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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-7258
CHARMING SHOPPES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1721355
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
450 Winks Lane, Bensalem, Pennsylvania 19020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 245-9100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $.10 per share)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. (X) YES ( ) NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in
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definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (X)
As of March 26, 1998, 100,720,159 common shares were outstanding. The aggregate
market value of the common shares (based upon the closing price on March 26,
1998), held by non-affiliates was approximately $482 million.
DOCUMENTS INCORPORATED BY REFERENCE: As stated in Part III of this annual
report, portions of the following document are incorporated herein by reference:
Definitive proxy statement for annual shareholders meeting to be filed within
120 days after the end of the fiscal year covered by this Annual Report.
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CHARMING SHOPPES, INC.
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1 Business
General...................................................... 1
Merchandising and Marketing.................................. 3
Purchasing................................................... 6
Distribution................................................. 7
Stores....................................................... 7
Store Management and Employees............................... 9
Trademarks and Servicemarks.................................. 9
Cautionary Statement for Purposes of the "Safe
Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995.............................. 9
Item 2 Properties..................................................... 11
Item 3 Legal Proceedings.............................................. 12
Item 4 Submission of Matters to a Vote of Security Holders............ 12
Item 4a Executive Officers of the Registrant........................... 12
PART II
Item 5 Market for the Registrant's Common Equity and
Related Stockholders' Matters........................................ 14
Item 6 Selected Financial Data........................................ 15
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 16
Item 7a Quantitative and Qualitative Disclosures About Market Risk..... 29
Item 8 Financial Statements and Supplementary Data.................... 30
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................. 62
PART III
Item 10 Directors and Executive Officers of the Registrant............. 63
Item 11 Executive Compensation......................................... 63
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Item 12 Security Ownership of Certain Beneficial Owners and Management. 63
Item 13 Certain Relationships and Related Transactions................. 63
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 64
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PART I
Item 1. Business
General
Charming Shoppes, Inc., a Pennsylvania corporation formed in 1969, operates
through its subsidiary corporations 1,135 women's specialty apparel stores in 42
states (as of January 31, 1998), the substantial majority of which are located
in the Northeast quadrant of the United States. Unless the context indicates
otherwise, the term "Company" refers to Charming Shoppes, Inc. and, where
appropriate, one or more of its wholly-owned subsidiaries. The Company's 1,077
"Fashion Bug" stores specialize in selling, at moderate and popular prices, a
wide variety of junior, misses, large-size and girls-size sportswear, dresses,
coats, lingerie, accessories and casual footwear. The Company's 58 "Fashion Bug
Plus" stores specialize in similar merchandise for the large-size customer. The
Company's stores sell both brand-name merchandise and specially manufactured
garments under one of the Company's private labels.
The Company has also carried an assortment of men's casual apparel in most of
its "Fashion Bug" stores. In the fall of 1997, the Company eliminated men's
merchandise from approximately 300 of its stores in order to refine its product
assortments. On March 5, 1998, the Company's Board of Directors approved a plan
to eliminate men's merchandise from the remaining "Fashion Bug" stores during
the fiscal year ending January 30, 1999 ("Fiscal 1999"). The Company expects
that the elimination of men's merchandise will allow for further development of
product categories that are more closely related to its existing women's apparel
businesses. The Company plans to focus on the development and expansion of its
junior apparel, junior accessories and footwear categories. The Company expects
to begin the repositioning of these stores in the Fall of Fiscal 1999.
The Company's real estate strategy is focused on locating stores in strip
shopping centers. As of the end of the fiscal year ended January 31, 1998
("Fiscal 1998") approximately 82% of the Company's stores were located in strip
shopping centers. The Company believes that its customers visit strip shopping
centers more frequently than malls for their shopping needs as a result of the
mix of the tenants in, and the convenience of, strip shopping centers. In
addition, the Company benefits from substantially lower occupancy costs as
compared to store occupancy costs in malls. The Company's "Fashion Bug" stores
average 9,600 square feet in size. During Fiscal 1998, the Company opened 25
stores while closing 24 underperforming stores. The Company continues to seek
new locations which meet its
(1)
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financial and operational objectives. In January 1998, the Company acquired 28
stores from Petrie Retail, Inc. These stores, the majority of which are now open
under the "Fashion Bug" name, will partly enable the Company to expand into
previously unserved markets.
The Company continually evaluates its real estate portfolio to determine what
action, if any, is necessary to maintain or improve sales productivity and store
profitability. As a result of this process and the decision to eliminate men's
merchandise from the "Fashion Bug" stores, on March 5, 1998, the Company's Board
of Directors also approved a plan to record a one-time pre-tax charge of
approximately $34,000,000 for the cost of downsizing approximately 100 stores
and closing approximately 65 underperforming stores. The charge is to be
recorded during the first quarter of Fiscal 1999 in accordance with Emerging
Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity," as this plan
was approved subsequent to the end of Fiscal 1998.
On November 2, 1997, the Company announced that its Board of Directors approved
the repurchase of up to ten million shares of the Company's Common Stock. As of
January 31, 1998, the Company had repurchased a total of 5,580,000 shares for
$25,382,000. During the first quarter of Fiscal 1999, the Company repurchased an
additional 400,000 shares for $1,800,000. These shares are held as treasury
stock. The Company will continue to evaluate market conditions to determine if
additional shares will be repurchased during Fiscal 1999.
The Company employs a business strategy, initiated in the fall of 1995 after a
significant management and financial restructuring, which focuses efforts on
providing fashion apparel and related merchandise which meet the demands of its
primary customers. Such customers are generally in the 20 to 45 year old age
group, and in the lower-middle to middle income range, and tend to follow,
rather than set, fashion trends. The Company responds to the needs of its
customers by providing a variety of choices in its merchandise assortment. The
Company offers an assortment of both casual and career oriented products.
Merchandise which complements these areas such as accessories, intimate apparel
and footwear are also featured. The Company has expanded its product line to
include junior merchandise which is intended to appeal to a younger,
trend-influenced consumer. To complement this area, the girl's assortment has
been redefined to reflect the apparel tastes of the pre-teen audience.
Product assortments are tailored to the demographics of an area, and merchandise
is available for six distinct seasons -- spring, summer, transitional, fall,
holiday and transitional. The Company maintains
(2)
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quality standards with respect to merchandise fabrication, construction and fit.
Realistic initial pricing is also part of the business strategy. The pricing
provides sufficient margin to permit merchandise discounts in order to stimulate
customer purchases. In addition, the Company's advertising expenditures are
focused on stimulating customer traffic through targeted direct mail advertising
to preferred customers selected from a database of customer purchase information
which includes approximately 2,600,000 active proprietary credit card customers,
as well as customers who utilize cash and third party credit cards. The Company
also uses radio and newspaper advertising to stimulate traffic at certain
strategic times of the year.
In order to meet the demands of its primary customer, the Company utilizes the
domestic wholesale apparel marketplace for a significant portion of its
purchases. This allows management to maintain short lead times, respond quickly
to current fashion trends and quickly replenish merchandise inventory as
necessary. The Company uses its overseas sourcing operation to procure basic
low-risk commodity merchandise which generally requires longer lead times.
Merchandising and Marketing
The Company employs a merchandise strategy which emphasizes a variety of choices
in its merchandise assortment. The Company utilizes domestic fashion market
guidance, fashion advisory services and in-store testing to determine the
optimal product assortment for its customer base. Management believes that this
results in a higher degree of accuracy in predicting consumer preferences while
reducing the Company's inventory investment and risk. The purpose of this
strategy is to enable the Company to provide merchandise assortments to meet its
customers' preferences.
The Company offers an assortment of both casual and career oriented products.
Merchandise which complements these areas such as accessories, intimate apparel
and footwear are also featured. The Company has expanded its product line to
include junior merchandise which is intended to appeal to a younger,
trend-influenced consumer. To complement this area, the girl's assortment has
been redefined to reflect the apparel tastes of the pre-teen audience. The
Company has also carried an assortment of men's casual apparel in most of its
"Fashion Bug" stores. In the fall of 1997, the Company eliminated men's
merchandise from approximately 300 of its stores in order to refine its product
assortments. On March 5, 1998, the Company's Board of Directors approved a plan
to eliminate men's merchandise from the remaining "Fashion Bug" stores during
Fiscal 1999. The Company expects that the elimination of men's merchandise will
allow for further development of product categories that are more closely
related to its existing women's apparel businesses. The Company plans to focus
on the
(3)
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development and expansion of its junior apparel, junior accessories and footwear
categories. These businesses are expected to yield improved sales and gross
margin productivity as compared to the men's merchandise. The Company expects to
begin the repositioning of these stores in the Fall of Fiscal 1999.
Product assortments are tailored to the demographics of an area, and merchandise
will be available for six distinct seasons -- spring, summer, transitional,
fall, holiday and transitional. In addition, the Company maintains quality
standards with respect to merchandise fabrication, construction and fit. The
Company also continues to redefine its merchandise assortments to reflect the
needs and demands of diverse customer groups. The Company has distribution
systems in place whereby stores which are identified as having certain customer
profiles can be merchandised with products specifically targeted to such
customers. In addition, the Company continues to work to improve inventory
turnover by better managing the inventory receipt flow of seasonal merchandise
to its stores across all geographic regions. Further, the Company addresses the
different lifestyle needs of its customers with respect to fashion by varying
the depth and assortments of career and casual merchandise.
The Company employs a realistic pricing strategy which is aimed at setting the
initial price markup of fashion merchandise in order to increase the percentage
of sales at the ticketed price. Management believes this strategy has resulted
in a greater degree of credibility with the customer, reducing the need for
aggressive price promotions. The pricing does allow sufficient margin to permit
merchandise discounts in order to stimulate customer purchases when necessary.
The Company expects to continue to achieve a higher initial markup in the basic
low-risk commodity merchandise that is purchased through its overseas sourcing
operation.
The Company continues to be promotionally oriented. The Company's advertising
expenditures are focused on stimulating customer traffic thorough targeted
direct mail advertising to preferred customers selected from a database of
customer purchase information which includes approximately 2,600,000 active
proprietary credit card customers, as well as customers who utilize cash and
third party credit cards. The Company also uses radio and newspaper advertising
to stimulate traffic at certain strategic times of the year. In addition, the
Company continues to explore alternative forms of advertising such as national
magazine advertising and selected television advertising vehicles. Pricing
policies, displays, store promotions, and convenient store hours are also used
to attract customers. With the planning and guidance of specialized home office
personnel, each store provides such displays and advertising as may be
(4)
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necessary to feature certain merchandise or certain promotional selling prices
from time to time.
In order to meet the demands of its primary customers, the Company utilizes the
domestic wholesale apparel marketplace for a significant portion of its
purchases. This allows management to maintain short lead times, respond quickly
to current fashion trends and quickly replenish merchandise inventory as
necessary. The Company uses its overseas sourcing operation to procure basic
low-risk commodity merchandise which generally requires longer lead times. In
Fiscal 1998, approximately 70% of merchandise was purchased in the domestic
market with the remainder being developed by the Company's sourcing
organization.
The retail sale of women's apparel is a highly competitive business with
numerous competitors, including moderate price department stores, discount
department stores and other low- to moderate-price specialty apparel stores. The
Company cannot estimate the number of competitors or its relative competitive
position, due to the large number of companies selling women's apparel. The
primary elements of competition are merchandise style, size, selection, quality,
display and price, as well as store location, design, advertising and promotion
and personalized service to the customers.
