfected and
of first priority.
EXHIBIT F-1
FORM OF CLEARANCE SYSTEM CERTIFICATE
TO BE GIVEN TO THE TRUSTEE BY
EUROCLEAR OR CEDEL FOR
DELIVERY OF DEFINITIVE SECURITIES
IN EXCHANGE FOR A PORTION OF A
TEMPORARY GLOBAL SECURITY
PARTNERS FIRST CREDIT CARD MASTER TRUST
Class [___] Series [199_-_] [Floating Rate
Asset Backed Securities
[Insert title or sufficient description of
Securities to be delivered]
We refer to that portion of the temporary Global Security in
respect of the above-captioned issue which is herewith submitted to be
exchanged for definitive Securities (the "Submitted Portion") as provided
in the Pooling and Servicing Agreement dated as of January 29, 1998 (as
amended and supplemented, the "Agreement") in respect of such issue. This
is to certify that (i) we have received a certificate or certificates, in
writing or by tested telex, with respect to each of the persons appearing
in our records as being entitled to a beneficial interest in the Submitted
Portion and with respect to such persons beneficial interest either (a)
from such person, substantially in the form of Exhibit G-2 to the
Agreement, or (b) from [ ], substantially in the
form of Exhibit G-3 to the Agreement, and (ii) the Submitted Portion
includes no part of the temporary Global Security excepted in such
certificates
We further certify that as of the date hereof we have not
received any notification from any of the persons giving such certificates
to the effect that the statements made by them with respect to any part of
the Submitted Portion are no longer true and cannot be relied on as of the
date hereof.
We understand that this certificate is required in connection
with certain securities and tax laws in the United States of America. If
administrative or legal proceedings are commenced or threatened in
connection with which this certificate is or would be relevant, we
irrevocably authorize you to produce this certificate or a copy thereof to
any interested party in such proceedings.
Dated:1/ [Morgan Guaranty Trust, Company of New York,
Brussels office, as operator of the
Euroclear Systems]2/
[Centrale de Livraison de
Valeurs Mobiliere S. A.]2/
By: _______________________________
- ------------------
1/ To be dated on the Exchange Date.
2/ Delete the inappropriate reference.
EXHIBIT F-2
FORM OF CERTIFICATE TO BE DELIVERED
TO EUROCLEAR OR CEDEL
BY [INSERT NAME OF MANAGER
WITH RESPECT TO REGISTERED SECURITIES SOLD TO
QUALIFIED INSTITUTIONAL BUYERS
PARTNERS FIRST CREDIT CARD MASTER TRUST
Class [___] Series [199_-_] [Floating Rate
Asset Backed Securities
In connection with the initial issuance and placement of the
above referenced Asset Backed Securities (the "Securities"), an
institutional investor in the United States ("institutional investor") is
purchasing U.S. $ aggregate principal amount of the Securities
held in our account at [Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System] [Cedel Bank] on behalf of such
investor.
We reasonably believe that such institutional investor is a
qualified institutional buyer as such term is defined under Rule 144A of
the Securities Act of 1933, as amended.
[We understand that this certificate is required in connection
with United States laws. We irrevocably authorize you to produce this
certificate or a copy hereof to any interested party in any administrative
or legal proceedings or official inquiry with respect to the matters
covered by this certificate.]
The Definitive Securities in respect of this certificate are to
be issued in registered form in the minimum denomination of U.S. $500,000
and such Definitive Securities (and, unless the Pooling and Servicing
Agreement or Supplement relating to the Securities otherwise provides, any
Securities issued in exchange or substitution for or on registration of
transfer of Securities) shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 NEITHER THIS SECURITY NOR ANY PORTION
HEREOF MAY BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE
UNITED STATES OR TO U.S. PERSONS (EACH AS DEFINED HEREIN), EXCEPT
IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION
PROVISIONS. THE TRANSFER OF THIS SECURITY IS SUBJECT TO CERTAIN
CONDITIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. THIS SECURITY CANNOT BE EXCHANGED FOR A
BEARER SECURITY."
Dated: [ ],
By: __________________________
Authorized Officer
EXHIBIT F-3
FORM OF CERTIFICATE TO BE DELIVERED
TO EUROCLEAR OR CEDEL BY A BENEFICIAL OWNER
OF SECURITIES, OTHER THAN A QUALIFIED INSTITUTIONAL BUYER
PARTNERS FIRST CREDIT CARD MASTER TRUST
Class [___] Series [199_-_] [Floating Rate
Asset Backed Securities
This is to certify that as of the date hereof and except as
provided in the third paragraph hereof, the above-captioned Securities held
by you for our account (i) are owned by a person that is a United States
person, or (ii) are owned by a United States person that is (A) the foreign
branch of a United States financial institution (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(v)) (a "financial institution")
purchasing for its own account or for resale, or (B) a United States person
who acquired the Securities through the foreign branch of a financial
institution and who holds the Securities through the financial institution
on the date hereof (and in either case (A) or (B), the financial
institution hereby agrees to comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder), or (iii) are owned by a financial
institution for purposes of resale during the Restricted Period (as defined
in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)). In addition,
financial institutions described in clause (iii) of the preceding sentence
(whether or not also described in clause (i) or (ii)) certify that they
have not acquired the Securities for purposes of resale directly or
indirectly to a United States person or to a person within the United
States or its possessions.
We undertake to advise you by tested telex if the above statement
as to beneficial ownership is not correct on the date of delivery of the
above-captioned Securities in bearer form with respect to such of said
Securities as then appear in your books as being held for our account.
This certificate excepts and does not relate to U.S.
$_______________ principal amount of Securities held by you for our
account, as to which we are not yet able to certify beneficial ownership.
We understand that delivery of Definitive Securities in such principal
amount cannot be made until we are able to so certify.
We understand that this certificate is required in connection
with certain securities and tax laws ln the United States of America. If
administrative or legal proceedings are commenced or threatened in
connection with which this certificate is or would be relevant, we
irrevocably authorize you to produce this certificate or a copy thereof to
any interested party in such proceedings. As used herein, "United States"
means the United States of America (including the States and the District
of Columbia), its territories, its possessions and other areas subject to
its jurisdiction; and "United States Person" means a citizen or resident of
the United States, a corporation, partnership or other entity created or
organized in or under the laws of the United States, or any political
subdivision thereof, or an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Dated:1/
By: _________________________
As, or an agent for, the beneficial
owner(s) of the interest in the
Securities to which this
certificate relates.
-------------------
1/ This Certificate must be dated on the earlier of the date of
the first actual payment of interest in respect of the
Securities and the date of the delivery of the Securities in
definitive form.
EXHIBIT G-1
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"). NEITHER THIS SECURITY NOR ANY PORTION
HEREOF MAY BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE 1933 ACT AND ANY
APPLICABLE PROVISIONS OF ANY STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THE TRANSFER
OF THIS SECURITY IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS SECURITY MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW).
EXHIBIT G-2
[FORM OF UNDERTAKING LETTER]
[Date]
The Bank of New York
101 Barclay Street, 12E
New York, New York 10286
Attention:
Partners First Receivables Funding, LLC
900 Elkridge Landing Road
Suite 400
Linthicum, MD 21090
Attention:
Re: Purchase of $___________ 1/ principal amount
of Partners First Credit Card Master Trust
Class [__] Series [199_-_] [Floating Rate]
[__%] Asset Backed Securities
------------------
1/ Not less than $250,000 minimum principal amount.
Dear Sirs:
In connection with our purchase of the above-referenced Asset
Backed Securities (the "Securities") we confirm that:
(i) we understand that the Securities are not being registered
under the Securities Act of 1933, as amended (the "1933 Act"), and are
being sold to us in a transaction that is exempt from the registration
requirements of the 1933 Act;
(ii) any information we desire concerning the Securities or any
other matter relevant to our decision to purchase the Securities is or
has been made available to us;
(iii) we have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks
of an investment in the Securities, and we (and any account for which
we are purchasing under paragraph (iv) below) are able to bear the
economic risk of an investment in the Securities; we (and any account
for which we are purchasing under paragraph (iv) below) are an
"accredited investor" (as such term is defined in Rule 501(a)(1), (2)
or (3) of Regulation D under the 1933 Act); and we are not, and none
of such accounts is, a Benefit Plan;
(iv) we are acquiring the Securities for our own account or for
accounts as to which we exercise sole investment discretion and not
with a view to any distribution of the Securities, subject,
nevertheless, to the understanding that the disposition of our
property shall at all times be and remain within our control;
(v) we agree that the Securities must be held indefinitely by us
unless subsequently registered under the 1933 Act or an exemption from
any registration requirements of that Act and any applicable state
securities laws available;
(vi) we agree that in the event that at some future time we wish
to dispose of or exchange any of the Securities (such disposition or
exchange not being currently foreseen or contemplated), we will not
transfer or exchange any of the Securities unless
(A)(l) the sale is of at least U.S. $250,000 principal
amount of Securities to an Eligible Purchaser (as defined below),
(2) a letter to substantially the same effect as paragraphs (i),
(ii), (iii), (iv), (v) and (vi) of this letter is executed
promptly by the purchaser and (3) all offers or solicitations in
connection with the sale, whether directly or through any agent
acting on our behalf, are limited only to Eligible Purchasers and
are not made by means of any form of general solicitation or
general advertising whatsoever; or
(B) the Securities are transferred pursuant to Rule 144
under the 1933 Act by us after we have held them for more than
three years; or
(C) the Securities are sold in any other transaction that
does not require registration under the 1933 Act and, if the
Transferor, the Servicer, the Trustee or the Transfer Agent and
Registrar so requests, we theretofore have furnished to such
party an opinion of counsel satisfactory to such party, in form
and substance satisfactory to such party, to such effect; or
(D) the Securities are transferred pursuant to an exception
from the registration requirements of the 1933 Act under Rule
144A under the 1933 Act; and
(vii) we understand that the Securities will bear a legend to
substantially the following effect:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT") NEITHER THIS SECURITY NOR ANY PORTION
HEREOF MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE 1933 ACT AND ANY
APPLICABLE PROVISIONS OF ANY STATE BLUE SKY OR SECURITIES LAWS OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION PROVISIONS. THE TRANSFER
OF THIS SECURITY IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN."
"THIS SECURITY MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW)."
The first paragraph of this legend may be removed if the Transferor, the
Servicer, the Trustee and the Transfer Agent and Registrar have received an
opinion of counsel satisfactory to them, in form and substance satisfactory
to them, to the effect that such paragraph may be removed.
"Eligible Purchaser" means either an Eligible Dealer or a corporation,
partnership or other entity which we have reasonable grounds to believe and
do believe can make representations with respect to itself to substantially
the same effect as the representations set forth herein. "Eligible Dealer"
means any corporation or other entity the principal business of which is
acting as a broker and/or dealer in securities. "Benefit Plan" means any
employee benefit plan, trust or account, including an individual retirement
account, that is subject to the Employee Retirement Income Security Act of
1974, as amended, or that is described in Section 4975(e)(1) of the
Internal Revenue Code of 1986, as amended, or an entity whose underlying
assets include plan assets by reason of a plan's investment in such entity.
Capitalized terms used but not defined herein shall have the meanings given
to such terms in the Pooling and Servicing Agreement, dated as of January
29, 1998, among Partners First Receivables Funding, LLC, as transferor,
Partners First Holdings, LLC, as servicer and The Bank of New York, as
trustee.