The Company experiences a normal seasonal sales pattern for the retail apparel
industry, with its peak sales occurring during the Christmas season and other,
less significant, increases around Easter and Labor Day. The Company generally
builds inventory levels prior to these peak selling periods. To keep inventory
current and fashionable, the Company reduces the price of slow-moving
merchandise throughout the year. End-of-season sales are conducted with the
objective of carrying a minimal amount of seasonal merchandise over from one
season to another. Sales for the four quarters of Fiscal 1998, as a percent of
total sales, were 23.2%, 26.1%, 23.2% and 27.5%, respectively.
The Company encourages sales on its proprietary credit card. The proprietary
credit program has approximately 2,600,000 active accounts which accounted for
36% of retail sales in Fiscal 1998. The Company believes that the credit card is
a promotional vehicle in itself, engendering customer loyalty, creating a
substantial base for targeted direct mail promotion and encouraging incremental
sales. The Company controls and services its entire proprietary credit card
file, and has entered into various agreements whereby it securitizes and sells
all of these receivables. In each securitization, the receivables are
transferred to a trust which issues certificates representing ownership
interests in the trust.
(5)
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Under these agreements, the Company continues to service the receivables and
control credit policies. This allows the Company to continue to fund receivable
growth, provide customer service and collect past-due accounts. Accordingly, its
relationship with its credit card customers is not affected by the
securitization agreements. The Company's proprietary credit card portfolio is
administered by Spirit of America National Bank, a national banking association
and wholly-owned subsidiary of the Company. Spirit of America National Bank
approves credit applications and a third party performs all billing and
collection activities. The Company's proprietary credit card customers tend to
be a higher credit risk than bank issued credit card customers.
The Company's stores feature wall and selling-floor displays which coordinate
merchandise in order to promote multiple sales. The stores, which the Company
believes must present a fresh, contemporary shopping environment, are
redecorated or remodeled as necessary. The Company is constantly testing and
implementing new store designs and fixture packages aimed at providing an
effective merchandise presentation.
The Company emphasizes customer service, including the presence of salespeople
in the stores, rather than self-service; lay-away plans; and acceptance of
merchandise returns for cash or credit within a reasonable time period.
Purchasing
Purchasing is conducted on a departmental basis for each of the "Fashion Bug"
and "Fashion Bug Plus" merchandise groups by a staff of buyers supervised by one
or more merchandise managers. The Company believes that specialization of buyers
within their departments enhances their expertise in obtaining quality
merchandise at a cost which will permit attractive selling prices, while
obtaining the desired markup for the Company.
The merchandising staff obtains store and chain-wide inventory information
generated by a merchandise information system utilizing point-of-sale terminals,
through which merchandise can be followed from the placement of the order to the
actual sale. Based upon this data, the merchandise managers compare
budgeted-to-actual sales and make merchandising decisions, as needed, including
re-order, mark-downs and changes in the buying plans for upcoming seasons.
During Fiscal 1998, the Company purchased merchandise from approximately 900
suppliers, none of which accounted for more than 5% of its purchases. In Fiscal
1998, approximately 70% of merchandise was purchased in the domestic market on
an open account basis, the remainder being developed by
(6)
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the Company's sourcing organization. During Fiscal 1998, the Company's Hong Kong
office conducted its sourcing operations in 21 countries while maintaining
satellite offices in 3 of these countries. Purchases of such merchandise is done
via letter of credit with third party factories, with the Company being the
importer of record. The Company also has a manufacturing facility in the
Dominican Republic which manufactures certain basic knit products.
Distribution
The Company operates two distribution centers. One is located in Bensalem,
Pennsylvania, adjacent to the Company's corporate headquarters. This automated
facility, which also contains executive, administrative and buying offices,
occupies approximately 515,000 square feet. The second distribution facility is
located in Greencastle, Indiana. The 150-acre tract of land contains a building
of approximately 525,000 square feet. The Company estimates that, by operating
multiple shifts, it would have the ability to service over 2,000 stores from
these two distribution centers.
The majority of merchandise purchased by the Company is received at these
centers, where it is prepared for distribution to the stores. The functions
performed at these central facilities include quality control inspection,
receiving, ticketing, packing and shipping. The Company's automated sortation
systems in both distribution centers enhance the flow of merchandise from
receipt to shipment. Shipments to each store are made by trucks operated
principally by common carriers. The Company utilizes a computerized automated
distribution model which enhances the efficiency of the distribution department
and enables that department to build various customer profiles into each store's
plan to determine not only the number of units, but also the type of unit to be
distributed to each store.
The Company's merchandise and purchasing strategy, and enhancements to the
Company's inventory management, facilitate the timely and orderly purchase and
flow of merchandise, thereby enabling the stores to offer fresh product
assortments on a regular basis.
Stores
The Company's 1,135 stores (as of January 31, 1998) are primarily located in
suburban areas and small towns. Approximately 82% of these stores are located in
strip shopping centers, while the balance are located in community and regional
malls. Typically, stores are open seven days per week, eleven hours per day
Monday through Saturday and seven hours on Sunday.
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The "Fashion Bug" stores range in size, generally, from 5,000 square feet to
15,000 square feet, averaging approximately 9,600 square feet. The "Fashion Bug
Plus" stores range in size, generally, from 3,000 square feet to 5,000 square
feet, averaging approximately 4,000 square feet. Total leased space was
10,587,000 square feet as of the end of Fiscal 1998, as compared to 10,650,000
square feet as of the end of the fiscal year ended February 1, 1997 ("Fiscal
1997").
On March 5, 1998, the Board of Directors of the Company approved a plan to
downsize approximately 100 stores and close approximately 65 underperforming
stores. This decision, in combination with the strategic decision to terminate
the men's apparel line in the Company's stores, is aimed at improving sales
productivity and store profitability.
In January 1998, the Company acquired 28 stores from Petrie Retail, Inc. These
stores, the majority of which are now open under the "Fashion Bug" name, will
partly enable the Company to expand into previously unserved markets. The
Company plans to open 65 stores in total during Fiscal 1999.
The Company's store openings and closings over the past five fiscal years is
set forth in the following table:
<TABLE>
<CAPTION>
Year Ended
Jan. 31, Feb. 1, Feb. 3, Jan. 28, Jan. 29,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Number of Stores
Open at beginning
of period.............. 1,134 1,301 1,428 1,333 1,220
Opened during period..... 25 5 47 126 157
Closed or combined
during period.......... (24) (172) (174) (31) (44)
----- ----- ----- ----- -----
1,135 1,134 1,301 1,428 1,333
===== ===== ===== ===== =====
Store Type
Fashion Bug.............. 1,077 1,073 1,234 1,346 1,248
Fashion Bug Plus......... 58 61 67 82 85
----- ----- ----- ----- -----
1,135 1,134 1,301 1,428 1,333
===== ===== ===== ===== =====
</TABLE>
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Store Management and Employees
All stores are operated under the direct management of the Company. Each store
has a manager and an assistant manager who are in daily operational control. The
Company has 101 district managers who travel to all stores in their district on
a frequent basis, to supervise store operations, each having responsibility for
an average of approximately 11 stores. The district managers are supervised by
12 regional managers who report to the Director of Stores. Generally, store
managers are appointed from the group of assistant managers, and district
managers are appointed from the group of existing store managers. The Company's
policy is to motivate its store personnel through promotion from within, with
competitive wages and various incentive, medical and retirement plans. Store
operational and purchasing policies are developed centrally, leaving individual
store management with the principal duties of display, selling and reporting
through point-of-sale terminals. As of the end of Fiscal 1998, the Company
employed approximately 12,600 people, approximately 6,500 of whom were employed
on a part-time basis. In addition, a number of temporary employees are hired
during the Christmas season.
Trademarks and Servicemarks
"Fashion Bug" (R), "Fashion Bug Plus" (R), "Glitter" (R), "Maggie Lawrence" (R),
"Stefano" (R), "L.A. Blues" (R), and several other trademarks and servicemarks
of lesser importance to the Company have been registered with the United States
Patent and Trademark Office and in other countries.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
The Company has made in this report, and from time to time may otherwise make,
forward-looking statements concerning the Company's operations, performance and
financial condition. This report includes, in particular, forward-looking
statements regarding the Company's expectations of future performance following
implementation of its business strategy, restructurings and expense reduction
initiatives and the expected benefits thereof. In addition, the information
contained herein includes certain forward-looking statements regarding store
openings and closings, foreign sourcing operations, capital requirements, and
other matters. Such forward-looking statements are subject to various risks and
uncertainties. Accordingly, actual results could differ materially from those
currently anticipated due to a number of factors, including those identified
below.
(9)
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Ability to Implement Business Strategy
The Company's future results and financial condition are dependent on the
successful implementation of its business strategy. While the Company believes
that this strategy will enable it to improve its financial results, there can be
no assurance that this strategy will be successful, that the anticipated
benefits of this strategy will be realized, that management will be able to
implement such strategy on a timely basis, that the Company will return to
profitability levels previously experienced or that losses will not be incurred
in the future.
Dependence on Key Management
The Company's success and its ability to successfully implement its business
strategy depends largely on the efforts and abilities of Dorrit J. Bern, the
Company's Chairman of the Board, President and Chief Executive Officer, and her
management team. The loss of the services of one or more of such key personnel
could have a material adverse effect on the Company's business and financial
results. The Company does not maintain key-man insurance policies with respect
to any of its employees.
Other Factors
Actual results could also differ materially from those currently anticipated due
to (i) rapid changes in or miscalculation of fashion trends, (ii) extreme or
unseasonable weather conditions, (iii) economic downturns, a weakness in overall
consumer demand, inflation and cyclical variations in the retail market for
women's fashion apparel, (iv) a further increase in Federal (or State) Minimum
Wage, (v) an acceleration in the rate of business failures in the retail
industry, (vi) the loss of certain or all of the collateral pledged under the
Company's credit facilities, (vii) the availability and/or cost of receivables
securitization arrangements, (viii) an increase in the rate of bad debt expense
among the Company's proprietary credit card customers, (ix) the risks attendant
to the sourcing of the Company's merchandise needs abroad, including China's
assumption of control of Hong Kong, exchange rate fluctuations, political
instability, trade sanctions or restrictions, changes in quota and duty
regulations, delays in shipping or increased costs of transportation, (x) the
availability and cost of external financing, (xi) competitive pressures, and
(xii) the imposition of more onerous payment terms for merchandise purchases. In
addition, the market price of the Company's Common Stock, which is quoted on the
Nasdaq National Market, may be subject to significant fluctuation in response to
quarter-to-quarter variations in the Company's revenues and earnings, variations
in monthly sales figures,
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and general stock market volatility unrelated to the Company's operating
performance.
Item 2. Properties
The Company leases all store premises, with the exception of 6 stores, which the
Company owns. Typically, store leases have initial terms of 5 to 20 years and
contain provisions for renewal options, additional rental charges based on sales
performance and payment of real estate taxes and common area charges.
With respect to leased stores open as of January 31, 1998, the following table
shows the number of store leases expiring during the periods indicated, assuming
the exercise of the Company's renewal options:
Number
of Leases
Period Expiring
------ --------
1998 12
1999 - 2003 81
2004 - 2008 158
2009 - 2013 206
2014 - 2018 191
2019 - 2023 248
2024 - 2028 197
2029 - 2041 42
The Company owns offices and an approximately 515,000 square foot distribution
center in Bensalem, Pennsylvania and a 525,000 square foot distribution center
in Greencastle, Indiana (see "Item 1. Business - Distribution" above).
The Company owns approximately 22 acres in two parcels across the street from
the Company's offices and distribution center in Bensalem, Pennsylvania. This
22-acre tract contains a 110,000 square foot office building which houses the
Company's data processing facility and additional administrative offices. Spirit
of America National Bank, a wholly-owned subsidiary of the Company, which is the
Company's proprietary credit card bank, occupies 15,000 square feet of leased
office space in Milford, Ohio. The Company owns or leases a total of 40,000
square feet of office and warehouse space in Hong Kong.
(11)
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Item 3. Legal Proceedings
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company or any of its
subsidiaries is a party or of which any of their property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
Item 4a. Executive Officers of the Registrant
The following list contains certain information relative to Executive Officers
of the Company as of April 22, 1998. There are no family relationships among any
Executive Officers. The term of each Executive Officer expires at the next
annual meeting of the Board of Directors following the Annual Meeting of
Shareholders scheduled to be held during July 1998, or until their successors
are duly elected and qualified.
Dorrit J. Bern, 47, has served as Chairman of the Board of Directors since
January 1997. Prior to that, she served as Vice Chairman of the Board of
Directors from September 1995 to January 1997. She has also served as President
and Chief Executive Officer since September 1995. Prior to that, she served as
Group Vice President of Women's Apparel and Home Fashions at Sears, Roebuck &
Co. from December 1993 to August 1995 and as Category Vice President of Women's
Apparel from December 1992 to December 1993. Ms. Bern's term as a Director
expires in 1999.
Anthony A. DeSabato, 49, has served as Executive Vice President and Corporate
Director of Human Resources for more than five years.
Eric M. Specter, 40, has served as Executive Vice President - Chief Financial
Officer since January 1997. He has also served as Treasurer since February 1998.
Prior to that he served as Vice President - Chief Financial Officer from
December 1995 to January 1997. Prior to that, he served as Vice President -
Corporate Controller for more than five years.
Colin D. Stern, 49, has served as Executive Vice President and General Counsel
for more than five years. He has also served as Secretary since February 1998.
(12)
<PAGE> 17
Elizabeth Williams, 44, has served as Executive Vice President - Merchandising
since October 1995. Prior to that, she served as Divisional Vice President -
Misses Sportswear and Special Sizes at Sears, Roebuck & Co. from February 1994
to October 1995 and as Divisional Merchandise Manager from August 1990 to
February 1994.
Erna Zint, 54, has served as Executive Vice President - Sourcing since January
1996. Prior to that, she served as Corporate Vice President - Southeast Asia
Operations for Leslie Fay Companies, Inc. from December 1990 to December 1995.
Jon A. Goldberg, 38, has served as Vice President - Corporate Controller since
December 1995. Prior to that, he served as Vice President - Retail Controller
from May 1995 to December 1995 and as Retail Controller from August 1990 to May
1995.
Carmen Monaco, 51, has served as Vice President - Marketing since May 1997.
Prior to that he served as Senior Vice President - Marketing/Advertising at
Goody's Family Clothing Inc. from August 1992 to May 1997.
(13)
<PAGE> 18
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholders'
Matters
(a) Principal Market: The Company's Common Stock is traded on the
over-the-counter market and quoted on the Nasdaq National Market under the
symbol CHRS.
(b) The following table sets forth the high and low closing sale prices for the
Company's Common Stock during the indicated periods, as reported by Nasdaq.
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1st Quarter.... $6 $4 3/8 $6 9/16 $3
2nd Quarter.... 6 1/8 5 3/16 8 1/4 6 1/8
3rd Quarter.... 7 1/32 5 1/16 7 3/4 4 1/2
4th Quarter.... 5 3/8 3 15/16 5 9/16 4 7/16
</TABLE>
On October 2, 1995, the Company's Board of Directors announced an indefinite
suspension of dividends on the Company's Common Stock. On November 30, 1995, the
Company entered into borrowing agreements that require, among other things, that
the Company not pay dividends on its Common Stock (see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Item 8. Financial Statements and Supplementary Data; Notes to Consolidated
Financial Statements - Debt" below).
(c) Approximate Number of Holders of Common Stock:
The approximate number of holders of record of the Company's Common
Stock as of March 26, 1998 was 2,839. This number excludes individual
stockholders holding stock under nominee security position listings.
(d) Recent Sales of Unregistered Securities
During the quarter ended January 31, 1998, the Company issued 39 shares of its
Common Stock, $.10 par value. The shares were issued on December 22, 1997 to an
employee of the Company under the terms of the Company's Restricted Stock Award
Plan for Associates. No consideration was received for the shares, which were
issued as a bonus award to the employee. The aggregate fair market value of the
shares on the date of issue was $180.38.
(14)
<PAGE> 19
The issuance and delivery of the 39 shares of Common Stock under the Restricted
Stock Plan for Associates need not be registered under the Securities Act of
1933, as amended (the 1933 Act) because it was a bonus grant of Restricted Stock
under an employee benefit plan, and, therefore, did not involve an offer or sale
of securities under Section 2(3) of the 1933 Act.
Item 6. Selected Financial Data
The following table presents selected financial data for the Company for each of
the five fiscal years ended as of January 29, 1994 through January 31, 1998. All
of the selected financial data are extracted from the Company's audited
financial statements and should be read in conjunction with the financial
statements and the notes thereto included under Item 8 of this Form 10-K.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
FIVE-YEAR COMPARATIVE SUMMARY
<TABLE>
<CAPTION>
Year Ended
(in thousands except Jan. 31, Feb. 1, Feb. 3, Jan. 28, Jan. 29,
per share amounts) 1998 1997 1996(1) 1995 1994
---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales ................ $1,016,537 $ 1,016,297 $ 1,102,384 $1,272,693 $1,254,122
Non-recurring gain from
asset securitization ... 13,018(2) 0 0 0 0
Restructuring charge ..... 0 0 103,000(3) 0 0
Income (loss) before cumu-
lative effect of
accounting change ...... 19,334 (7,237) (139,241) 44,689 75,765(4)
Income (loss) per share
before cumulative effect
of accounting change ... .18 (.07) (1.35) .43 .74(4)
Income (loss) per share
before cumulative effect
of accounting change,
assuming dilution ...... .18 (.07) (1.35) .42 .70(4)
Cash dividends per common
share(5) ............... .00 .00 .045 .09 .09
At year end:
Total assets ............. $ 709,738 $ 710,397 $ 681,746 $ 840,809 $ 829,233
Current portion -
Long-term debt ......... 16 16 57,691 5,002 5,005
Long-term debt ........... 138,116 138,128 38,102 17,298 22,298
Working capital .......... 163,208 224,144 199,457 191,815 181,906
Stockholders' equity ..... 416,810 421,035 419,029 558,822 522,100
</TABLE>
(1) The fiscal year ended February 3, 1996 consists of 53 weeks.
(15)
<PAGE> 20
(2) During the third quarter of Fiscal 1998, the Company recorded a
non-recurring gain of $13,018,000 as a result of the adoption of SFAS No. 125 as
related to the sale of credit card receivables during Fiscal 1998 (see "Item 8.
Financial Statements and Supplementary Data; Notes to Consolidated Financial
Statements - Asset Securitization" below).
(3) During the fourth quarter of the fiscal year ended February 3, 1996, the
Company's Board of Directors approved a restructuring plan which resulted in a
fourth quarter pre-tax charge of $103,000,000 (see "Item 8. Financial Statements
and Supplementary Data; Notes to Consolidated Financial Statements -
Restructuring Charge" below).
(4) Net income for the fiscal year ended January 29, 1994 is before the
cumulative effect of an accounting change of $3,991,000 or $.04 per share.
(5) On October 2, 1995, the Company's Board of Directors announced an indefinite
suspension of dividends on the Company's Common Stock (see "Item 5. Market for
the Registrant's Common Equity and Related Stockholders' Matters" above).
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements concerning the Company's
operations, performance and financial condition including, in particular,
forward-looking statements regarding the Company's expectations of future
performance following implementation of its business strategy, recent
restructurings and expense reduction initiatives, and the expected benefits
thereof. In addition, the information contained herein includes certain
forward-looking statements regarding store openings and closings, foreign
sourcing operations, capital requirements and other matters. Such
forward-looking statements are subject to various risks and uncertainties that
could cause actual results to differ materially from those indicated in the
forward-looking statements due to a number of factors identified in Part 1, Item
1 -- Business: Cautionary Statement for Purposes of the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995 of this Annual Report on
Form 10-K, among others, and other risks and factors identified from time to
time in the Company's reports filed with the Securities and Exchange Commission.
(16)
<PAGE> 21
1998 STORE RESTRUCTURING AND ELIMINATION OF MEN'S MERCHANDISE FROM THE
COMPANY'S "FASHION BUG" STORES
On March 5, 1998, the Company's Board of Directors approved a plan to record a
one-time pre-tax charge of approximately $34,000,000 to account for the cost of
downsizing approximately 100 stores and closing approximately 65 underperforming
stores, during the fiscal year ending January 30, 1999 ("Fiscal 1999"). This
plan was approved in conjunction with the decision to eliminate men's
merchandise from the Company's stores. Sales of men's merchandise were
approximately $48,000,000 in Fiscal 1998 and are expected to be approximately
$15,000,000 in Fiscal 1999. In the fall of 1997, the Company eliminated men's
merchandise from approximately 300 of its stores in order to refine its product
assortments. The Company expects that the elimination of men's merchandise will
allow for further development of product categories that are more closely
related to its existing women's apparel businesses. The Company plans to focus
on the development and expansion of its junior apparel, junior accessories and
footwear categories. These businesses are expected to yield improved sales and
gross margin productivity as compared to the men's merchandise. The Company
expects to cease selling men's merchandise by the Fall of 1998 at which time it
will begin to reposition the merchandise assortments in these stores. The
Company does not expect to realize the full benefit of this strategy until after
Fiscal 1999. The charge is to be recorded during the first quarter of Fiscal
1999 in accordance with Emerging Issues Task Force ("EITF") Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity," as this plan was approved subsequent to the end of the
fiscal year ended January 31, 1998 ("Fiscal 1998").