Very truly yours,
______________________________
(Name of Purchaser)
By: __________________________
(Authorized Officer)
EXHIBIT G-3
THIS SECURITY MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT PLAN
(AS DEFINED BELOW).1/
-------------------
1/ The following text should be included in any Security in
which the above legend appears:
The [Securities] may not be acquired by or for the
account of any employee benefit plan, trust or account,
including an individual retirement account, that is subject
to the Employee Retirement Income Security Act of 1974, as
amended, or that is described in Section 4975(e)(1) of the
Internal Revenue Code of 1986, as amended, or an entity
whose underlying assets include plan assets by reason of a
plan's investment in such entity (a "Benefit Plan"). By
accepting and holding this Security, the Holder hereof shall
be deemed to have represented and warranted that it is not a
Benefit Plan. By acquiring any interest in this Security,
the applicable Security Owner or Owners shall be deemed to
have represented and warranted that it or they are not
Benefit Plans.
SCHEDULE 1
List of Accounts
[Original list delivered to Trustee]
Exhibit 4.5
-------------------------------------------------------------------------
PARTNERS FIRST RECEIVABLES, LLC
and
PARTNERS FIRST RECEIVABLES FUNDING, LLC
-------------------------------------------------------------------------
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of May 13, 1998
amending and restating the
Receivables Purchase Agreement
dated as of January 29, 1998
-------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Other Definitional Provisions . . . . . . . . . . 5
ARTICLE II
PURCHASE AND CONVEYANCE OF RECEIVABLES
Section 2.1. Purchase . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2. Addition of Aggregate Addition Accounts . . . . . 7
Section 2.3. Addition of New Accounts . . . . . . . . . . . . . 9
Section 2.4. Representations and Warranties . . . . . . . . . . 9
Section 2.5. Delivery of Documents . . . . . . . . . . . . . . 10
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1. Purchase Price . . . . . . . . . . . . . . . . . . 10
Section 3.2. Adjustments to Purchase Price . . . . . . . . . . 11
Section 3.3. Settlement and Ongoing Payment of Purchase
Price . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Seller
Relating to the Seller . . . . . . . . . . . . . 12
Section 4.2. Representations and Warranties of the Seller
Relating to the Agreement and the Receivables . . 14
Section 4.3. Representations and Warranties of the
Purchaser . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Seller . . . . . . . . . . . . . 17
Section 5.2. Covenants of the Seller with Respect to
Receivables Purchase Agreements . . . . . . . . 18
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1. Reassignment of Ineligible Receivables . . . . . . 19
Section 6.2. Reassignment of Certificateholders'
Interest in Trust Portfolio . . . . . . . . . . 20
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1. Conditions to the Purchaser's Obligations
Regarding Initial Receivables . . . . . . . . . . 20
Section 7.2. Conditions Precedent to the Seller's
Obligations . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII
TERM AND PURCHASE TERMINATION
Section 8.1. Term . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.2. Purchase Termination . . . . . . . . . . . . . . . 22
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment . . . . . . . . . . . . . . . . . . . . 22
Section 9.2. Governing Law . . . . . . . . . . . . . . . . . . 23
Section 9.3. Notices . . . . . . . . . . . . . . . . . . . . . 23
Section 9.4. Severability of Provisions . . . . . . . . . . . . 23
Section 9.5. Assignment . . . . . . . . . . . . . . . . . . . . 24
Section 9.6. Acknowledgment and Agreement of the
Seller . . . . . . . . . . . . . . . . . . . . 24
Section 9.7. Further Assurances . . . . . . . . . . . . . . . . 24
Section 9.8. No Waiver; Cumulative Remedies . . . . . . . . . . 24
Section 9.9. Counterparts . . . . . . . . . . . . . . . . . . . 25
Section 9.10. Binding; Third-Party Beneficiaries . . . . . . . 25
Section 9.11. Merger and Integration . . . . . . . . . . . . . 25
Section 9.12. Headings . . . . . . . . . . . . . . . . . . . . 25
Section 9.13. Schedules and Exhibits . . . . . . . . . . . . . 25
Section 9.14. Survival of Representations and
Warranties . . . . . . . . . . . . . . . . . . 25
Section 9.15. Nonpetition Covenant . . . . . . . . . . . . . . 25
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as of
May 13, 1998, by and between PARTNERS FIRST RECEIVABLES, LLC, a limited
liability company organized under the laws of the State of Delaware (the
"Seller"), and PARTNERS FIRST RECEIVABLES FUNDING, LLC, a limited liability
company organized under the laws of the State of Delaware (the
"Purchaser").
W I T N E S S E T H
WHEREAS, the Purchaser and the Seller have entered into a
Receivables Purchase Agreement, dated as of January 29, 1998 (the "Original
Receivables Purchase Agreement"), which provides for the purchase by the
Purchaser from the Seller, and the sale from the Seller to the Purchaser,
from time to time, of certain Receivables (as hereinafter defined)
purchased by the Seller in the ordinary course of its business from one or
more owners of consumer revolving credit card accounts; and
WHEREAS, the Purchaser and the Seller desire to amend and restate
the Original Receivables Purchase Agreement in its entirety as provided
herein.
NOW, THEREFORE, it is hereby agreed by and between the Purchaser
and the Seller that the Original Receivables Purchase Agreement be amended
and restated as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used herein or
in any certificate, document, or Conveyance Paper made or delivered
pursuant hereto, and not defined herein or therein, shall have the meaning
ascribed thereto in the Pooling and Servicing Agreement; in addition, the
following words and phrases shall have the following meanings:
"Account" shall mean (a) each MasterCardregistered trademark1/
and VISAregistered trademark1/ account established pursuant to a Credit
Card Agreement between an Account Originator and any Person, which account
is identified by account number and by the receivables balance in the
computer file, microfiche list or printed list delivered to the Purchaser
by the Seller on the Closing Date, (b) each Additional Account (but only
from and after the Addition Date with respect thereto), (c) each Related
Account, and (d) each Transferred Account, but shall exclude (e) any
Account that (i) after the Removal Date, the newly generated Receivables in
which shall not be assigned to the Purchaser hereunder, (ii) as to which
the right, title and interest of the Purchaser in the related Receivables
are reassigned to the Seller pursuant to Section 6.1 or (iii) as to which
the right, title and interest of the Trust in the related Receivables are
assigned and transferred to the Servicer pursuant to Section 3.3 of the
Pooling and Servicing Agreement.
- --------------------
1/
MasterCard and VISA are registered trademarks of
International Incorporated and of VISA USA, Inc.,
respectively.
"Account Originator" shall mean the original issuer of the credit
card relating to an Account pursuant to a Credit Card Agreement or a
purchaser of such Account.
"Account Owner" shall mean with respect to any Account, the
related Account Originator, or if the Account Originator has assigned its
interest in the Account, the entity which has acquired such Account.
"Additional Account" shall mean each New Account and each
Aggregate Addition Account.
"Additional Cut-Off Date" shall mean (i) with respect to
Aggregate Addition Accounts, the date specified as such in the notice
delivered with respect thereto pursuant to Section 2.2, and (ii) with
respect to New Accounts, the later of the dates on which such New Accounts
are originated or designated pursuant to Section 2.3.
"Addition Date" shall mean (a) with respect to Aggregate Addition
Accounts, the date from and after which such Aggregate Addition Accounts
are to be included as Accounts pursuant to Section 2.2 and (b) with respect
to New Accounts, the first Distribution Date following the calendar month
in which such New Accounts are originated.
"Addition Notice Date" shall have the meaning specified in
Section 2.2 of this Agreement.
"Aggregate Addition Account" shall mean each Eligible Account
that is designated pursuant to Section 2.2 to be included as an Account and
is identified in the computer file or microfiche list delivered to the
Purchaser by the Seller pursuant to Sections 2.1 and 2.5.
"Agreement" shall mean this Receivables Purchase Agreement and
all amendments hereof and supplements hereto.
"Capital Ratio" shall mean, as of any date, the ratio (expressed
as a percentage) computed by dividing (a) shareholder's equity in the
Purchaser by (b) total assets (as shown on the Purchaser's balance sheet
prepared in accordance with GAAP) plus the aggregate Invested Amount of
Certificates which have not been retained by the Purchaser as of such date.
"Closing Date" shall mean January 29, 1998.
"Conveyance" shall have the meaning specified in subsection
2.1(a).
"Conveyance Papers" shall have the meaning specified in
subsection 4.1(c).
"Credit Adjustment" shall have the meaning specified in Section
3.2.
"Debtor Relief Laws" shall mean (i) the Bankruptcy Code of the
United States of America and (ii) all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, readjustment of debt,
marshalling of assets or similar debtor relief laws of the United States,
any state or any foreign country from time to time in effect affecting the
rights of creditors generally.
"Finance Charge Receivables" shall mean all Receivables in the
Accounts which would be treated as "Finance Charge Receivables" in
accordance with the definition for such term in the Pooling and Servicing
Agreement.
"Initial Account" shall mean any Account designated as an
"Account" hereunder and as an "Initial Account" under the Pooling and
Servicing Agreement on the Closing Date.
"Insolvency Event" shall have the meaning specified in Section
8.2.
"Interchange" shall mean interchange fees payable to an Account
Owner in its capacity as credit card issuer, through VISA or MasterCard in
connection with cardholder charges for goods and services with respect to
the Accounts.
"Investor Certificate" shall have the meaning specified in the
Pooling and Serving Agreement.
"Minimum Capital Ratio" shall mean a percentage designated from
time to time by the Transferor.
"Monthly Period" shall mean the period from and including the
first day of a calendar month to and including the last day of such
calendar month.
"New Account" shall mean each MasterCard and VISA consumer
revolving credit card account established pursuant to a Credit Card
Agreement, which account is designated pursuant to Section 2.3 to be
included as an Account and is identified in the computer file or microfiche
list delivered to the Purchaser by the Seller pursuant to Sections 2.1 and
2.5.
"New Principal Receivables" shall have the meaning set forth in
Section 3.1.
"Obligor" shall mean, with respect to each Account, each person
that would be treated as an "Obligor" in accordance with the definition for
such term in the Pooling and Servicing Agreement.
"Original Receivables Purchase Agreement" shall mean the
Receivables Purchase Agreement, dated as of January 29, 1998, by and
between Partners First Receivables, LLC, as Seller, and PFRF, as Purchaser.
"PFRF" shall mean Partners First Receivables Funding, LLC, a
Delaware limited liability company, and its permitted successors and
assigns.
"Pooling and Servicing Agreement" shall mean the Pooling and
Servicing Agreement, dated as of January 29, 1998, among Holdings, as
Servicer, PFRF, as Transferor, and the Trustee, and all amendments and
supplements thereto.
"Portfolio Reassignment Price" shall mean the portion of the
amount payable by PFRF to the Trustee pursuant to Section 2.6 of the
Pooling and Servicing Agreement with respect to the Receivables.
"Principal Receivables" shall mean all Receivables in the
Accounts that would be treated as "Principal Receivables" in accordance
with the definition for such term in the Pooling and Servicing Agreement.
"Receivables Purchase Agreements" shall have the meaning set
forth in Section 5.2.
"Purchase Price" shall have the meaning set forth in Section 3.1.
"Purchased Assets" shall have the meaning set forth in Section
2.1.
"Receivables" shall mean all amounts shown on the Servicer's
records as amounts payable by Obligors on any Account from time to time,
including amounts payable for Principal Receivables and Finance Charge
Receivables. Receivables that become Defaulted Receivables will cease to
be included as Receivables as of the day on which they become Defaulted
Receivables. A Receivable shall be deemed to have been created at the end
of the Date of Processing of such Receivable.