(17)
<PAGE> 22
RESULTS OF OPERATIONS
Financial Summary
The following table sets forth certain financial data expressed as a percentage
of net sales and on a comparative basis:
<TABLE>
<CAPTION>
Percentage Increase
(Decrease)
Percentage of Net Sales From Prior Year
Fiscal Fiscal Fiscal Fiscal Fiscal
1998 1997 1996 1998-1997 1997-1996
------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales ............. 100.0% 100.0% 100.0% 0.0% (7.8)%
Cost of goods sold,
buying and occupancy 76.0 77.0 83.2 (1.3) (14.7)
Selling, general and
administrative ...... 22.9 23.8 27.1 (3.5) (19.3)
Non-recurring gain from
asset securitization 1.3 0.0 0.0 ** **
Restructuring charge .. 0.0 0.0 9.3 0.0 (100.0)
Interest expense ...... 1.0 0.9 0.3 8.5 161.3
Income tax (benefit)
expense ............. 1.0 (0.3) (6.9) ** **
Net income (loss) ..... 2.0 (0.7) (12.6) ** **
</TABLE>
** Not meaningful
Net Sales
Net sales for the fiscal year ended January 31, 1998 totaled $1,016,537,000,
which is approximately equal to net sales of $1,016,297,000 for the fiscal year
ended February 1, 1997 ("Fiscal 1997"). The Company experienced a 3.0% increase
in comparable store sales (sales generated by stores in operation during the
same weeks of each period) in Fiscal 1998 from Fiscal 1997. In addition, sales
from new stores (sales generated by stores in operation during Fiscal 1998 that
were not in operation during the corresponding weeks in Fiscal 1997) in Fiscal
1998 equaled 1.0% of Fiscal 1997 sales. Sales for Fiscal 1997 which were not
comparable with sales for Fiscal 1998 as a result of the closing of stores in
those years equaled 3.8% of Fiscal 1997 sales. The number of retail stores
increased from 1,134 as of February 1, 1997 to 1,135 as of January 31, 1998.
Sales for the fourth quarter of Fiscal 1998 totaled $278,950,000, a 3.4%
increase from $269,797,000 for the corresponding period of Fiscal 1997. The
Company experienced a 3.9% increase in comparable store sales in the
(18)
<PAGE> 23
fourth quarter of Fiscal 1998 as compared to the fourth quarter of Fiscal 1997.
In addition, sales from new stores equaled 1.5% of Fiscal 1997 fourth quarter
sales; and, sales in the fourth quarter of Fiscal 1997 which were not comparable
with sales for the fourth quarter of Fiscal 1998 as a result of the closing of
stores in those years equaled 2.2% of Fiscal 1997 fourth quarter sales.
The increases in comparable store sales were primarily attributable to increased
sales of sportswear, dresses, accessories and footwear. Such increases were
partially offset by declines in comparable sales in outerwear and men's apparel.
Net sales decreased 7.8% in Fiscal 1997 as compared to net sales in the fiscal
year ended February 3, 1996 ("Fiscal 1996"). The primary reason for this
decrease was a 12.5% reduction from Fiscal 1996 sales as a result of stores
closed during Fiscal 1996 and Fiscal 1997 and an additional week of sales in
Fiscal 1996, which equaled 1.5% of Fiscal 1997 sales. The Company experienced a
4.5% increase in comparable store sales in Fiscal 1997 from Fiscal 1996 and
sales from new stores open less than a full year equaled 2.2% of Fiscal 1996
sales.
Net sales for the fourth quarter of Fiscal 1997 decreased 16.2% as compared to
net sales for the corresponding period during Fiscal 1996. This decrease in
sales was primarily due to a 12.5% reduction from fourth quarter Fiscal 1996
sales as a result of stores closed during Fiscal 1996 and Fiscal 1997 and an
additional week of sales in Fiscal 1996, which equaled 9.0% of Fiscal 1997
fourth quarter sales. The Company experienced a 2.5% increase in comparable
store sales in the fourth quarter of Fiscal 1997 from the fourth quarter of
Fiscal 1996 and sales from new stores open less than a full year equaled 0.6% of
Fiscal 1996 fourth quarter sales.
Cost of Goods Sold, Buying and Occupancy
Cost of goods sold, buying and occupancy expenses expressed as a percentage of
sales decreased 1.0% in Fiscal 1998 as compared to the prior year. The Company's
cost of goods sold in relation to sales was constant in Fiscal 1998 as compared
to Fiscal 1997. Buying and occupancy expenses decreased as a percentage of sales
in Fiscal 1998 as compared to the prior year as a result of reductions in
distribution center operating expenses, lower store depreciation expense and
decreases in store occupancy expenses.
Cost of goods sold, buying and occupancy expenses expressed as a percentage of
sales decreased 0.5% in the fourth quarter of Fiscal 1998 as compared to the
corresponding period of Fiscal 1997. This improvement was attributable to
improvements in both merchandise gross margins and buying and occupancy
(19)
<PAGE> 24
expenses expressed a percentage of sales. The decrease in cost of goods sold in
relation to sales in the fourth quarter of Fiscal 1998 as compared to the
corresponding period of Fiscal 1997 resulted from an improvement in gross
margins due to improved sales in higher margin categories. The decrease in
buying and occupancy expenses in relation to sales in the fourth quarter of
Fiscal 1998 was due primarily to reductions in distribution center operating
expenses, lower store depreciation expense and decreases in merchandising
payroll expenses which were partially offset by increases in store occupancy
expenses.
Cost of goods sold, buying and occupancy expenses expressed as a percentage of
sales decreased 6.2% in Fiscal 1997 as compared to Fiscal 1996. The Company's
cost of goods sold in relation to sales decreased during Fiscal 1997 as a
result of a significantly reduced level of price reductions, which are initiated
to stimulate consumer demand. The reduced level of price reductions was made
possible by a favorable response to the Company's new merchandising strategy
implemented during Fiscal 1997. Buying and occupancy expenses in relation to
sales decreased in the fourth quarter of Fiscal 1998 as compared to the
corresponding period of Fiscal 1997 as a result of cost savings attributable to
the closing of underperforming stores, the renegotiation of store lease
obligations and the reduction of distribution and merchandising personnel.
Cost of goods sold, buying and occupancy expenses expressed as a percentage of
sales decreased 15.4% in the fourth quarter of Fiscal 1997 as compared to the
corresponding period of Fiscal 1996. The Company's cost of goods sold in
relation to sales decreased during the fourth quarter of Fiscal 1997 as a result
of a significantly reduced level of price reductions made possible by a more
favorable consumer response to the Company's new merchandising strategy. Buying
and occupancy expenses decreased as a percentage of sales in the fourth quarter
of Fiscal 1997 as compared to the prior year as a result of cost savings
attributable to the closing of underperforming stores, the renegotiation of
store lease obligations and the reduction of distribution and merchandising
personnel.
Selling, General and Administrative
Selling, general and administrative expenses expressed as a percentage of sales
decreased 0.9% in Fiscal 1998 as compared to Fiscal 1997. This was primarily
attributable to the closing of underperforming stores during Fiscal 1997 and
administrative expense reductions as part of the Company's expense reduction
initiative. These reductions were partially offset by the effect of the increase
in the Federal minimum wage. Selling expenses for Fiscal 1998 continued to be
adversely impacted by a higher, although
(20)
<PAGE> 25
stable, level of delinquencies within the Company's securitized proprietary
credit card receivables portfolio. However, the impact of these increased
expenses has been partially offset by reduced expenses related to the servicing
of the credit card operations.
Selling, general and administrative expenses expressed as a percentage of sales
decreased 3.3% in Fiscal 1997 as compared to Fiscal 1996. This was primarily
attributable to the Company's efforts to reduce operating costs through the
closing of underperforming stores, the reduction of store payroll expenses, a
decrease in advertising and promotional expenses and the reduction of corporate
and administrative personnel.
Non-recurring Gain From Asset Securitization
The Company securitizes all of its private label credit card receivables in the
public and private markets. In each securitization, credit card receivables are
transferred to a trust, which issues certificates representing ownership
interest in the trust to institutional investors. The Company retains a
participation interest in the trust, reflecting the excess of the total amount
of receivables transferred to the trust over the portion represented by
certificates sold to investors. The Company is subject to certain recourse
provisions in connection with securitizations entered into prior to January 1,
1997 and has established reserves relating to these provisions.
In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
establishes the accounting for certain financial asset transfers, including
securitization transactions. The Company adopted the provisions of this
statement in January 1997. For transfers that result in the recognition of a
sale, SFAS No. 125 requires that assets obtained and liabilities incurred by
transferors be measured at fair value. In conjunction with the sale of
$83,500,000 of credit card receivables during Fiscal 1998, the Company evaluated
the fair value of its participation interest and related recourse provisions in
these securitizations. As the result of such evaluation, the Company recognized
a non-recurring gain of $13,018,000.
Interest Expense
Interest expense increased in Fiscal 1998 as compared to the corresponding
period of Fiscal 1997 as a result of an increase in the average amount of
long-term debt outstanding. The average amount of long-term debt outstanding in
Fiscal 1998 was $138,138,000 in Fiscal 1998 as compared to $105,140,000 in
Fiscal 1997. The impact of this increase was partially offset by a reduction in
the average interest rate on the combined debt
(21)
<PAGE> 26
from 8.67% in Fiscal 1997 to 7.5% in Fiscal 1998. The primary reason for this
increase in principal and reduction in rate was the issuance in July 1996 of
$138,000,000 aggregate principal amount of 7.5% Convertible Subordinated Notes
due 2006 (the "Notes") which were issued, in part, to repay the outstanding
principal balance of term loans issued in November 1995.
Interest expense increased in Fiscal 1997, as compared to Fiscal 1996, as a
result of the interest expense associated with the Notes as well as the interest
expense associated with $92,350,000 of term loans which were issued in November
1995.
Restructuring Charge - Fiscal 1996
In Fiscal 1996, the Company's Board of Directors approved a restructuring plan
that resulted in a pre-tax charge of $103,000,000. The restructuring charge
included $58,878,000 related to the planned closing of 290 stores, $34,487,000
related to the reorganization of foreign merchandise sourcing operations,
$5,445,000 for severance benefits and a $4,190,000 write-off of surplus store
construction fixtures and equipment. From inception of this restructuring plan,
the Company closed 294 underperforming stores, reduced store employees by 2,300
and reduced non-store employees by 600. As of January 31, 1998, all costs
relating to the restructuring had been paid. There were no material changes in
the restructuring plan as originally announced or in the estimates of charges
accrued with respect to this restructuring plan.
Income Tax (Benefit) Expense
The income tax expense for Fiscal 1998 was $10,088,000, resulting in a 34.3%
effective tax rate, as compared to a $2,683,000 income tax benefit, resulting in
a (27.1)% effective tax rate for Fiscal 1997. The change in the effective tax
rate is primarily attributable to an increase in state income taxes, a decrease
in foreign income taxes, and a decrease in non-deductible permanent differences
relating to certain Company-owned life insurance policies. This compares with a
$75,747,000 income tax benefit, resulting in a (35.2)% effective tax rate for
Fiscal 1996. The decrease in the effective tax rate for Fiscal 1997 as compared
to Fiscal 1996 is primarily attributable to an increase in state income taxes
and an increase in non-deductible permanent differences relating to certain
Company-owned life insurance policies (see "Item 8. Financial Statements and
Supplementary Data; Notes to Consolidated Financial Statements - Income Taxes"
below).
(22)
<PAGE> 27
Performance Analysis
The following ratios measure the Company's overall performance as shown by the
return on average stockholders' equity and return on average total assets.