"Removed Account" shall mean an Account hereunder that is a
"Removed Account" (as such term is defined in the Pooling and Servicing
Agreement) that is designated for removal pursuant to Section 2.10 of the
Pooling and Servicing Agreement.
"Repurchase Price" shall have the meaning set forth in Section
6.1(b).
"Seller" shall mean Partners First Receivables, LLC, a limited
liability company organized under the laws of the State of Delaware, and
its successor and assigns.
"Servicer" shall have the meaning set forth in the Pooling and
Services Agreement.
"Settlement Statement" shall have the meaning set forth in
Section 3.3.
"Supplemental Conveyance" shall have the meaning set forth in
Section 2.5.
"Transaction Documents" shall mean, the Pooling and Servicing
Agreement, the Series 1998-1 Supplement, this Agreement and each
Receivables Purchase Agreement.
"Transferred Account" shall mean each account into which an
Account shall be transferred provided that (i) such transfer was made in
accordance with the Credit Card Guidelines and (ii) such account can be
traced or identified as an account into which an Account has been
transferred.
"Trust" shall mean the trust created by the Pooling and Servicing
Agreement.
"Trustee" shall mean The Bank of New York, a New York banking
corporation, the institution executing the Pooling and Servicing Agreement
as, and acting in the capacity of Trustee thereunder, or its successor in
interest, or any successor trustee appointed as provided in the Pooling and
Servicing Agreement.
Section 1.2. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the defined
meanings when used in any certificate, other document or Conveyance Paper
made or delivered pursuant hereto unless otherwise defined therein.
(b) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any Conveyance Paper shall
refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Section, Subsection, Schedule and Exhibit references
contained in this Agreement are references to Sections, Subsections,
Schedules and Exhibits in or to this Agreement unless otherwise specified.
(c) All determinations of the principal or finance charge
balance of Receivables, and of any collections thereof, shall be made in
accordance with the Pooling and Servicing Agreement and all applicable
Supplements.
ARTICLE II
PURCHASE AND CONVEYANCE OF RECEIVABLES
Section 2.1. Purchase.
(a) By execution of this Agreement, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to the Purchaser
(collectively, the "Conveyance"), without recourse except as provided
herein, all its right, title and interest in, to and under (i) all of the
Receivables in the Accounts and all of the Receivables created in such
Accounts following the Closing Date and the Receivables in each Additional
Account designated from time to time for inclusion as an Account as of the
date of such designation, whether such Receivables shall then be existing
or shall thereafter be created and all monies due and or to become due and
all amounts received with respect thereto and all proceeds (including,
without limitation, "proceeds" as defined in the UCC) thereof, (ii) the
right to receive Interchange and Recoveries with respect to such
Receivables and (iii) to the extent applicable to the Receivables, each
Account Owner Purchase Agreement (the "Purchased Assets").
(b) In connection with such Conveyance, the Seller agrees (i) to
record and file, at its own expense, any financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Receivables now existing and hereafter
created, meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect, and maintain
perfection of, the Conveyance of such Purchased Assets from the Seller to
the Purchaser, (ii) that such financing statements shall name the Seller,
as seller, and the Purchaser, as purchaser, of the Receivables and (iii) to
deliver a file-stamped copy of such financing statements or other evidence
of such filings (excluding such continuation statements, which shall be
delivered as filed) to the Purchaser as soon as is practicable after
filing.
(c) In connection with such Conveyance, the Seller further
agrees that it will, at its own expense, (i) on or prior to (x) the Closing
Date, in the case of Initial Accounts, (y) the applicable Addition Date, in
the case of Additional Accounts, and (z) the applicable Removal Date, in
the case of Removed Accounts, to indicate in its computer files that, in
the case of the Initial Accounts or the Additional Accounts, Receivables
created in connection with such Accounts have been conveyed to the
Purchaser in accordance with this Agreement and have been conveyed by the
Purchaser to the Trustee pursuant to the Pooling and Servicing Agreement
for the benefit of the Certificateholders by including (or deleting, in the
case of newly originated Receivables in Removed Accounts) in such computer
files the code identifying each such Account and (ii) on or prior to (w)
the Closing Date, in the case of the Initial Accounts, (x) the date that is
five Business Days after the applicable Addition Date, in the case of
designation of Aggregate Addition Accounts, (y) the date that is 30 days
after the applicable Addition Date, in the case of New Accounts, and (z)
the date that is five Business Days after the applicable Removal Date, in
the case of Removed Accounts, to deliver to the Purchaser a computer file
or microfiche list containing a true and complete list of all such Accounts
specifying for each such Account, as of the Closing Date, in the case of
the Initial Accounts, the applicable Additional Cut-off Date, in the case
of Additional Accounts, and the applicable Removal Date, in the case of
Removed Accounts, (A) its account number, (B) the aggregate amount
outstanding in such Account and (C) the aggregate amount of Principal
Receivables in such Account. Each such file or list, as supplemented from
time to time to reflect Additional Accounts or Removed Accounts, shall be
marked as Schedule I to this Agreement, shall be delivered to the
Purchaser, and is hereby incorporated into and made a part of this
Agreement. The Seller further agrees not to alter the code referenced in
clause (i) of this paragraph with respect to any Account during the term of
this Agreement unless and until such Account becomes a Removed Account.
(d) The parties hereto intend that the conveyance of the
Seller's right, title and interest in and to the Receivables shall
constitute an absolute sale, conveying good title free and clear of any
liens, claims, encumbrances or rights of others from the Seller to the
Purchaser. It is the intention of the parties hereto that the arrangements
with respect to the Receivables shall constitute a purchase and sale of
such Receivables and not a loan. In the event, however, that it were to be
determined that the transactions evidenced hereby constitute a loan and not
a purchase and sale, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law, and
that the Seller shall be deemed to have granted and does hereby grant to
the Purchaser a first priority perfected security interest, in all of the
Seller's right, title and interest, whether now owned or hereafter
acquired, in, to and under the Receivables and other Purchased Assets to
secure the rights of the Purchaser hereunder and the obligations of the
Seller hereunder.
Section 2.2. Addition of Aggregate Addition Accounts.
(a) If, from time to time, the Purchaser becomes obligated to
designate Aggregate Addition Accounts (as such term is defined in the
Pooling and Servicing Agreement) pursuant to subsection 2.9(a) of the
Pooling and Servicing Agreement, then the Purchaser may, at its option,
give the Seller written notice thereof on or before the eighth Business Day
(the "Addition Notice Date") prior to the Addition Date therefor, and upon
receipt of such notice the Seller shall on or before the Addition Date,
designate sufficient Eligible Accounts to be included as Additional
Accounts so that after the inclusion thereof the Purchaser will be in
compliance with the requirements of said subsection 2.9(a). Additionally,
subject to subsections 2.9(b) and (c) of the Pooling and Servicing
Agreement and subsection 2.2(b), from time to time Eligible Accounts may be
designated to be included as Aggregate Addition Accounts, upon the mutual
agreement of the Purchaser and the Seller. In either event, the Seller
shall have sole responsibility for selecting the Aggregate Addition
Accounts; provided, that the selection method employed by the Seller shall
not have an Adverse Effect.
(b) On the Addition Date with respect to any designation of
Aggregate Addition Accounts, the Purchaser shall purchase the Seller's
right, title and interest in, to and under the Receivables in Aggregate
Addition Accounts (and such Aggregate Addition Accounts shall be deemed to
be Accounts for purposes of this Agreement), subject to the satisfaction of
the following conditions:
(i) any Aggregate Addition Accounts shall all be Eligible
Accounts;
(ii) the Seller shall have delivered to the Purchaser copies of
UCC-1 financing statements covering such Aggregate Addition Accounts,
if necessary to perfect the Purchaser's undivided interest in the
Receivables arising therein;
(iii) to the extent required of the Purchaser by Section 4.3 of
the Pooling and Servicing Agreement, the Seller shall have deposited
in the Collection Account all Collections with respect to such
Aggregate Addition Accounts since the Additional Cut-Off Date;
(iv) as of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the Seller or any Account
Owner shall have occurred nor shall the transfer of the Receivables
arising in the Aggregate Addition Accounts to the Purchaser have been
made in contemplation of the occurrence thereof;
(v) solely with respect to Aggregate Addition Accounts
designated pursuant to the second sentence of subsection 2.2(a), the
Rating Agency Condition shall have been satisfied;
(vi) the Seller shall have delivered to the Purchaser an
Officer's Certificate, dated the Addition Date, confirming, to the
extent applicable, the items set forth in clauses (i) through (v)
above; and
(vii) the transfer of the Receivables arising in the Aggregate
Addition Accounts to the Purchaser and by the Purchaser to the Trust
will not result in an Adverse Effect and, in the case of Aggregate
Addition Accounts, the Seller shall have delivered to the Purchaser an
Officer's Certificate, dated the Addition Date, stating that the
Seller reasonably believes that the addition of the Receivables
arising in the Aggregate Addition Accounts to the Purchaser and by the
Purchaser to the Trust will not have an Adverse Effect.
Section 2.3. Addition of New Accounts.
(a) Upon the mutual agreement of the Purchaser and the Seller, subject to
compliance by the Purchaser with the conditions specified in subsections
2.9(d) and (e) of the Pooling and Servicing Agreement and compliance by the
Seller with subsection 2.3(b), the Seller may designate newly originated
Eligible Accounts to be included as New Accounts. Upon such designation,
such New Accounts shall be deemed to be Accounts hereunder. The Seller
shall take all actions necessary to comply, or to enable the Purchaser to
comply, with the requirements of Section 2.9 of the Pooling and Servicing
Agreement and shall cooperate with the Purchaser to enable it to perform
with respect to the Receivables in such New Accounts all actions specified
in subsections 2.9(d) and (e) of the Pooling and Servicing Agreement.
(b) On the Addition Date with respect to any New Accounts, the
Purchaser shall purchase the Seller's right, title and interest in, to and
under the Receivables in New Accounts (and such New Accounts shall be
deemed to be Accounts for purposes of this Agreement) as of the close of
business on the applicable Additional Cut-Off Date, subject to the
satisfaction of the following conditions:
(i) the New Accounts shall all be Eligible Accounts;
(ii) the Seller shall have delivered to the Purchaser copies of
UCC-1 financing statements covering such New Accounts, if necessary to
perfect the Purchaser's interest in the Receivables arising therein;
(iii) to the extent required of the Purchaser by Section 4.3 of
the Pooling and Servicing Agreement, the Seller shall have deposited
in the Collection Account all Collections with respect to such New
Accounts since the Additional Cut-Off Date;
(iv) as of each of the Additional Cut-Off Date and the Addition
Date, no Insolvency Event with respect to the Seller or the related
Account Owner shall have occurred nor shall the transfer of the
Receivables arising in the New Accounts to the Purchaser have been
made in contemplation of the occurrence thereof; and
(v) the transfer of the Receivables arising in the New
Accounts to the Purchaser and by the Purchaser to the Trust will not
result in the occurrence of a Pay Out Event or a Reinvestment Event.
Section 2.4. Representations and Warranties. The Seller hereby
represents and warrants to the Purchaser as of the related Addition Date as
to the matters set forth in Sections 2.2(b)(iv) and (v) above and that, in
the case of Additional Accounts, the list delivered pursuant to Section 2.5
below is, as of the applicable Additional Cut-Off Date, true and complete
in all material respects.