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
1998 1997 1996
------ ------ -------
<S> <C> <C> <C>
Net return on average stockholders' equity.. 4.6% (1.7)% (28.5)%
Net return on average total assets.......... 2.7% (1.0)% (18.3)%
</TABLE>
FINANCIAL CONDITION
Liquidity and Capital Resources
The Company's primary sources of working capital are cash flow from operations,
its proprietary credit card receivables securitization agreements, its long-term
investment portfolio and its $150 million revolving credit facility described
below. The Company considers, and currently uses for internal management
purposes, the following measures of liquidity and capital resources:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
(dollars in thousands) 1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Working capital .......... $ 163,208 $ 224,144 $ 199,457
Cash provided by (used in)
operating activities ... 83,484 131,399 (55,434)
Current ratio ............ 2.1 2.6 2.0
Debt to equity ratio ..... 33.1% 32.8% 22.9%
</TABLE>
The Company's cash flow from operations decreased $47.9 million in Fiscal 1998
as compared to Fiscal 1997. The primary reason for this decrease was a reduction
in income tax refunds received, a smaller decrease in the net investment in
inventory and an increase in prepaid assets. An increase in income, net of the
non-recurring gain from asset securitization, and an increase in accrued
expenses partially offset the decrease in cash flow from operations.
The Company's cash flow from operations increased $186.8 million in Fiscal 1997
as compared to Fiscal 1996. The primary reason for this increase was a reduction
of $132.0 million in the net loss for Fiscal 1997 as compared to Fiscal 1996. In
addition, reductions in the income tax refund
(23)
<PAGE> 28
receivable, deferred taxes and merchandise inventories, net of accounts payable,
served to further increase cash flow from operations. A reduced level of losses
from abandonment of capital assets and the payment of accrued restructuring
expenses partially offset the improvement in cash flow from operations.
During Fiscal 1997, the Company received a $56,726,000 income tax refund as a
result of net operating loss carrybacks for taxes paid in prior years. In
accordance with the terms of the Company's $82,862,000 of term loans, the tax
refund was used to reduce the amount of such term loans to $26,136,000. As a
result of such payment, a letter of credit in the amount of $22,000,000, issued
under the Company's revolving credit facility (see below) as security for the
payment of such refund, was canceled and a $7,000,000 cash deposit in support of
such letter of credit was returned to the Company.
On July 22, 1996, the Company completed a public offering of $138,000,000
aggregate principal amount of 7.5% Convertible Subordinated Notes due 2006 (the
"Notes"). The net proceeds of the offering to the Company, after underwriting
discounts and commissions, were $133,860,000. The Notes are convertible at any
time prior to maturity into shares of Common Stock of the Company at a
conversion price of $7.46 per share. The Notes are redeemable at the Company's
option, in whole or in part, on or after July 15, 1999, at declining redemption
prices, starting at 103.750% of principal and decreasing to 100% on or after
July 15, 2005. Under certain circumstances involving a change of control of the
Company, holders of the Notes may require the Company to repurchase all or a
portion of the Notes at 100% of the principal amount plus accrued and unpaid
interest, if any. There is no sinking fund for the Notes. Of the net proceeds
received, $35,624,000 were used to repay the remainder of the Company's
outstanding term loans. The remaining net proceeds were invested in
cash-equivalent and available-for-sale securities.
The Company has an agreement with a commercial finance company to provide a
revolving credit facility with a maximum availability of $150,000,000, subject
to limitations based upon eligible inventory. The primary purpose of the
facility, which expires June 1, 1998, is to enable the Company to issue letters
of credit for overseas purchases of merchandise as well as to provide for
seasonal cash borrowings. The facility is secured by merchandise inventory,
furniture and fixtures within retail stores and certain other Company assets. As
of the end of Fiscal 1998, the availability under the facility was approximately
$98,356,000, against which the Company had outstanding letters of credit of
$22,875,000. There were no cash borrowings outstanding under the agreement as of
the end of Fiscal 1998. The agreement requires that, among other things, the
Company
(24)
<PAGE> 29
maintain a minimum net worth of $350,000,000 and not pay dividends on its Common
Stock.
The Company has formed a trust to which it has transferred, at face value, its
interest in receivables created under the Company's proprietary credit card
program. The Company, together with the trust, has entered into various
agreements whereby it can sell, on a revolving basis, interests in these
receivables for a specified term. When the revolving period terminates, an
amortization period begins whereby the principal payments are made to the party
with whom the trust has entered into the securitization agreement. The Company
securitized $376,885,000 and $402,670,000 of credit card receivables in Fiscal
1998 and Fiscal 1997, respectively, and had $313,874,000 of credit card
receivables under securitizations outstanding as of January 31, 1998, of which
the Company retained an interest equal to $38,893,000 (see "Item 8. Financial
Statements and Supplementary Data; Notes to Consolidated Financial Statements -
Asset Securitization" below).
These securitization agreements improve the overall liquidity of the Company and
lessen the effect of interest rate volatility by providing short-term sources of
funding. The agreements provide for the Company to continue to service the
credit card receivables and control credit policies. This control allows the
Company to fund continued credit card receivable growth and to provide the
appropriate customer service and collection activities. Accordingly, its
relationship with its credit card customers is not affected by these agreements.
The terms of certain of the Company's securitizations require the Company to
maintain a certain level of assets, retained by the trust, to absorb potential
credit losses. The amounts available to absorb potential credit losses were
included in available-for-sale securities and were $12,750,000 and $9,042,000 as
of January 31, 1998 and February 1, 1997, respectively, which were held in a
cash collateral account. In the event of a deterioration in the performance of
the credit card receivables portfolio, the Company will be required to increase
its contribution to the cash collateral account through distributions otherwise
due to the Company from the trust. In the event the cash collateral account is
released to the investors, the Company will have a subordinated interest equal
to its contribution to the released amounts. Management does not believe that
such events will have a material adverse effect on the Company.
If such securitization agreements were to become unavailable to the Company or
prohibitively expensive, this could have a material adverse effect on the
Company's results of operations and financial position. The Company receives
loan servicing proceeds from the Charming Shoppes Master Trust
(25)
<PAGE> 30
representing income from credit card finance charge income and fees in excess of
interest paid to certificate holders, credit losses and other expenses. As a
result, although the Company's securitization agreements provide for the Company
to continue to service the credit card receivables and control credit policy, a
significant decrease in loan servicing proceeds as a result of an increase in
interest paid to certificate holders, credit losses or other expenses may result
in a material adverse effect on the Company's results of operations.
At January 31, 1998, the Company had $12,750,000 of receivables from the credit
card securitizations and $38,893,000 of Charming Shoppes Master Trust
Certificates, collectively, which will be available first and foremost to
satisfy the claims of its creditors, including certain claims of investors in
the Charming Shoppes Master Trust. The providers of the credit enhancements and
trust investors have no other recourse to the Company. The Company does not
receive collateral from any party to the securitization, and the Company does
not have any risk of counterparty non-performance.
The Company has historically entered into interest-rate swap and interest-rate
cap agreements to reduce the impact of increases in interest rates on the
Company's floating-rate credit card securitizations. The Company had no
interest-rate swap agreements in effect during Fiscal 1998 or Fiscal 1997. The
Company has entered into interest-rate cap agreements with an aggregate notional
amount of $143.5 million as of the end of Fiscal 1998 (see "Item 8, Financial
Statements and Supplementary Data; Notes to Consolidated Financial Statements -
Derivative Financial Instruments Held For Purposes Other Than Trading" below).
The Company believes that cash flow from operations, its proprietary credit card
receivables securitization agreements, its long-term investment portfolio and
its $150 million revolving credit facility are sufficient to support current
operations.
Capital Requirements
Capital expenditures amounted to $22.0 million, $11.8 million and $30.0 million
in Fiscal 1998, 1997 and 1996, respectively. In Fiscal 1998, such expenditures
were for the leasehold improvements and fixtures of new stores, the remodeling
and fixturing of existing retail stores, the acquisition of leases for stores to
be opened in Fiscal 1999, investment in loss prevention equipment, and an
investment in systems technology to complement the Company's merchandising
strategies. In Fiscal 1997, such expenditures were primarily for remodeling and
fixturing of existing retail stores. In Fiscal 1996, such expenditures were
primarily for new store
(26)
<PAGE> 31
construction, the remodeling and expansion of existing stores and the expansion
of the Company's Greencastle, Indiana distribution center.
During Fiscal 1999, the Company anticipates capital expenditures of
approximately $25 million, which are intended principally for (i) remodeling and
fixturing of existing retail stores, (ii) construction and fixturing of new
stores and (iii) investment in management information systems technology. The
Company plans to open approximately 65 new stores during Fiscal 1999, including
28 which were acquired during January 1998 from a competitor which had closed
such locations. It is anticipated that the funds required for capital
expenditures will be financed principally through internally generated funds.
The Company continually evaluates its real estate portfolio to determine what
action, if any, is necessary to maintain or improve sales productivity and store
profitability. As a result of this process and the previously mentioned decision
to eliminate men's merchandise from the "Fashion Bug" stores (see "1998 STORE
RESTRUCTURING AND ELIMINATION OF MEN'S MERCHANDISE FROM THE COMPANY'S "FASHION
BUG" STORES"" above and "Item 8. Financial Statements and Supplementary Data;
Notes to Consolidated Financial Statements - Subsequent Event" below), on March
5, 1998, the Company's Board of Directors approved a plan to record a one-time
pre-tax charge of approximately $34,000,000 to account for the cost of
downsizing approximately 100 stores and closing approximately 65 underperforming
stores. The charge is to be recorded during the first quarter of Fiscal 1999 in
accordance with Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity," as this plan was approved subsequent to the end of Fiscal 1998. It is
currently estimated that cash payments required to execute this plan will be
approximately $23,000,000.
The Company has estimated debt maturity payments of $16,000 in Fiscal 1999.
On November 2, 1997, the Company announced that its Board of Directors approved
the repurchase of up to ten million shares of the Company's Common Stock. As of
January 31, 1998, the Company had repurchased a total of 5,580,000 shares for
$25,382,000. During the first quarter of Fiscal 1999, the Company repurchased an
additional 400,000 shares for $1,800,000. These shares are held as treasury
stock. The Company will continue to evaluate market conditions to determine if
additional shares will be repurchased during Fiscal 1999.
The Company has not paid cash dividends since Fiscal 1996. On October 2, 1995,
the Company's Board of Directors announced an indefinite suspension of dividends
on the Company's Common Stock. In addition, the Company's
(27)
<PAGE> 32
revolving credit facility (discussed above) requires the Company to refrain from
paying dividends on its Common Stock during the term of such agreement.
Impact of Year 2000
Since Fiscal 1997 the Company has been in the process of modifying or replacing
its existing computer systems to make them Year 2000 compliant. It is
anticipated that this project will be completed during the fiscal year ending
January 29, 2000 ("Fiscal 2000"). The Company currently estimates that the total
cost of achieving compliance will range between $1,500,000 and $2,500,000 over
the period from Fiscal 1997 through Fiscal 2000. The Company has also initiated
discussions with its significant vendors to ensure that these parties have
appropriate plans to remediate Year 2000 issues.
Inflation
The Company's financial statements are presented on a historical cost basis. The
Company believes that the impact of inflation during Fiscal 1998 has not been
material to its financial condition and results of operations.
Impact of Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These statements are required to be adopted by the Company as of
the beginning of Fiscal 1999. SFAS No. 130 requires disclosure of transactions
from non-owner sources which affect stockholders' equity in a separate financial
statement for the period in which they are recognized. SFAS No. 131 requires
disclosure of certain information about operating segments, products and
services, geographic areas of operations and major customers and the factors
used by management to determine reportable segments. The adoption of these
statements will not affect the Company's financial position or results of
operations. Management has not completed its determination of the effect these
statements will have on financial statement disclosures.