Section 2.5. Delivery of Documents. In the case of the
designation of Additional Accounts, the Seller shall deliver to the
Purchaser (i) the computer file or microfiche list required to be delivered
pursuant to Section 2.1 with respect to such Additional Accounts on the
date such file or list is required to be delivered pursuant to Section 2.1
(the "Document Delivery Date") and (ii) a duly executed, written assignment
(including an acceptance by the Purchaser, substantially in the form of
Exhibit A (the "Supplemental Conveyance"), on the Document Delivery Date.
In addition, in the case of the designation of New Accounts, the Seller
shall deliver to the Purchaser on the Document Delivery Date an Officer's
Certificate confirming, to the extent applicable, the items set forth in
clause (i) through (v) of subsection 2.3(b) above.
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1. Purchase Price.
(a) The "Purchase Price" for the Receivables in the Initial
Accounts as of the Closing Date conveyed to the Purchaser under this
Agreement shall be payable on the Closing Date and shall be an amount equal
to 100% of the aggregate balance of Principal Receivables in those Accounts
as of the Closing Date, adjusted to reflect such factors as the Seller and
the Purchaser mutually agree will result in a Purchase Price determined to
be the fair market value of such Receivables. This computation of initial
purchase price should assume no reinvestment in new Receivables. The
Purchase Price for the Receivables (including Receivables in Additional
Accounts) to be conveyed to the Purchaser under this Agreement which come
into existence after the Closing Date, shall be payable on the Distribution
Date following the Monthly Period in which such Receivables are conveyed by
the Seller to the Purchaser in an amount equal to 100% of the aggregate
balance of the Principal Receivables so conveyed (the "New Principal
Receivables"), adjusted to reflect such factors as the Seller and the
Purchaser mutually agree will result in a Purchase Price determined to be
the fair market value of such New Principal Receivables.
(b) The Purchase Price to be paid by the Purchaser with respect
to the Receivables on the Closing Date and with respect to each Receivable
created thereafter shall be paid (i) in cash, (ii) with the consent of the
Purchaser, by means of capital contributed by the Seller to the Purchaser
in the form of a contribution of the Receivables, (iii) with the consent of
the Purchaser, by issuance to the Seller of a subordinated note in or
substantially in the form of Exhibit B (the "Subordinated Note") or by
increase in the amount outstanding thereunder, or (iv) any combination of
the foregoing, in each case in accordance with Section 3.3.
(c) To the extent that the Purchaser shall not have paid before,
or shall not have available to it, cash in U.S. dollars in same day funds
sufficient to pay (or cause to be paid) to the Seller the Purchase Price
for Receivables that have been newly created during any Monthly Period, the
remainder of the Purchase Price shall be paid on each Distribution Date by
increasing the principal amount of the Subordinated Note by an amount equal
to such insufficiency; provided, however, that to the extent that any such
increase in the principal amount of the Subordinated Note would cause the
Capital Ratio as of the end of the preceding Monthly Period to be less than
the Minimum Capital Ratio as of the end of the preceding Monthly Period,
Receivables having an outstanding balance of Principal Receivables
sufficient to avoid the Capital Ratio being less than the Minimum Capital
Ratio shall be deemed contributed to the capital of the Purchaser by the
Seller.
Section 3.2. Adjustments to Purchase Price. The Purchase Price
shall be adjusted on each Distribution Date (a "Credit Adjustment") with
respect to any Receivable previously conveyed to the Purchaser by the
Seller which has since been reversed by the Seller or the Servicer because
of a rebate, refund, unauthorized charge or billing error to a cardholder
because such Receivable was created in respect of merchandise which was
refused or returned by a cardholder or due to the occurrence of any other
event referred to in Section 3.9 of the Pooling and Servicing Agreement.
The amount of such adjustment shall equal (x) the reduction in the
principal balance of such Receivable resulting from the occurrence of such
event multiplied by (y) the quotient (expressed as a percentage) of (i) the
Purchase Price for Principal Receivables payable on such Distribution Date
computed in accordance with Section 3.1 divided by (ii) the Principal
Receivables paid for on such date pursuant to such Section. In the event
that an adjustment pursuant to this Section 3.2 causes the Purchase Price
to be a negative number, the Seller agrees that, not later than 1:00 P.M.
New York City time on such Distribution Date, the Seller shall pay to the
Purchaser an amount equal to the amount by which the Purchase Price minus
the Credit Adjustment would be a negative number.
Section 3.3. Settlement and Ongoing Payment of Purchase Price.
On each Distribution Date under the Pooling and Servicing Agreement, the
Seller shall deliver, or cause to be delivered, a settlement statement (the
"Settlement Statement") to the Purchaser, showing the aggregate Purchase
Price of Receivables conveyed to the Purchaser during the prior Monthly
Period, the portion thereof paid in cash, the portion represented by an
increase in the Subordinated Note and the portion represented by a capital
contribution, and the amount which remains unpaid as Credit Adjustments
made with respect to such prior Monthly Period pursuant to Section 3.2
hereof and any adjustment to the Purchase Price of Receivables with respect
to such Monthly Period pursuant to Section 6.1 hereof. Any cash balance
due from the Purchaser to the Seller shall be paid in cash in immediately
available funds to the Seller or the Seller shall convey such amount as a
capital contribution to the Purchaser or the outstanding balance of the
Subordinated Note shall be increased to reflect such unpaid balance or a
combination of the foregoing shall occur, and any balance due from the
Purchaser to the Seller be paid in immediately available funds to the
Purchaser. To the extent that the Seller has received an amount greater
than the Purchase Price of such Receivables, the Seller shall first apply
such amount to the payment of the unpaid principal of the Subordinated
Note, if any. If, after giving effect to any such payment in respect of
the Subordinated Note, the Seller has received an amount greater than the
Purchase Price, the Seller shall retain such amounts and, at the option of
the Purchaser (x) issue its note to the Purchaser with terms substantially
similar to the terms of the Subordinated Note or (y) subject to applicable
legal restrictions and the Minimum Capital Ratio, elect to treat such
amounts as a dividend or return of capital to the Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Seller
Relating to the Seller. The Seller hereby represents and warrants to, and
agrees with, the Purchaser as of the Closing Date and on each Addition
Date, that:
(a) Organization and Good Standing. The Seller is a limited
liability company duly organized and validly existing in good standing
under the laws of the State of Delaware and has, in all material respects,
full power and authority to own its properties and conduct its business as
presently owned or conducted as contemplated by the Transaction Documents,
and to execute, deliver and perform its obligations under this Agreement.
(b) Due Qualification. The Seller is duly qualified to do
business and is in good standing as a foreign limited liability company (or
is exempt from such requirements) and has obtained all necessary licenses
and approvals, in each jurisdiction which requires such qualification
except where the failure to so qualify or obtain licenses or approvals
would not render any credit card agreement relating to any Account or any
Receivables unenforceable by the Purchaser or the Trustee or (ii) have a
material adverse effect on the Purchaser or the Certificateholders.
(c) Due Authorization. The execution, delivery and performance
of this Agreement, each Receivables Purchase Agreement and any other
document or instrument delivered pursuant hereto, including any
Supplemental Conveyance (such other documents or instruments, collectively,
the "Conveyance Papers"), and the consummation of the transactions provided
for in this Agreement and the Conveyance Papers have been duly authorized
by the Seller by all necessary corporate action on the part of the Seller.
(d) No Conflict. The execution and delivery of this Agreement,
each Receivables Purchase Agreement and the Conveyance Papers by the
Seller, the performance of the transactions contemplated by this Agreement,
each Receivables Purchase Agreement and the Conveyance Papers, and the
fulfillment of the terms of this Agreement, each Receivables Purchase
Agreement and the Conveyance Papers will not conflict with, violate or
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, any
indenture, contract, agreement, mortgage, deed of trust, or other
instrument to which the Seller is a party or by which it or any of its
properties are bound which would have an Adverse Effect.
(e) No Violation. The execution, delivery and performance of
this Agreement, each Receivables Purchase Agreement and the Conveyance
Papers by the Seller and the fulfillment of the terms contemplated herein
and therein applicable to the Seller will not conflict with or violate any
Requirements of Law applicable to the Seller in a manner which would have
an Adverse Effect.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Seller, threatened against the
Seller, before any Governmental Authority (i) asserting the invalidity of
this Agreement, any Receivables Purchase Agreement or the Conveyance
Papers, (ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, any Receivables Purchase Agreement or the
Conveyance Papers, (iii) seeking any determination or ruling that, in the
reasonable judgment of the Seller, would materially and adversely affect
the performance by the Seller of its obligations under this Agreement, any
Receivables Purchase Agreement or the Conveyance Papers, (iv) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of this Agreement, any Receivables Purchase
Agreement or the Conveyance Papers or (v) seeking to affect adversely the
income tax attributes of the Trust under the United States federal or
Delaware income tax systems.
(g) All Consents. All authorizations, consents, orders or
approvals of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Seller in
connection with the execution and delivery by the Seller of this Agreement,
each Receivables Purchase Agreement and the Conveyance Papers and the
performance of the transactions contemplated by this Agreement, each
Receivables Purchase Agreement or the Conveyance Papers by the Seller have
been duly obtained, effected or given and are in full force and effect.
The representations and warranties set forth in this Section 4.1
shall survive the transfer and assignment of the Receivables to the
Purchaser. Upon discovery by the Seller or the Purchaser of a breach of
any of the foregoing representations and warranties, the party discovering
such breach shall give written notice to the other party and the Trustee
within three Business Days following such discovery.
Section 4.2. Representations and Warranties of the Seller
Relating to the Agreement and the Receivables.
(a) Representations and Warranties. The Seller hereby
represents and warrants to the Purchaser as of the date of this Agreement,
as of the Closing Date and, with respect to Additional Accounts, as of the
related Addition Date that:
(i) this Agreement and, in the case of Additional Accounts, the
related Supplemental Conveyance, each constitutes a legal, valid and
binding obligation of the Seller enforceable against the Seller in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally from time to time in
effect or general principles of equity;
(ii) as of the Closing Date, and as of the related Additional
Cut-Off Date with respect to Additional Accounts, Schedule I to this
Agreement, as supplemented to such date, is an accurate and complete
listing in all material respects of all the Accounts as of the Closing Date
or such Additional Cut-Off Date, as the case may be, and the information
contained therein with respect to the identity of such Accounts and the
Receivables existing thereunder is true and correct in all material
respects as of the Closing Date or such applicable Additional Cut-Off Date,
as the case may be, and as of the December 31, 1997, the aggregate amount
of Receivables in all the Initial Accounts was $1,914,820,647, of which
$1,884,184,263 were Principal Receivables;
(iii) each Receivable has been conveyed to the Purchaser free
and clear of any Lien of any Person (other than Liens permitted under
subsection 2.7(b) of the Pooling and Servicing Agreement);
(iv) all authorizations, consents, orders or approvals of or
registrations or declarations with any Governmental Authority required to
be obtained, effected or given by the Seller in connection with the
conveyance of Receivables to the Purchaser have been duly obtained,
effected or given and are in full force and effect;
(v) this Agreement or, in the case of Additional Accounts, the
related Supplemental Conveyance constitutes a valid sale, transfer and
assignment to the Purchaser of all right, title and interest of the Seller
in the Receivables and the proceeds thereof and the Interchange payable
pursuant to this Agreement and the Recoveries payable pursuant to this
Agreement or, if this Agreement or, in the case of Additional Accounts, the
related Supplemental Conveyance, does not constitute a sale of such
property, it constitutes a grant of a first priority perfected "security
interest" (as defined in the UCC) in such property to the Purchaser, which,
in the case of existing Receivables and the proceeds thereof and said
Recoveries and Interchange, is enforceable upon execution and delivery of
this Agreement, or, with respect to then existing Receivables in Additional
Accounts, as of the applicable Addition Date, and which will be enforceable
with respect to such Receivables hereafter and thereafter created and the
proceeds thereof upon such creation. Upon the filing of the financing
statements and, in the case of Receivables hereafter created and the
proceeds thereof, upon the creation thereof, the Purchaser shall have a
first priority perfected security or ownership interest in such property
and proceeds;
(vi) on the Closing Date, each Account is an Eligible Account
and, in the case of Additional Accounts, on the Additional Cut-Off Date,
each related Additional Account is an Eligible Account;
(vii) on the Closing Date, each Receivable then existing is an
Eligible Receivable, and in the case of Additional Accounts, on the
applicable Additional Cut-Off Date, each Receivable generated thereunder is
an Eligible Receivable;
(viii) as of the date of the creation of any new Receivable,
such Receivable is an Eligible Receivable;
(ix) no selection procedures believed by the Seller to be
materially adverse to the interests of the Purchaser or the Investor
Certificateholders have been used in selecting such Accounts; and
(x) each Receivable is an "account" or a "general intangible"
for the purposes of the UCC.
(b) Notice of Breach. The representations and warranties set
forth in this Section 4.2 shall survive the transfer and assignment of the
Receivables to the Purchaser. Upon discovery by either the Seller or the
Purchaser of a breach of any of the representations and warranties set
forth in this Section 4.2, the party discovering such breach shall give
written notice to the other party, the Trustee and to the Rating Agency
within three Business Days following such discovery; provided that the
failure to give notice within three Business Days does not preclude
subsequent notice. The Seller hereby acknowledges that the Purchaser
intends to rely on the representations hereunder in connection with
representations made by the Purchaser to secured parties, assignees or
subsequent transferees including but not limited to transfers made by the
Purchaser to the Trust pursuant to the Pooling and Servicing Agreement and
that the Trustee may enforce such representations directly against the
Seller.
Section 4.3. Representations and Warranties of the Purchaser.
As of the Closing Date, and on each Addition Date the Purchaser hereby
represents and warrants to, and agrees with, the Seller that:
(a) Organization and Good Standing. The Purchaser is a limited
liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has, in all material respects,
full power and authority to own its properties and conduct its business as
presently owned or conducted and to execute, deliver and perform its
obligations under this Agreement and the Conveyance Papers.
(b) Due Authorization. The execution and delivery of this
Agreement and the Conveyance Papers and the consummation of the
transactions provided for in this Agreement and the Conveyance Papers have
been duly authorized by the Purchaser by all necessary corporate action on
the part of the Purchaser.
(c) No Conflict. The execution and delivery of this Agreement
and the Conveyance Papers by the Purchaser, the performance of the
transactions contemplated by this Agreement and the Conveyance Papers, and
the fulfillment of the terms of this Agreement and the Conveyance Papers
applicable to the Purchaser, will not conflict with, result in any breach
of any of the material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a material default under, any
indenture, contract, agreement, mortgage, deed of trust or other instrument
to which the Purchaser is a party or by which it or any of its properties
are bound.
(d) No Violation. The execution, delivery and performance of
this Agreement and the Conveyance Papers by the Purchaser and the
fulfillment of the terms contemplated herein and therein applicable to the
Purchaser will not conflict with or violate any Requirements of Law
applicable to the Purchaser.
(e) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Purchaser, threatened against the
Purchaser, before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality (i) asserting the invalidity
of this Agreement or the Conveyance Papers, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or
the Conveyance Papers, (iii) seeking any determination or ruling that, in
the reasonable judgment of the Purchaser, would materially and adversely
affect the performance by the Purchaser of its obligations under this
Agreement or the Conveyance Papers or (iv) seeking any determination or
ruling that would materially and adversely affect the validity or
enforceability of this Agreement or the Conveyance Papers.
(f) All Consents. All authorizations, consents, orders or
approvals of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Purchaser in
connection with the execution and delivery by the Purchaser of this
Agreement and the Conveyance Papers and the performance of the transactions
contemplated by this Agreement and the Conveyance Papers have been duly
obtained, effected or given and are in full force and effect.
The representations and warranties set forth in this Section 4.3
shall survive the Conveyance of the Receivables to the Purchaser. Upon
discovery by the Purchaser or the Seller of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the other party.
ARTICLE V
COVENANTS
Section 5.1. Covenants of the Seller. The Seller hereby
covenants and agrees with the Purchaser as follows:
(a) Receivables Not To Be Evidenced by Promissory Notes. Except
in connection with its enforcement or collection of an Account, the Seller
will take no action to cause any Receivable to be evidenced by any
instrument other than an instrument that, taken together with one or more
other writings, constitutes chattel paper (as such terms are defined in the
UCC) and if any Receivable (or underlying receivable) is so evidenced as a
result of any action by the Seller it shall be deemed to be an Ineligible
Receivable in accordance with Section 6.1(a) and shall be reassigned to the
Seller in accordance with Section 6.1(b)
(b) Security Interests. Except for the conveyances hereunder,
the Seller will not sell, pledge, assign or transfer to any other Person,
or take any other action inconsistent with the Purchaser's ownership of the
Receivables or grant, create, incur, assume or suffer to exist any Lien on,
any Receivable, whether now existing or hereafter created, or any interest
therein, and the Seller shall not claim any ownership interest in the
Receivables and shall defend the right, title and interest of the Purchaser
in, to and under the Receivables, whether now existing or hereafter
created, against all claims of third parties claiming through or under the
Seller; provided, however, that nothing in this section shall prevent or be
deemed to prohibit the Seller from suffering to exist upon any of the
Receivables or Participation Interests any Liens for taxes if such taxes
shall not at the time be due and payable or if the Seller shall currently
be contesting the validity thereof in good faith by appropriate proceedings
and shall have set aside on its books adequate reserves with respect
thereto. Notwithstanding the foregoing, nothing in this section shall be
construed to prevent or be deemed to prohibit the transfer of the
Transferor Certificate and certain other rights of Purchaser as the
Transferor under the Pooling and Servicing Agreement in accordance with the
terms of this Agreement and any related Supplement.
(c) Account Allocations. In the event that the Seller is unable
for any reason to transfer Receivables to the Purchaser in accordance with
the provisions of this Agreement (including, without limitation, by reason
of the application of the provisions of Section 8.2 or any order of any
Governmental Authority), then, in any such event, the Seller agrees (except
as prohibited by any such order) to allocate and pay to the Purchaser,
after the date of such inability, all amounts which the Purchaser is
required to allocate and pay to the Trust pursuant to Section 2.11 of the
Pooling and Servicing Agreement, and in the same as the Purchaser is
required to allocate pay such amounts to the Trust.
(d) Notice of Liens. The Seller shall notify the Purchaser
promptly after becoming aware of any Lien on any Receivable other than the
conveyances hereunder and under the Pooling and Servicing Agreement.
(e) Interchange. Not later than 1:00 p.m., New York City time,
on each Business Day, the Seller shall deposit or cause to be deposited
into the Collection Account, in immediately available funds, (i) the amount
of Interchange to be included as Collections of Finance Charge Receivables
with respect to the preceding Business Day or (ii) if at any time the
Seller cannot identify or cause to be identified the amount of such
Interchange, the amount reasonably estimated by the Seller as the amount of
such Interchange.
(f) Documentation of Transfer. The Seller shall undertake to
file the documents which would be necessary to perfect and maintain the
transfer of the Purchased Assets to the Purchaser.
(g) Segregation of Accounts. The records of the Seller will be
marked to evidence the sale or transfer of the Receivables to the Purchaser
and the transfer of the Receivables by the Purchaser to the Trust;
provided, however, that the Seller need not segregate the documents or
agreements relating to the Accounts and the Receivables from documents or
agreements relating to other credit card accounts and receivables.
Section 5.2. Covenants of the Seller with Respect to Receivables
Purchase Agreements. The Seller, in its capacity as purchaser of
Receivables from any Account Owner pursuant to a receivables purchase
agreement in, or substantially in, the form of this agreement (each a
"Receivables Purchase Agreement") hereby covenants that the Seller will at
all times enforce the covenants and agreements of the applicable Account
Owner in such Receivables Purchase Agreement, including covenants
substantially to the effect set forth below:
(a) Periodic Rate Finance Charges. Except (x) as otherwise
required by any Requirements of Law or (y) as is deemed by the related
Account Owner to be necessary in order for it to maintain its credit card
business or a program operated by such credit card business on a
competitive basis based on a good faith assessment by it of the nature of
the competition with respect to the credit card business or such program,
it shall not at any time take any action which would have the effect of
reducing the Portfolio Yield to a level that could be reasonably expected
to cause any Series to experience any Pay Out Event or Reinvestment Event
based on the insufficiency of the Portfolio Yield or any similar test and
except as otherwise required by any Requirements of Law, it shall not take
any action which would have the effect of reducing the Portfolio Yield to
be less than the highest Average Rate for any Group.
(b) Credit Card Agreements and Guidelines. Subject to compliance
with all Requirements of Law and Sections 5.2(a), the related Account Owner
may change the terms and provisions of the applicable Credit Card
Agreements or the applicable Credit Card Guidelines in any respect
(including the calculation of the amount or the timing of charge-offs and
the Periodic Rate Finance Charges to be assessed thereon). Notwithstanding
the above, unless required by Requirements of Law or as permitted by
Section 5.2(a), no Account Owner will take action with respect to the
applicable Credit Card Agreements or the applicable Credit Card Guidelines,
which, at the time of such action, such Account Owner reasonably believes
will have a material adverse effect on the Investor Certificateholders.
The Seller further covenants that it will not enter into any
amendments to the Receivables Purchase Agreements or enter into a new
Receivables Purchase Agreement unless the Rating Agency Condition has been
satisfied. The Seller also further covenants that it will provide prompt
written notice to the Rating Agency of any amendment to a Receivables
Purchase Agreement to which it is a party.
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1. Reassignment of Ineligible Receivables
(a) In the event any representation or warranty under Section
4.2(a)(ii), (iii), (iv), (vi), (vii), (viii) or (x) is not true and correct
in any material respect as of the date specified therein with respect to
any Receivable or the related Account and as a result of such breach the
Purchaser is required to accept reassignment of Ineligible Receivables
previously sold by the Seller to the Purchaser pursuant to Section 2.5(a)
of the Pooling and Servicing Agreement, the Seller shall accept
reassignment of the Purchaser's interest in such Ineligible Receivables on
the terms and conditions set forth in Section 6.1(b).