(28)
<PAGE> 33
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
The Company operates a credit card banking subsidiary. Its primary activity is
to service its own private label credit card account portfolio, the balances of
which were sold under a credit card securitization program. Under the
securitization program, the Company may be exposed to fluctuations in interest
rates to the extent that a portion of the investor certificates are
floating-rate instruments.
The Company manages a portion of its interest rate risk through the use of
derivative instruments that cap a portion of interest rate risk. The Company
regularly monitors interest rate fluctuations and the business implications such
rate changes may have to the value of its private label credit card program and
matches such interest rate risk to each asset it then securitizes.
As of January 31, 1998, rate exposure to floating-rate-interest instruments
represented approximately $84 million, or approximately 26% of all securitized
assets under the credit card receivable program. The credit card banking
subsidiary has no interest rate risk other than the instruments identified.
Certain interest rate cap agreements protect both asset-backed-certificate
investors and the Company to the extent that short-term interest rates were to
exceed 9% and 12%. To the extent that short-term interest rates were to increase
by one percentage point by the end of the next fiscal year, an increase of
approximately $306,000 in selling, general and administrative expenses would
result. Conversely, a decrease by one percentage point would result in a
corresponding decrease in selling, general and administrative expenses. Such
increase or decrease would not have been material to the Company's Fiscal 1998
results of operations or financial condition.
(29)
<PAGE> 34
Item 8. Financial Statements and Supplementary Data
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and Board of Directors
Charming Shoppes, Inc.
We have audited the accompanying consolidated balance sheets of Charming
Shoppes, Inc. and subsidiaries as of January 31, 1998 and February 1, 1997, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three fiscal years in the period ended January 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Charming Shoppes,
Inc. and subsidiaries at January 31, 1998 and February 1, 1997, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended January 31, 1998, in conformity with
generally accepted accounting principles.
As discussed in the Notes to Consolidated Financial Statements, the Company
changed its method of accounting for asset securitizations as of January 1,
1997.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 24, 1998
(30)
<PAGE> 35
Charming Shoppes, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, February 1,
(dollars in thousands except per share amounts 1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents ............................. $ 12,349 $ 78,979
Available-for-Sale Securities [including fair
value adjustments of $37 as of January 31,
1998 and ($2) as of February 1, 1997] ............... 84,909 55,856
Income Tax Refund Receivable .......................... 0 3,836
Merchandise Inventories ............................... 175,785 193,977
Deferred Taxes ........................................ 863 3,277
Prepayments and Other ................................. 31,975 30,301
----------- -----------
Total Current Assets .................................. 305,881 366,226
----------- -----------
Property, Equipment and Leasehold
Improvements - at Cost .............................. 443,017 438,933
Less: Accumulated Depreciation and Amortization ....... 257,013 238,539
----------- -----------
Net Property, Equipment and Leasehold Improvements .... 186,004 200,394
----------- -----------
Available-for-Sale Securities [including fair value
adjustments of $474 as of January 31, 1998 and
$220 as of February 1, 1997] ........................ 207,191 119,975
Other Assets .......................................... 10,662 23,802
----------- -----------
Total Assets .......................................... $709,738 $710,397
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
(31)
<PAGE> 36
Charming Shoppes, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
January 31, February 1,
(dollars in thousands except per share amounts) 1998 1997
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable .................................... $ 53,623 $ 55,501
Accrued Expenses .................................... 82,911 86,565
Income Taxes Payable ................................ 6,123 0
Current Portion - Long-Term Debt .................... 16 16
----------- -----------
Total Current Liabilities ........................... 142,673 142,082
----------- -----------
Deferred Taxes ...................................... 12,139 9,152
Long-Term Debt ...................................... 138,116 138,128
Stockholders' Equity
Common Stock $.10 par value
Authorized - 300,000,000 shares
Issued - 106,249,385 shares and 105,470,251 shares 10,625 10,547
Additional Paid-In Capital .......................... 64,019 62,818
Treasury stock at cost - 5,580,000 shares ........... (25,382) 0
Deferred Employee Compensation ...................... (1,073) (1,444)
Unrealized Gains on Available-for-Sale Securities
[net of income tax expense of $179 as of January
31, 1998 and $59 as of February 1, 1997] .......... 332 159
Retained Earnings ................................... 368,289 348,955
----------- -----------
Total Stockholders' Equity .......................... 416,810 421,035
----------- -----------
Total Liabilities and Stockholders' Equity .......... $ 709,738 $ 710,397
=========== ===========
</TABLE>
Certain prior-year amounts have been reclassified to conform to current-
year presentation.
See Notes to Consolidated Financial Statements.
(32)
<PAGE> 37
Charming Shoppes, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
(in thousands except January 31, February 1, February 3,
per share amounts) 1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales ....................... $ 1,016,537 $ 1,016,297 $ 1,102,384
Other Income .................... 15,986 7,464 5,655
----------- ----------- -----------
Total Revenue ................... 1,032,523 1,023,761 1,108,039
----------- ----------- -----------
Cost of Goods Sold, Buying and
Occupancy Expenses ............ 772,709 782,671 917,064
Selling, General and
Administrative Expenses ....... 233,020 241,431 299,297
Non-recurring Gain from Asset
Securitization ................ (13,018) 0 0
Restructuring Charge ............ 0 0 103,000
Interest Expense ................ 10,390 9,579 3,666
----------- ----------- -----------
Total Expenses .................. 1,003,101 1,033,681 1,323,027
----------- ----------- -----------
Income (Loss) Before Income Taxes 29,422 (9,920) (214,988)
Income Tax (Benefit) Expense .... 10,088 (2,683) (75,747)
----------- ----------- -----------
Net Income (Loss) ............... $ 19,334 $ (7,237) $ (139,241)
=========== =========== ===========
Per Share Data
Net Income (Loss) ............... $ .18 $ (.07) $ (1.35)
Cash Dividends .................. $ .00 $ .00 $ .045
</TABLE>
The fiscal year ended February 3, 1996 consists of 53 weeks.
See Notes to Consolidated Financial Statements.
(33)
<PAGE> 38
Charming Shoppes, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
January 31, February 1, February 3,
(in thousands) 1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities
Net Income (Loss) ...................... $ 19,334 $ (7,237) $(139,241)
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided By (Used
In) Operating Activities:
Deferred Income Taxes ................ 5,401 773 (21,065)
Depreciation and Amortization ........ 40,092 45,089 46,988
Amortization of Deferred Compensation 718 2,994 2,195
Non-recurring Gain from Asset
Securitization ..................... (13,018) 0 0
(Gain) Loss from Disposition of
Capital Assets ..................... (2,107) (2,115) 37,546
Tax Expense Related to Stock Plans ... (78) (505) (373)
Net (Gain) Loss on Sale of Available-
for-Sale Securities ................ (109) 0 44
Changes in Operating Assets and
Liabilities:
Income Tax Refund Receivable ....... 3,836 53,066 (49,460)
Merchandise Inventories ............ 18,192 26,873 37,702
Accounts Payable ................... (1,878) 15,030 (14,289)
Prepayments and Other .............. (2,266) 17,842 33,853
Income Taxes Payable ............... 6,003 0 0
Accrued Expenses ................... 9,364 (20,411) 10,666
----------- ----------- -----------
Net Cash Provided By (Used In)
Operating Activities ................. 83,484 131,399 (55,434)
----------- ----------- -----------
</TABLE>
The fiscal year ended February 3, 1996 consists of 53 weeks.
Certain prior-year amounts have been reclassified to conform to current-year
presentation.
See Notes to Consolidated Financial Statements.
(34)
<PAGE> 39
Charming Shoppes, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Year Ended
January 31, February 1, February 3,
(in thousands) 1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Investing Activities
Gross Purchases of Available-for-Sale
Securities ............................. (419,983) (190,569) (30,525)
Proceeds from Sales of Available-for-
Sale Securities ........................ 304,189 56,462 108,898
Investment in Capital Assets ............. (22,001) (11,802) (30,007)
Proceeds from Sales of Capital Assets .... 3,565 9,141 0
Decrease in Other Assets ................. 7,908 7,376 8,703
----------- ----------- -----------
Net Cash Provided By (Used In)
Investing Activities ................... (126,322) (129,392) 57,069
----------- ----------- -----------
Financing Activities
Purchases of Treasury Stock .............. (25,382) 0 0
Proceeds from Exercise of Stock Options .. 1,602 6,644 562
Reduction of Long-Term Borrowings ........ (12) (95,649) (9,369)
Reduction of Short-Term Borrowings ....... 0 (761,097) (247,822)
Proceeds from Long-Term Borrowings ....... 0 138,000 0
Proceeds from Short-Term Borrowings ...... 0 761,097 247,822
Underwriting Discounts and Commissions
on Long-Term Borrowings ................ 0 (4,140) 0
(Increase) Decrease in Restricted Cash ... 0 7,000 (7,000)
Dividends Paid ........................... 0 0 (4,634)
----------- ----------- -----------
Net Cash Provided By (Used In) Financing
Activities ............................. (23,792) 51,855 (20,441)
----------- ----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents ............................ (66,630) 53,862 (18,806)
Cash and Cash Equivalents, Beginning
of Year ................................ 78,979 25,117 43,923
----------- ----------- -----------
Cash and Cash Equivalents, End of Year.... $ 12,349 $ 78,979 $ 25,117
=========== =========== ===========
</TABLE>
The fiscal year ended February 3, 1996 consists of 53 weeks.
See Notes to Consolidated Financial Statements.
(35)
<PAGE> 40
Charming Shoppes, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Treasury Stock
(dollars in thousands) Shares Amount Capital Shares Amount
------------ -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 28, 1995 ...... 102,894,239 $ 10,289 $ 55,176 0 $ 0
Issued to Employees, Net ....... 88,406 9 (169)
Exercise of Stock Options ...... 270,005 27 279
Tax Expense - Employee Stock
Programs ..................... (373)
------------ -------- ---------- ---------- --------
Balance, February 3, 1996 ...... 103,252,650 10,325 54,913 0 0
Issued to Employees, Net ....... 475,698 48 2,162
Exercise of Stock Options ...... 1,741,903 174 6,248
Tax Expense - Employee Stock
Programs ..................... (505)
------------ -------- ---------- ---------- --------
Balance, February 1, 1997 ...... 105,470,251 10,547 62,818 0 0
Issued to Employees, Net ....... 286,627 29 (23)
Exercise of Stock Options ...... 492,507 49 1,302
Purchases of Treasury Stock .... (5,580,000) (25,382)
Tax Expense - Employee Stock
Programs ..................... (78)
------------ -------- ---------- ---------- --------
Balance January 31, 1998 ....... 106,249,385 $ 10,625 $ 64,019 (5,580,000) $(25,382)
============ ======== ======== ========== ========
</TABLE>
See Notes to Consolidated Financial Statements.