(b) The Seller shall accept reassignment of any Ineligible
Receivables previously sold by the Seller to the Purchaser from the
Purchaser on the date on which such reassignment obligation arises, and
shall pay for such reassigned Ineligible Receivables by paying to the
Purchaser not later than 3:00 p.m., New York City time on such date, an
amount equal to the unpaid principal balance of such Ineligible Receivables
plus accrued and unpaid finance charges at the annual percentage rate
applicable to such Receivables from the last date billed through the end of
the Monthly Period in which such reassignment obligation arises. Upon
reassignment of such Ineligible Receivables, the Purchaser shall
automatically and without further action be deemed to sell, transfer,
assign, set-over and otherwise convey to the Seller, without recourse,
representation or warranty, all the right, title and interest of the
Purchaser in and to such Ineligible Receivables, all monies due or to
become due with respect thereto and all proceeds thereof; and such
reassigned Ineligible Receivables shall be treated by the Purchaser as
collected in full as of the date on which they were transferred. The
Purchaser shall execute such documents and instruments of transfer or
assignment and take such other actions as shall reasonably be requested by
the Seller to effect the conveyance of such Ineligible Receivables pursuant
to this subsection.
Section 6.2. Reassignment of Certificateholders' Interest in
Trust Portfolio. In the event any representation or warranty set forth in
Section 4.1(a) or (c) or Section 4.2(a)(i) or (a)(v) is not true and
correct in any material respect and as a result of such breach the
Purchaser is required to accept a reassignment of the Certificateholders'
Interest in the Receivables previously sold by the Seller to the Purchaser
pursuant to Section 2.6 of the Pooling and Servicing Agreement, the Seller
shall be obligated to accept a reassignment of the Purchaser's interest in
such Receivables on the terms set forth below.
The Seller shall pay to the Purchaser by depositing in the
Collection Account in immediately available funds, not later than 1:00 P.M.
New York City time, on the first Transfer Date following the Monthly Period
in which such reassignment obligation arises, in payment for such
reassignment, an amount equal to the amount specified in Section 2.6 of the
Pooling and Servicing Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1. Conditions to the Purchaser's Obligations Regarding
Initial Receivables. The obligations of the Purchaser to purchase the
Receivables in the Initial Accounts on the Closing Date shall be subject to
the satisfaction of the following conditions:
(a) All representations and warranties of the Seller contained
in this Agreement shall be true and correct on the Closing Date with the
same effect as though such representations and warranties had been made on
such date;
(b) All information concerning the Initial Accounts provided to
the Purchaser shall be true and correct as of the Closing Date in all
material respects;
(c) The Seller shall have (i) delivered to the Purchaser a
computer file or microfiche list containing a true and complete list of all
Initial Accounts identified by account number and by the Receivables
balance as of the Closing Date and (ii) substantially performed all other
obligations required to be performed by the provisions of this Agreement;
(d) The Seller shall have recorded and filed, at its expense,
any financing statement with respect to the Receivables (other than
Receivables in Additional Accounts) now existing and hereafter created for
the transfer of accounts and general intangibles (each as defined in
Section 9-106 of the UCC) meeting the requirements of applicable state law
in such manner and in such jurisdiction as would be necessary to perfect
the sale of and security interest in the Receivables from the Seller to the
Purchaser, and shall deliver a file-stamped copy of such financing
statements or other evidence of such filings to the Purchaser;
(e) On or before the Closing Date, the Purchaser and the Trustee
shall have entered into the Pooling and Servicing Agreement and the closing
under the Pooling and Servicing Agreement shall take place simultaneously
with the initial closing hereunder; and
(f) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Purchaser, and the Purchaser
shall have received from the Seller copies of all documents (including,
without limitation, records of corporate proceedings) relevant to the
transactions herein contemplated as the Purchaser may reasonably have
requested.
Section 7.2. Conditions Precedent to the Seller's Obligations.
The obligations of the Seller to sell Receivables in the Initial Accounts
on the Closing Date shall be subject to the satisfaction of the following
conditions:
(a) All representations and warranties of the Purchaser
contained in this Agreement shall be true and correct on the Closing Date
with the same effect as though such representations and warranties had been
made on such date;
(b) Payment or provision for payment of the Purchase Price in
accordance with the provision of Section 3.1 hereof shall have been made;
and
(c) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Seller, and the Seller shall have
received from the Purchaser copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as the Seller may reasonably have requested.
ARTICLE VIII
TERM AND PURCHASE TERMINATION
Section 8.1. Term. This Agreement shall commence as of the date
of execution and delivery hereof and shall continue until the termination
of the Trust as provided in Article XII of the Pooling and Servicing
Agreement.
Section 8.2. Purchase Termination. If the Seller shall fail
generally to, or admit in writing its inability to, pay its debts as they
become due; or if a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in
respect of the Seller in an involuntary case under any Debtor Relief Law,
or for the appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator, conservator or other similar official of the
Seller or for any substantial part of the Seller's property, or for the
winding-up or liquidation of the Seller's affairs and, if instituted
against the Seller, any such proceeding shall continue undismissed or
unstayed and in effect, for a period of 60 consecutive days, or any of the
actions sought in such proceeding shall occur; or if the Seller shall
commence a voluntary case under any Debtor Relief Law, or if the Seller
shall consent to the entry of an order for relief in an involuntary case
under any Debtor Relief Law, or consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official of, or for, any
substantial part of its property, or any general assignment for the benefit
of its creditors; or the Seller or any subsidiary of the Seller shall have
taken any corporate action in furtherance of any of the foregoing actions
(each an "Insolvency Event"); then the Seller shall immediately cease to
transfer Principal Receivables to the Purchaser and shall promptly give
notice to the Purchaser and the Trustee of such Insolvency Event.
Notwithstanding any cessation of the transfer to the Purchaser of
additional Principal Receivables, Principal Receivables transferred to the
Purchaser prior to the occurrence of such Insolvency Event and Collections
in respect of such Principal Receivables and Finance Charge Receivables
whenever created, accrued in respect of such Principal Receivables, shall
continue to be property of the Purchaser available for transfer by the
Purchaser the Trust pursuant to the Pooling and Servicing Agreement.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment. This Agreement and any Conveyance
Papers and the rights and obligations of the parties hereunder may not be
changed orally, but only by an instrument in writing signed by the
Purchaser and the Seller in accordance with this Section 9.1. This
Agreement and any Conveyance Papers may be amended from time to time by the
Purchaser and the Seller (i) to cure any ambiguity, (ii) to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein or in any such other Conveyance Papers, (iii) to add any
other provisions with respect to matters or questions arising under this
Agreement or any Conveyance Papers which shall not be inconsistent with the
provisions of this Agreement or any Conveyance Papers, (iv) to change or
modify the Purchase Price and (v) to change, modify, delete or add any
other obligation of the Seller or the Purchaser; provided, however, that no
amendment pursuant to clause (iv) or (v) of this Section 9.1 shall be
effective unless the Seller and the Purchaser have been notified in writing
that the Rating Agency Condition has been satisfied; provided, further,
that such action shall not (as evidenced by an Opinion of Counsel delivered
to the Trustee) adversely affect in any material respect the interests of
the Trustee or the Investor Certificateholders, unless the Trustee shall
consent thereto. Any reconveyance executed in accordance with the
provisions hereof shall not be considered to be an amendment to this
Agreement. A copy of any amendment to this Agreement shall be sent to the
Rating Agency.
Section 9.2. Governing Law. THIS AGREEMENT AND THE CONVEYANCE
PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 9.3. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given
if personally delivered at or mailed by registered mail, return receipt
requested, to (a) in the case of the Seller, to Partners First Receivables,
LLC, at 900 Elkridge Landing Road, Suite 300, Linthicum, Maryland 21090,
Attention: John R. Soderlund (facsimile no. (410) 855-8599), (b) in the
case of the Purchaser, to Partners First Receivables, LLC, at 900 Elkridge
Landing Road, Suite 300, Linthicum, Maryland 21090, Attention: John R.
Soderlund (facsimile no. (410) 855-8599), (c) in the case of the Trustee,
to The Bank of New York at 101 Barclay Street 12E, New York, NY 10286,
Attention: Corporate Trust Department (facsimile no. (212) [815-5544]); (d)
in the case of the Rating Agency, (i) to Moody's, at 99 Church Street, New
York, New York 10007, Attention: ABS Monitoring Department, 4th Floor
(facsimile no. (212) 553-4600), (ii) to Standard & Poor's, at 26 Broadway,
New York, New York 10004, Attention: Asset Backed Group, 15th Floor
(facsimile no. (212) 412-0323), or (iii) to Fitch, at One State Street
Plaza, New York, New York, Attention: Structured Finance Department
(facsimile no. (212) 480-4438), or, as to each party, at such other address
as shall be designated by such party in a written notice to each other
party.
Section 9.4. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement or any
Conveyance Paper shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions, or terms shall be deemed severable from
the remaining covenants, agreements, provisions, and terms of this
Agreement or any Conveyance Paper and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of any
Conveyance Paper.
Section 9.5. Assignment. Notwithstanding anything to the
contrary contained herein, other than the Purchaser's assignment of its
rights, title, and interests in, to, and under this Agreement to the
Trustee for the benefit of the beneficiaries of the Trust, including the
Certificateholders as contemplated by the Pooling and Servicing Agreement
and Section 9.6 hereof, this Agreement and all other Conveyance Papers may
not be assigned by the parties hereto; provided, however, the Seller shall
have the right to assign its rights, title and interests, in, to and under
this Agreement to (i) any successor by merger assuming this Agreement, or
(ii) to any other entity, provided that in either case the Rating Agency
Condition shall have been satisfied.
Section 9.6. Acknowledgment and Agreement of the Seller. By
execution below, the Seller expressly acknowledges and agrees that all of
the Purchaser's right, title, and interest in, to, and under this
Agreement, including, without limitation, all of the Purchaser's right,
title, and interest in and to the Receivables purchased pursuant to this
Agreement, shall be assigned by the Purchaser to the Trustee for the
benefit of the beneficiaries of the Trust, including the
Certificateholders, and the Seller consents to such assignment. The Seller
further agrees that notwithstanding any claim, counterclaim, right or
setoff or defense which it may have against the Purchaser, due to a breach
by the Purchaser of this Agreement or for any other reason, and
notwithstanding the bankruptcy of the Purchaser or any other event
whatsoever, the Seller's sole remedy shall be a claim against the Purchaser
for money damages and, then only to the extent of funds received by the
Purchaser pursuant to the Pooling and Servicing Agreement, and in no event
shall the Seller assert any claim on or any interest in the Receivables or
any proceeds thereof or take any action which would reduce or delay receipt
by Certificateholders of collections with respect to the Receivables.
Additionally, the Seller agrees for the benefit of the Trustee that any
amounts payable by the Seller to the Purchaser hereunder which are to be
paid by the Purchaser to the Trustee for the benefit of the
Certificateholders shall be paid by the Seller on behalf of the Purchaser,
directly to the Trustee.
Section 9.7. Further Assurances. The Purchaser and the Seller
agree to do and perform, from time to time, any and all acts and to execute
any and all further instruments required or reasonably requested by the
other party or the Trustee more fully to effect the purposes of this
Agreement, the Conveyance Papers and the Pooling and Servicing Agreement,
including, without limitation, the execution of any financing statements or
continuation statements or equivalent documents relating to the Receivables
for filing under the provisions of the UCC or other law of any applicable
jurisdiction.
Section 9.8. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Purchaser or the
Seller, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.
Subject to Section 9.6, the rights, remedies, powers and privileges herein
provided are cumulative and not exhaustive of any rights, remedies, powers
and privileges provided by law.
Section 9.9. Counterparts. This Agreement and all Conveyance
Papers may be executed in two or more counterparts (and by different
parties on separate counterparts), each of which shall be an original, but
all of which together shall constitute one and the same instrument.