(36)
<PAGE> 41
Charming Shoppes, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Continued)
<TABLE>
<CAPTION>
Unrealized Gains
Deferred (Losses) on
Employee Available-For-Sale Retained
(in thousands) Compensation Securities Earnings
------------ ------------------ ---------
<S> <C> <C> <C>
Balance, January 28, 1995 .. $(5,025) $(1,685) $ 500,067
Issued to Employees, net ... 416
Amortization ............... 2,195
Unrealized Gains [net of
income taxes of ($914)] .. 1,698
Cash Dividends ............. (4,634)
Net Loss ................... (139,241)
------- ------- ---------
Balance, February 3, 1996 .. (2,414) 13 356,192
Issued to Employees, net ... (2,024)
Amortization ............... 2,994
Unrealized Gains [net of
income taxes of ($50)] ... 146
Net Loss ................... (7,237)
------- ------- ---------
Balance, February 1, 1997 .. (1,444) 159 348,955
Issued to Employees, net ... (347)
Amortization ............... 718
Unrealized Gains [net of
income taxes of ($120)] .. 173
Net Income ................. 19,334
------- ------- ---------
Balance, January 31, 1998 .. $(1,073) $ 332 $ 368,289
======= ======= =========
</TABLE>
See Notes to Consolidated Financial Statements.
(37)
<PAGE> 42
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company operates a chain of specialty stores located throughout the
continental United States which merchandises moderately priced junior, misses,
large-size and girls-size sportswear, dresses, coats, lingerie, accessories and
casual footwear.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant intercompany
accounts and transactions are eliminated. The parent and its subsidiaries have a
52-53 week fiscal year ending the Saturday nearest January 31.
Foreign Operations
The Company follows the practice of using a December 31 fiscal year for all
foreign subsidiaries in order to expedite the year-end closing.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. These amounts are stated
at cost, which approximates market value.
Investments
The Company's investments are classified as available-for-sale. These securities
are carried at fair value and unrealized gains and losses are reported in a
separate component of stockholders' equity. The cost of investments is adjusted
for amortization of premiums and the accretion of discounts to maturity. Such
amortization is included in other income. Realized gains and losses and interest
from investments are also included in other income. The cost of securities sold
is based on the specific identification method. Short-term investments include
investments with an
(38)
<PAGE> 43
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
original maturity of greater than three months and a remaining maturity of less
than one year.
Inventories
Merchandise inventories are valued at the lower of cost or market as determined
by the retail method (average cost basis).
Property and Depreciation
Depreciation and amortization for financial reporting purposes are principally
computed by the straight-line method over the estimated useful lives of the
assets, or in the case of leasehold improvements, over the lives of the
respective leases. Accelerated depreciation methods are used for income tax
reporting purposes. Depreciation expense was $35,307,000, $39,378,000 and
$44,126,000 in Fiscal 1998, 1997 and 1996, respectively.
Asset Securitizations
In June 1996, the Financial Accounting Standards Board (FASB) issued SFAS No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which was effective January 1, 1997 and which
establishes the accounting for certain financial asset transfers, including
securitization transactions. As a result of the adoption of SFAS No. 125 in
January 1997, the Company recorded as an asset on the balance sheet the retained
rights to future interest income from the sold credit card receivables that
exceed the contractual servicing fee (i.e., interest-only strips) and recorded a
liability on the balance sheet for its costs associated with its future
servicing obligations associated with the sold credit card receivables. The
Company prospectively adopted the requirements of SFAS No. 125 for the
securitization of its proprietary credit cards. The incremental effect of
applying the new requirements was to increase income before income taxes in
Fiscal 1998 by $3,941,000. The adoption of SFAS No. 125 did not have a material
impact on the Fiscal 1997 financial statements.Transaction expenses related to
securitizations are deferred and amortized over the reinvestment period of the
transaction. Net securitization income is included as a reduction of selling,
general and administrative expenses in the accompanying statements of income.
Interest Rate Cap Agreements
The Company purchases interest-rate cap agreements that are designed to limit
its exposure to increasing interest rates and are designated as hedges of its
asset-backed certificates issued in connection with its
(39)
<PAGE> 44
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
credit card securitizations. An interest rate cap entitles the Company to
receive a payment from the counterparty equal to the excess, if any, of the
hypothetical interest expense (strike price) on a specified notional amount at a
current market interest rate over an amount specified in the agreement. The only
amount the Company is obligated to pay to the counterparty is an initial
premium. The strike price of these agreements exceeds the current market levels
at the time they are entered into. The interest rate indices specified by the
agreements have been, and are expected to be, highly correlated with the
interest rates the Company incurs on its asset-backed certificates. Payments to
be received as a result of the specified interest rate index exceeding the
strike price are accrued in other assets and are recognized as a reduction of
selling, general and administrative expenses (the accrual accounting method).
The cost of these agreements is included in other assets and amortized to
selling, general and administrative expenses ratably during the life of the
agreement.
Upon termination of an interest-rate cap agreement, to the extent it represents
the value attributable to the market interest rate exceeding the strike rate of
the cap and it continues to be probable that asset-backed certificates of at
least as much as the notional amount of the terminated cap will be outstanding,
the gain is deferred in other liabilities and amortized over the remaining term
of the original contractual life of the agreement as a reduction of selling,
general and administrative expenses. Additional gains or losses are recognized
in earnings. Any notional amounts of agreements in excess of the balance of
asset-backed certificates to be outstanding during their terms would be marked
to market, with changes in market value recorded in selling, general and
administrative expenses.
Common Stock Plans
The Company accounts for stock compensation in accordance with Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations. Deferred compensation expense
relating to Employee Stock Option and Stock Incentive Plans is amortized over
the required employment period. No compensation expense is recognized for the
Company's option plans which have an exercise price equal to the market price on
the date of grant or for the Company's Employee Stock Purchase Plan. The Company
has adopted the disclosure requirements of SFAS No. 123, "Accounting for
Stock-Based Compensation," as of Fiscal 1997.
(40)
<PAGE> 45
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs charged to
expense were $22,677,000, $23,583,000 and $26,211,000 in Fiscal 1998, 1997 and
1996, respectively.
Income Taxes
The Company uses the liability method of accounting for income taxes as
prescribed by SFAS No. 109, "Accounting for Income Taxes." Under the liability
method, deferred tax assets and liabilities are adjusted to reflect the effect
of changes in enacted tax rates on expected reversals of financial statement and
income tax carrying value differences.
U.S. income taxes have not been provided on undistributed earnings of foreign
subsidiaries accumulated prior to January 31, 1998 because the Company intends
to reinvest such undistributed earnings in the operations. Presently, income
taxes would not be significantly increased if such earnings were remitted
because of available foreign tax credits.
Net Income (Loss) Per Share
The Company has adopted the provisions of SFAS No. 128, "Earnings per Share," as
of the beginning of Fiscal 1998. Prior-period amounts have been restated to
conform to the current presentation. Adoption of SFAS No. 128 did not have a
material impact on the Company's financial statements. Net income (loss) per
share is based on the weighted average number of common shares outstanding
during each fiscal year. Net income per share assuming dilution is based on the
weighted average number of common shares and share equivalents outstanding.
Common share equivalents include the effect of dilutive stock options, using the
treasury stock method. Share equivalents are not included in the weighted
average shares outstanding for determining net loss per share as the result
would be antidilutive.
Impact of Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These statements are required to be adopted by the Company as of
the beginning of Fiscal 1999. SFAS No. 130 requires disclosure of transactions
from non-owner sources which affect stockholders' equity in a separate financial
statement for the period in which they are recognized. SFAS No. 131 requires
disclosure of certain information about operating segments, products and
services, geographic
(41)
<PAGE> 46
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
areas of operations and major customers and the factors used by management to
determine reportable segments. The adoption of these statements will not affect
the Company's financial position or results of operations. Management has not
completed its determination of the effect these statements will have on
financial statement disclosures.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
<TABLE>
<CAPTION>
Lives
(in thousands) (Years) 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Land ............................ $ 4,014 $ 4,014
Buildings and Improvements ...... 10 to 33 67,129 65,606
Store Fixtures .................. 5 to 10 100,543 105,094
Equipment ....................... 3 to 10 128,338 118,679
Leasehold Improvements .......... 10 to 20 142,993 145,540
-------- --------
Total at Cost ................... 443,017 438,933
Less Accumulated Depreciation
and Amortization .............. 257,013 238,539
-------- --------
$186,004 $200,394
======== ========
</TABLE>
(42)
<PAGE> 47
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
AVAILABLE-FOR-SALE SECURITIES
<TABLE>
<CAPTION>
Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value
-------- ----- ---------- ----------
<S> <C> <C> <C> <C>
January 31, 1998
U. S. Treasury and Government
Agency Bonds ...................... $233,156 $ 635 $ (124) $233,667
Charming Shoppes Master Trust
Certificates ...................... 38,893 0 0 38,893
Charming Shoppes Master Trust Note .. 12,750 0 0 12,750
Low Income Housing Partnerships ..... 6,503 0 0 6,503
Other ............................... 287 0 0 287
-------- ----- ---------- ----------
$291,589 $ 635 $ (124) $292,100
======== ===== ========== ==========
February 1, 1997
U. S. Treasury and Government
Agency Bonds ...................... $134,881 $ 305 $ (87) $135,099
Charming Shoppes Master Trust
Certificates ...................... 25,856 0 0 25,856
Charming Shoppes Master Trust Note .. 9,042 0 0 9,042
Low Income Housing Partnerships ..... 5,550 0 0 5,550
Other ............................... 284 0 0 284
-------- ----- ---------- ----------
$175,613 $ 305 $ (87) $175,831
======== ===== ========== ==========
</TABLE>
Gross realized gains and (losses) on available-for-sale securities were $223,000
and $(114,000), respectively, during Fiscal 1998. There were no realized gains
or losses on available-for-sale securities during Fiscal 1997.
(43)
<PAGE> 48
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
Contractual maturities of available-for-sale securities at January 31, 1998
were:
<TABLE>
<CAPTION>
Estimated
(in thousands) Cost Fair Value
-------- ----------
<S> <C> <C>
Due in One Year or Less ................ $ 74,077 $ 74,114
Due After One Year Through Five Years .. 200,214 200,688
-------- --------
274,291 274,802
Equity Securities ...................... 6,503 6,503
-------- --------
$280,794 $281,305
======== ========
</TABLE>
INCOME TAXES
Income (loss) before income taxes:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Domestic ..... $ 27,853 $ (9,268) $(212,698)
Foreign ...... 1,569 (652) (2,290)
-------- --------- ---------
$ 29,422 $ (9,920) $(214,988)
======== ========= =========
</TABLE>
(44)
<PAGE> 49
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
Income tax (benefit) expense:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal .... $ 6,376 $ (3,394) $(56,953)
State ...... 2,061 583 591
Foreign .... 4 (351) 1,680
-------- -------- --------
8,441 (3,162) (54,682)
-------- -------- --------
Deferred:
Federal .... 2,776 624 (19,026)
State ...... (779) (385) (2,039)
Foreign .... (350) 240 0
-------- -------- --------
1,647 479 (21,065)
-------- -------- --------
$ 10,088 $ (2,683) $(75,747)
======== ======== ========
</TABLE>
The Company made income tax payments of $2,000,000, $1,367,000 and $3,531,000
during Fiscal 1998, 1997 and 1996, respectively.