Section 9.10. Binding; Third-Party Beneficiaries. This
Agreement and the Conveyance Papers will inure to the benefit of and be
binding upon the parties hereto and their respective successors and
permitted assigns. The Trustee shall be considered a third-party
beneficiary of this Agreement.
Section 9.11. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement and the Conveyance Papers set forth
the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by
this Agreement and the Conveyance Papers. This Agreement and the
Conveyance Papers may not be modified, amended, waived or supplemented
except as provided herein.
Section 9.12. Headings. The headings are for purposes of
reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section 9.13. Schedules and Exhibits. The schedules and
exhibits attached hereto and referred to herein shall constitute a part of
this Agreement and are incorporated into this Agreement for all purposes.
Section 9.14. Survival of Representations and Warranties. All
representations, warranties and agreements contained in this Agreement or
contained in any Supplemental Conveyance, shall remain operative and in
full force and effect and shall survive conveyance of the Receivables by
the Purchaser to the Trustee pursuant to the Pooling and Servicing
Agreement.
Section 9.15. Nonpetition Covenant. The Seller hereby covenants
and agrees that prior to the date which is one year and one day after the
payment in full of all Investor Certificates of all Series, it will not
institute against or join any other Person in instituting against the
Purchaser any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the
United States or any state of the United States.
IN WITNESS WHEREOF, the undersigned have caused this Amended and
Restated Receivables Purchase Agreement to be duly executed by their
respective officers as of the day and year first above written.
PARTNERS FIRST RECEIVABLES, LLC
By: /s/ Harry G. Pappas
-------------------------------
Name: Harry G. Pappas
Title: Chief Financial Officer
PARTNERS FIRST RECEIVABLES FUNDING, LLC
By: /s/ Mark J. Norwicz
-------------------------------
Name: Mark J. Norwicz
Title: Treasurer
EXHIBIT A
FORM OF SUPPLEMENTAL CONVEYANCE
As required by Section 2.5 of
the Receivables Purchase Agreement
SUPPLEMENTAL CONVEYANCE No. dated as of , 19 , by
and between PARTNERS FIRST RECEIVABLES, LLC, as Seller (the "Seller"), and
PARTNERS FIRST RECEIVABLES FUNDING, LLC (the "Purchaser"), pursuant to the
Receivables Purchase Agreement referred to below.
WITNESSETH
WHEREAS, the Seller and the Purchaser are parties to a
Receivables Purchase Agreement, dated as of January 29, 1998 (hereinafter
as such agreement may have been, or may from time to time be, amended,
supplemented or otherwise modified, the "Receivables Purchase Agreement");
WHEREAS, pursuant to the Receivables Purchase Agreement, the
Seller wishes to designate Additional Accounts to be included as Accounts
and the Seller wishes to convey its right, title and interest in the
Receivables of such Additional Accounts, whether now existing or hereafter
created, to the Purchaser pursuant to the Receivables Purchase Agreement
(as each such term is defined in the Receivables Purchase Agreement or if
not defined therein, as defined in the Pooling and Servicing Agreement);
and
WHEREAS, the Purchaser is willing to accept such designation and
conveyance subject to the terms and conditions hereof.
NOW, THEREFORE, the Seller and the Purchaser hereby agree as
follows:
1. Defined Terms. All capitalized terms used herein shall have
the meanings ascribed to them in the Receivables Purchase Agreement unless
otherwise defined herein.
"Addition Date" shall mean, with respect to the Additional
Accounts designated hereby, , 19 .
"Additional Cut-Off Date" shall mean, with respect to the
Additional Accounts designated hereby, _________ __, 19__.
2. Designation of Additional Accounts. The Seller delivers
herewith a computer file or microfiche list containing a true and complete
schedule identifying all such Additional Accounts and specifying for each
such Account, as of the Additional Cut-Off Date, its account number, the
aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables in such Account. Such computer file, microfiche list
or other documentation shall be as of the date of this Supplemental
Conveyance incorporated into and made part of this Supplemental Conveyance
and is marked as Schedule I to this Supplemental Conveyance.
3. Conveyance of Receivables.
(a) The Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Purchaser, without recourse except as provided in
the Receivables Purchase Agreement, all its right, title and interest in,
to and under (i) the Receivables generated by such Additional Accounts, now
existing at the close of business on the Additional Cut-Off Date and
hereafter created until termination of the Receivables Purchase Agreement,
all monies due or to become due and all amounts received with respect
thereto and all "proceeds" (including, without limitation, "proceeds" as
defined in Article 9 of the UCC) thereof and (ii) the right to receive
Interchange and Recoveries with respect to such Receivables.
(b) In connection with such sale, the Seller agrees to record
and file, at its own expense, one or more financing statements (and
continuation statements with respect to such financing statements when
applicable) with respect to the Receivables, now existing and hereafter
created, for the transfer of accounts and general intangibles meeting the
requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the sale and assignment of and
the security interest in the Receivables to the Purchaser, and to deliver a
file-stamped copy of such financing statement or other evidence of such
filing to the Purchaser.
(c) In connection with such sale, the Seller further agrees, at
its own expense, on or prior to the date of this Supplemental Conveyance,
to indicate in the appropriate computer files or microfiche list that all
Receivables created in connection with the Additional Accounts designated
hereby have been conveyed to the Purchaser pursuant to this Supplemental
Conveyance.
4. Acceptance by the Purchaser. The Purchaser hereby
acknowledges its acceptance of all right, title and interest to the
property, now existing and hereafter created, conveyed to the Purchaser
pursuant to Section 3(a) of this Supplemental Conveyance, and declares that
it shall maintain such right, title and interest. The Purchaser further
acknowledges that, prior to or simultaneously with the execution and
delivery of this Supplemental Conveyance, the Seller delivered to the
Purchaser the computer file or microfiche list described in Section 2 of
this Supplemental Conveyance.
5. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Purchaser as of the date of this
Supplemental Conveyance and as of the Addition Date that:
(a) Legal, Valid and Binding Obligation. This Supplemental
Conveyance constitutes a legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally from time to time in effect or general principles of
equity;
(b) Eligibility of Accounts. On the Additional Cut-Off Date,
each Additional Account designated hereby is an Eligible Account;
(c) No Liens. Each Receivable in an Additional Account
designated hereby has been conveyed to the Purchaser free and clear of any
Lien (other than Liens permitted under subsection 2.7(b) of the Pooling and
Servicing Agreement);
(d) Eligibility of Receivables. On the Additional Cut-Off Date,
each Receivable existing in an Additional Account designated hereby is an
Eligible Receivable and as of the date of creation of any Receivable in an
Additional Account designated hereby, such Receivable is an Eligible
Receivable;
(e) Selection Procedures. No selection procedure believed by
the Seller to be adverse to the interests of the Purchaser or the Investor
Certificateholders was utilized in selecting the Additional Accounts;
(f) Transfer of Receivables. This Supplemental Conveyance
constitutes a valid sale, transfer and assignment to the Seller of all
right, title and interest of the Seller in the Receivables arising in the
Additional Accounts designated hereby now existing or hereafter created,
all monies due or to become due and all amounts received with respect
thereto and the "proceeds" (including, without limitation, "proceeds" as
defined in Article 9 of the UCC) thereof and the Interchange and the
Recoveries with respect thereto;
(g) No Conflict. The execution and delivery of this
Supplemental Conveyance, the performance of the transactions contemplated
by this Supplemental Conveyance and the fulfillment of the terms hereof,
will not conflict with, result in any breach of any of the material terms
and provisions of, or constitute (with or without notice or lapse of time
or both) a material default under, any indenture, contract, agreement,
mortgage, deed of trust or other instrument to which the Seller is a party
or by which it or its properties are bound;
(h) No Violation. The execution and delivery of this
Supplemental Conveyance by the Seller, the performance of the transactions
contemplated by this Supplemental Conveyance and the fulfillment of the
terms hereof applicable to the Seller will not conflict with or violate any
Requirements of Law applicable to the Seller;
(i) No Proceedings. There are no proceedings or investigations,
pending or, to the best knowledge of the Seller, threatened against the
Seller before any Governmental Authority (i) asserting the invalidity of
this Supplemental Conveyance, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Supplemental Conveyance, (iii)
seeking any determination or ruling that, in the reasonable judgment of the
Seller, would materially and adversely affect the performance by the Seller
of its obligations under this Supplemental Conveyance or (iv) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of this Supplemental Conveyance; and
(j) All Consents. All authorizations, consents, orders or
approvals of any court or other governmental authority required to be
obtained by the Seller in connection with the execution and delivery of
this Supplemental Conveyance by the Seller and the performance of the
transactions contemplated by this Supplemental Conveyance by the Seller,
have been obtained.
6. Ratification of the Receivables Purchase Agreement. The
Receivables Purchase Agreement is hereby ratified, and all references to
the "Receivables Purchase Agreement", to "this Agreement" and "herein"
shall be deemed from and after the Addition Date to be a reference to the
Receivables Purchase Agreement as supplemented by this Supplemental
Conveyance. Except as expressly amended hereby, all the representations,
warranties, terms, covenants and conditions of the Receivables Purchase
Agreement shall remain unamended and shall continue to be, and shall,
remain, in full force and effect in accordance with its terms and except as
expressly provided herein shall not constitute or be deemed to constitute a
waiver of compliance with or consent to non-compliance with any term or
provision of the Receivables Purchase Agreement.
7. Counterparts. This Supplemental Conveyance may be executed
in any number of counterparts, all of which taken together shall constitute
one and the same instrument.
8. Headings. The headings are for purposes of reference only
and shall not otherwise affect the meaning or interpretation of any
provision hereof.
9. Nonpetition Covenant. The Seller hereby covenants and
agrees that prior to the date which is one year and one day after the
payment in full of all Investor Certificates of all Series, it will not
institute against or join any other Person in instituting against the
Purchaser any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the
United States or any state of the United States.
IN WITNESS WHEREOF, the undersigned have caused this Supplemental
Conveyance to be duly executed and delivered by their respective duly
authorized officers on the day and the year first above written.
PARTNERS FIRST RECEIVABLES, LLC
By:_________________________________
Name:_____________________________
Title:____________________________
PARTNERS FIRST RECEIVABLES FUNDING, LLC
By:_________________________________
Name:____________________________
Title:___________________________
Schedule I to
Supplemental
Conveyance
Additional Accounts
EXHIBIT B
FORM OF REVOLVING NOTE
REVOLVING NOTE
This Revolving Note, dated as of January 29, 1998, by PARTNERS FIRST
RECEIVABLES FUNDING, LLC, a Delaware limited liability company (the
"Borrower") to PARTNERS FIRST RECEIVABLES, LLC, a Delaware limited
liability company (the "Lender").
The Lender and the Borrower have entered into a Receivables Purchase
Agreement (the "Receivables Purchase Agreement") dated as of January 29,
1998 providing for the purchase from time to time by the Borrower of
certain receivables generated from time to time in a portfolio of consumer
open end credit card accounts (the "Receivables"). Except as otherwise
expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Receivables Purchase Agreement.
1. The Note. For value received, the Borrower hereby promises to pay
to the order of the Lender at its offices at 900 Elkridge Landing Road,
Suite 700, Linthicum, MD 21640-2025, the principal amount of all Loans (as
hereinafter defined) made by the Lender to the Borrower from time to time
under the terms of this Note as remains unpaid, as shown in the schedule
attached hereto and any continuations thereof, on the day which is one year
and a day after the payment in full of the Transferor Amount and all
Invested Amounts of each Series issued pursuant to the Pooling and
Servicing Agreement (the "Maturity Date"). The Borrower shall pay interest
on the unpaid principal amount of the Loans as provided herein.
2. The Loans. a From time to time between the date of this Note
and the Maturity Date, and subject to the restrictions on lending under
this Note contained in the Receivables Purchase Agreement, the Lender may
lend to the Borrower additional sums (each a "Loan" and, together with the
Initial Loan, the "Loans"), as provided herein.
3. The obligation of the Borrower to repay the aggregate unpaid
principal amount of the Loans outstanding shall be evidenced by this Note
and the schedule attached hereto. The Lender is hereby authorized to
endorse on the schedule or on a continuation of such schedule, appropriate
notations regarding each Loan evidenced by this Note; provided, however,
that the failure to make, or error in making, any notation shall not limit
or otherwise affect the obligation of the Borrower hereunder. When the
Borrower requests a Loan in connection with the acquisition of any
Receivables, the Borrower shall notify the Lender by telephone specifying
the amount and the date on which such Loan is requested. Unless otherwise
specified, the maturity of each such Loan shall be the Maturity Date.
4. The Lender agrees that on each Distribution Date, the Lender shall
determine whether the Capital Ratio as of the end of the preceding Monthly
Period equaled or exceeded the Minimum Capital Ratio. If, as of any such
date, the Capital Ratio was less than the Minimum Capital Ratio, from and
after the date of such determination the Lender shall not increase the
principal amount of this Revolving Note until the Capital Ratio is at least
equal to the Minimum Capital Ratio.
5. Interest. Each Loan shall bear interest which shall be calculated
as the arithmetic mean of the beginning and ending principal balances for
such month, from the date hereof until this Revolving Note is fully paid,
at a monthly rate equal to one-twelfth of the Federal Funds rate near
closing bid as published in the Wall Street Journal on the 15th of that
month, or the next Business Day if the fifteenth is not a Business Day.
Interest shall be due and payable semi-annually on the last day of June and
December of each year (each, an "Interest Payment Date"), commencing on
June 30, 1998. Interest is based on twelve 30-day months.
6. Payment. The Lender shall be entitled to and may require the
Borrower to, make a payment of the loans, in whole or in part, on any day
upon providing one Business Day's written notice to the Borrower.
7. Subordination of Obligations. The Lender irrevocably agrees that
the obligations of the Borrower under this Note with respect to the payment
of principal and interest are and shall be fully and irrevocably
subordinate in right of payment and subject to the prior payment or
provision for payment in full of all Senior Indebtedness, that such
obligations may only be satisfied to the extent of cash or other assets of
the Borrower then available for such purpose after giving effect to all
required payments in respect of Senior Indebtedness, and that such
obligations shall not constitute a claim against the Borrower at any time
that, and for so long as, cash or such other assets available therefor are
insufficient. "Senior Indebtedness" means the principal of and interest,
including post-default interest, on any indebtedness of or guaranteed by
the Borrower, whether outstanding or guaranteed on the date hereof or
thereafter created, incurred, assumed or guaranteed for money borrowed or
for the deferred purchase price of property purchased by any person
including, for this purpose, all obligations of the Borrower under
capitalized leases or purchase money mortgages, and, in each such case, all
renewals, extensions and refundings thereof including, without limitation,
all obligations of the Borrower arising under or in respect of the Pooling
and Servicing Agreement; provided, however, that Senior Indebtedness shall
not include any obligation of or guarantee by the Borrower, whether
outstanding or guaranteed on the date hereof of thereafter created,
incurred, assumed or guaranteed that by agreement, operation of law or by
its terms is subordinate in right of payment to this Note. In the event of
the appointment of a receiver or trustee of the Borrower or in the event of
its insolvency, bankruptcy, assignment for the benefit of creditors or
reorganization, whether or not pursuant to the bankruptcy laws, or any
other marshalling of the assets and liabilities of the Borrower, the Lender
shall not be entitled to participate or share, ratably or otherwise, in the
distribution of the assets of the Borrower until all claims of all other
present and future creditors of the Borrower, whose claims are senior
hereto, have been fully satisfied, or provisions have been made therefor.
8. Acceleration Upon Certain Events. The Borrower's obligation to
pay the unpaid principal amount hereof shall forthwith mature, together
with interest accrued thereon, in the event of any receivership,
insolvency, liquidation, bankruptcy, assignment for the benefit of
creditors, reorganization whether or not pursuant to bankruptcy laws, or
any other marshalling of the assets and liabilities of the Borrower, but
payment of the same shall remain subordinate as hereinabove set forth.
9. Effect of Default. Default in any payment hereunder, including
the payment of interest, shall not accelerate the maturity hereof except as
herein specifically provided, and the obligation to make payments shall
remain subordinated as hereinabove set forth.
10. Upon Whom Binding. The provisions of this Note shall be binding
upon the Lender, its successors and assigns and upon the Borrower.
11. GOVERNING LAW. THIS NOTE SHALL BE DEEMED TO HAVE BEEN MADE
UNDER, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF DELAWARE IN ALL
RESPECTS.
12. Cancellation. This Note shall not be subject to cancellation by
either party.
13. No Security. The Lender agrees that it is not taking and will
not take or assert as security for the payment of this Note any security
interest in or lien upon, whether created by contract, statute or
otherwise, any property of the Borrower or any property in which the
Borrower may have an interest, which is or at any time may be in possession
or subject to the control of the Lender. The Lender hereby waives, and
further agrees that it will not seek to obtain payment of this Note in
whole or in any part by exercising any right of set-off it may assert or
possess whether created by contract, statute or otherwise. Any agreement
between the Borrower and the Lender (whether in the nature of a general
loan and collateral agreement, a security or pledge agreement or
otherwise), shall be deemed amended hereby to the extent necessary so as
not to be inconsistent with the provisions of this Note.
14. Assignment. This Note shall inure to the benefit of and be
binding upon the parties hereto and each of their respective successors and
assigns. The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Lender.
15. No Bankruptcy Petition Against the Borrower. The Lender (in its
capacity as Lender, but in no other capacity), by its acceptance of this
Note, hereby covenants and agrees that, prior to the date which is one year
and one day after the payment in full of the Transferor Amount and all
Invested Amounts of all Series issued pursuant to the Pooling and Servicing
Agreement, it will not institute against or join any other Person in
instituting against the Borrower any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar
proceeding under the laws of the United States or any state of the United
States.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
its officers or employees thereunto duly authorized and directed by
appropriate corporate authority.
PARTNERS FIRST RECEIVABLES FUNDING, LLC
By:____________________________
Title:_________________________
THE TERMS AND CONDITIONS HEREOF
ARE HEREBY ACKNOWLEDGED AND ACCEPTED:
PARTNER FIRST RECEIVABLES, LLC
By:____________________________
Title:_________________________
SCHEDULE
Principal Amount of Loan Date
------------------------ ----
Schedule I
LIST OF ACCOUNTS
DEEMED INCORPORATED BY REFERENCE
Exhibit 5.1
May 20, 1998
Partners First Receivables Funding, LLC
900 Elkridge Landing Road
Suite 301
Linthicum, MD 21090
Re: Registration Statement on Form S-3
Registration No. 333-29495
Ladies and Gentlemen:
We have acted as special counsel to Partners First Receivables
Funding, LLC, as transferor (the "Transferor"), in connection with the
transfer of receivables ("Receivables") generated from time to time in a
portfolio of Visa and MasterCard revolving credit card accounts by the
Transferor to The Bank of New York, as trustee (the "Trustee") for the
Partners First Credit Card Master Trust (the "Trust"), formed pursuant to
a Pooling and Servicing Agreement, dated as of January 29, 1998, by and
among the Transferor, Partners First Holdings, LLC, as servicer (the
"Servicer") and the Trustee, as amended or as supplemented from time to
time (the "Pooling and Servicing Agreement"), in exchange for certain
Asset Backed Certificates (the Certificates"), each such Certificate
evidencing a fractional undivided interest in the Trust, which
Certificates will be offered and sold pursuant to the Registration
Statement No. 333-29495 filed on Form S- 3, as amended from time to time
(as amended, the "Registration Statement").
In connection with our engagement, we have examined and relied
upon the forms of the Pooling and Servicing Agreement and the Underwriting
Agreement included as exhibits to the Registration Statement. In addition,
we have examined and considered executed originals or counterparts, or
certified or other copies identified to our satisfaction as being true
copies of such securities, instruments, documents and other corporate
records of the Transferor and matters of fact and law as we deem necessary
for the purposes of the opinion expressed below.
In our examination we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the original of
such latter documents. As to any facts material to the opinions expressed
herein that we did not independently establish or verify, we have relied
upon statements and representations of officers and other representatives
of the Transferor and others.
We express no opinion as to the laws of any jurisdiction other
than the laws of the State of Delaware and the laws of the United States of
America to the extent specifically referred to herein.
Based upon and subject to the foregoing, we are of the opinion
that, when the offered Securities to be issued pursuant to the Pooling and
Servicing Agreement have been duly and validly authorized by the Transferor
and when the Offered Securities are executed and delivered by the
Transferor and authenticated by the Trustee in accordance with the
provisions of the Pooling and Servicing Agreement, and when the Offered
Securities are paid for by the Underwriters in accordance with the terms of
the Underwriting Agreement, the Offered Securities will be legally issued,
fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to Skadden, Arps, Slate,
Meagher & Flom LLP under the caption "Legal Matters" in the Prospectus
included in the Registration Statement.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom LLP
Exhibit 8.1
May 20, 1998
Partners First Receivables Funding, LLC
900 Elkridge Landing Road
Suite 301
Linthicum, MD 21090
Re: Registration Statement No. 333-29495 on Form S-3
relating to Partners First Credit Card Master Trust
Ladies and Gentlemen:
In connection with the filing of Registration Statement No. 333-
29495 on Form S-3 relating to Partners First Credit Card Master Trust (the
"Registration Statement") with the Securities and Exchange Commission, you
have requested our opinion regarding certain description of tax
consequences contained in the form of prospectus (the "Prospectus")
included in the Registration Statement.
Our opinion is based on an examination of the Prospectus, the Pooling
and Servicing Agreement, dated as of January 29, 1998, by and among
Partners First Receivables Funding, LLC, as Transferor, Partners First
Holdings, LLC, as Servicer, and The Bank of New York, as Trustee, as
amended or as supplemented from time to time (the "Agreement") and such
other documents, instruments and information as we considered necessary.
Our opinion is also based upon the Internal Revenue Code of 1986, as
amended, administrative rulings, judicial decisions, Treasury regulations
and other applicable authorities. The statutory provisions, regulation and
interpretations on which our opinion is based are subject to changes, and
such changes could apply retroactively. In addition, there can be no
assurance that positions contrary to those stated in our opinion may not
be taken by the Internal Revenue Service.
Based on the foregoing, we hereby confirm that the statements in
the Prospectus under the headings "Prospectus Summary Tax Status," "U.S.
Federal Income Tax Consequences" and "State and Local Taxation," subject to
the qualifications set forth therein, accurately describe the material
federal and Delaware income tax consequences to holders of the offered
Securities, under existing law and the assumptions stated therein.
We also note that the Prospectus and the Agreement do not relate
to a specific transaction. Accordingly, the above-referenced description
of federal income tax consequences may, under certain circumstances,
require modification in the context of an actual transaction.
We express no opinion with respect to the matters addressed in
this letter other than as set forth above.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom LLP