Reconciliation of the effective tax rate with the statutory Federal income tax
rate:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------- -------
<S> <C> <C> <C>
Statutory Federal Income Tax
(Benefit) Rate ................ 35.0% (35.0)% (35.0)%
State Income Tax (Benefit), Net
of Federal Income Tax ......... 2.8 1.3 (0.4)
Foreign Income .................. (3.0) 1.2 1.1
Investment Income ............... 0.0 0.0 (0.3)
Employee Benefits ............... (0.2) 3.1 (1.6)
Other, Net ...................... (0.3) 2.3 1.0
------ ------- -------
34.3% (27.1)% (35.2)%
====== ======= =======
</TABLE>
(45)
<PAGE> 50
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
The components of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
Net Current Net Long-Term
Assets Assets
(in thousands) (Liabilities) (Liabilities)
----------- -------------
<S> <C> <C>
January 31, 1998
Property, Equipment and Leasehold
Improvements .................... $(17,645)
Tax Credit Carryforwards .......... 11,722
Accrued Expenses .................. $ 2,388
Inventory ......................... (7,430)
Deferred Employee Compensation .... 2,333
Prepaid Employee Benefits ......... 1,495
Investments ....................... (2,729)
Deferred Rent ..................... 2,783
Other ............................. 1,627 (5,820)
----------- -------------
$ 863 $(12,139)
=========== =============
February 1, 1997
Property, Equipment and Leasehold
Improvements .................... $(17,390)
Tax Credits and Operating Loss
Carryforwards ................... 12,891
Inventory ......................... $ (6,425)
Deferred Employee Compensation .... 3,306
Prepaid Employee Benefits ......... 1,500
Accounts Receivable ............... 3,484
Deferred Rent ..................... 2,896
Other ............................. 1,822 (7,959)
----------- -------------
$ 3,277 $ (9,152)
=========== =============
</TABLE>
At January 31, 1998, the Company had Alternative Minimum Tax and General
Business Credit carryforwards of $11,722,000. The tax credit carryforwards do
not expire.
(46)
<PAGE> 51
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
(in thousands
except per-share amounts) 1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Net Income (Loss) ................... $ 19,334 $ (7,237) $(139,241)
Weighted Average Common Shares
Outstanding ....................... 105,678 104,616 103,038
Basic Net Income (Loss) per Share ... $ .18 $ (.07) $ (1.35)
Dilutive Effect of Stock Options .... 1,403 0 0
Weighted Average Common Shares
and Equivalents Outstanding ....... 107,081 104,616 103,038
Diluted Net Income (Loss) per Share . $ .18 $ (.07) $ (1.35)
</TABLE>
Options to purchase 4.0 million, 3.0 million and 9.3 million shares of Common
Stock at a weighted average exercise price of $8.49, $10.09 and $8.05 per share
were outstanding at January 31, 1998, February 1, 1997 and February 3, 1996,
respectively, but were not included in the computation of diluted net income
(loss) per share because the option exercise prices were greater than the
average market price of the Company's Common Stock. The effect of an assumed
conversion of the Company's Convertible Notes were excluded from the computation
of diluted net income (loss) per share because the effect would have been
antidilutive.
Options to purchase 1.9 million and 2.0 million shares of Common Stock at
February 1, 1997 and February 3, 1996, respectively, with
exercise prices below the average market price of the
Company's Common Stock, were excluded from the calculation of diluted net
loss per share because the effect would have been antidilutive.
(47)
<PAGE> 52
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
DEBT
Long-term debt at year end:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
-------- --------
<S> <C> <C>
7.5% Convertible Subordinated Notes
Due 2006............................. $138,000 $138,000
Other.................................. 132 144
-------- --------
Total Long-Term Debt................... 138,132 138,144
Less Current Portion................... 16 16
-------- --------
$138,116 $138,128
======== ========
</TABLE>
The 7.5% Convertible Subordinated Notes (the "Notes") are convertible at any
time prior to maturity into shares of Common Stock of the Company at a
conversion price of $7.46 per share. The Notes are redeemable at the Company's
option, in whole or in part, on or after July 15, 1999, at declining redemption
prices, starting at 103.750% of principal and decreasing to 100% on or after
July 15, 2005. Under certain circumstances involving a change of control of the
Company, holders of the Notes may require the Company to repurchase all or a
portion of the Notes at 100% of the principal amount plus accrued and unpaid
interest, if any. There is no sinking fund for the Notes.
The Company has an agreement with a commercial finance company to provide a
revolving credit facility with a maximum availability of $150,000,000, subject
to limitations based upon eligible inventory. The primary purpose of the
facility, which expires June 1, 1998, is to enable the Company to issue letters
of credit for overseas purchases of merchandise as well as to provide for
seasonal cash borrowings. The facility is secured by merchandise inventory,
furniture and fixtures within retail stores and certain other Company assets.
The interest rate on borrowings is 0.75% above the Prime rate. There is a fee of
.375% on the unused portion of the first $105,000,000 of the facility, and an
annual servicing fee of $100,000. As of January 31, 1998, the availability under
the facility was approximately $98,356,000, against which the Company had
outstanding
(48)
<PAGE> 53
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
letters of credit of $22,875,000. There were no cash borrowings outstanding
under the agreement as of January 31, 1998. The agreement requires that, among
other things, the Company maintain a minimum net worth of $350,000,000 and not
pay dividends on its Common Stock.
During Fiscal 1998, 1997 and 1996, the Company made interest payments of
$10,361,000, $9,357,000 and $4,267,000, respectively.
Aggregate maturities of long-term debt during the next five fiscal years are:
1999 - $16,000, 2000 - $16,000, 2001 - $16,000, 2002 - $84,000, and 2003 - $0.
STOCKHOLDERS' EQUITY
The Company's capital consists of 1,000,000 shares of Series Participating
Preferred Stock, $1.00 par value, of which 300,000 shares of Participating
Series A Junior Preferred Stock, $1.00 par value have been authorized; and
300,000,000 shares of Common Stock, $.10 par value.
On November 19,1997, the Board of Directors approved the repurchase of up to
10,000,000 shares of the Company's Common Stock. Shares repurchased will be held
as treasury stock available for use under the Company's employee benefits
program or for other corporate purposes. In Fiscal 1998 the Company purchased
5,580,000 shares at an aggregate cost of $25,382,000.
STOCK OPTION AND STOCK INCENTIVE PLANS
At January 31, 1998, the Company had various stock-based compensation plans,
which are described below. The Company applies APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
its stock plans. Accordingly, no compensation has been recognized in the
financial statements for options issued under such plans with an exercise price
equal to the market price of the Company's Common Stock at the date of grant. In
addition, no compensation expense has been recognized for shares of stock issued
under the Company's Employee Stock Purchase Plan. Compensation cost recognized
in the financial statements for discounted stock options, restricted stock
awards and performance share awards granted was $718,000, $2,994,000 and
$2,195,000 in Fiscal 1998, 1997
(49)
<PAGE> 54
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
and 1996, respectively. Had compensation cost for the Company's stock-based
compensation plans been determined using fair values at the grant dates for
awards under those plans (as defined by SFAS No. 123, "Accounting for
Stock-based Compensation"), the Company's net income (loss) and net income
(loss) per share would have changed to the pro forma amounts shown below:
<TABLE>
<CAPTION>
(in thousands except
per-share data) 1998 1997 1996
------- ------- ---------
<S> <C> <C> <C>
Net Income (Loss)
As Reported.............. $19,334 $(7,237) $(139,241)
Pro forma................ 17,690 (8,281) (139,847)
Net Income (Loss) Per Share
As reported.............. $.18 $(.07) $(1.35)
Pro forma................ $.17 (.08) (1.36)
</TABLE>
For purposes of determining the pro forma disclosures, the fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option-pricing model, with the following weighted-average assumptions used for
each year except as otherwise indicated: dividend yield of 0%; expected
volatility of 37.6%; risk-free interest rates of 5.33% (Fiscal 1998) and 5.21%
(Fiscal 1997 and Fiscal 1996) for the Employee Stock Purchase Plan; risk-free
interest rates of 5.55% (Fiscal 1998) and 6.18% (Fiscal 1997 and Fiscal 1996)
for stock option and stock incentive plans; and expected lives of 3 months for
the Employee Stock Purchase Plan, 1 to 3 years for stock award plans, and 6
years for stock option and stock incentive plans. In accordance with the
transition provisions of SFAS No. 123, the pro forma disclosures presented above
reflect the statement's application only to option grants and stock awards dated
on or after January 29, 1995. Therefore, because option grants and awards
generally vest over several years and additional awards are expected to be made
in the future, the pro forma results should not be considered to be
representative of the effects on reported results for future years.
The Company's 1993 Employee Stock Incentive Plan provides for the grant of
options to purchase up to 9,000,000 shares of Common Stock plus 9% of shares
issued by the Company after the effective date of the plan and any shares
available but unissued under the 1990 Plan described below. The
(50)
<PAGE> 55
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
form of the grants and exercise price, where applicable, are at the discretion
of the Board of Directors and the Stock Option Committee of the Board of
Directors. The maximum term of options issued under the plan is ten years. As of
January 31, 1998 and February 1, 1997, 1,852,420 options and 1,246,920 options,
respectively, were exercisable under this plan. During Fiscal 1998 and Fiscal
1997, 13,992 shares and 400,000 shares, respectively, of Restricted Stock were
awarded and issued at no cost under this plan. These shares had grant date fair
values ranging from $3.94 to $5.81 per share.
The Company's 1990 Employees' Stock Incentive Plan provides for the grant of
options to purchase Common Stock to key employees of the Company. The exercise
price of such options may not be less than the fair market value at the date of
grant. As a result of adoption of the 1993 Employees' Stock Incentive Plan, the
Company no longer intends to issue shares under this Plan. As of January 31,
1998 and February 1, 1997, 3,901,494 options and 4,016,191 options,
respectively, were exercisable under this plan.
The Company's 1989 Non-Employee Director Stock Option Plan provides for the
grant of options to purchase up to 30,000 shares of Common Stock to each member
of the Board of Directors who is not an employee of the Company. The exercise
price of such options shall be equal to the fair market value of the stock on
the date of grant. As of January 31, 1998 and February 1, 1997, 144,000 options
and 126,000 options, respectively, were exercisable under this plan.
The Company's 1988 Key Employee Stock Option Plan provides for the grant of
options to purchase up to 3,000,000 shares of Common Stock to key employees of
the Company. The exercise price of options granted under this plan is $1.00 per
share. As of January 31, 1998 and February 1, 1997, 791,925 options and 961,242
options, respectively, were exercisable under this plan.
(51)
<PAGE> 56
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
The table below summarizes the activity in all Stock Option Plans:
<TABLE>
<CAPTION>
Average Option
Option Option Prices
Shares Price Per Share
----------- ------------- -------------
<S> <C> <C> <C>
Outstanding at January 28, 1995 ........ 11,498,301 $ 6.818 $ .222-17.000
Granted ................................ 3,976,800 5.089 1.000- 6.125
Canceled/Forfeited ..................... (2,099,554) 9.403 .500-17.000
Exercised .............................. (270,005) 1.134 .222- 4.500
----------- ------------- -------------
Outstanding at February 3, 1996 ........ 13,105,542 5.996 .222-17.000
Granted-Option Price Equal to Market ... 1,551,940 4.060 3.937- 7.688
Granted-Option Price Less Than Market .. 24,800 1.000 1.000- 1.000
Canceled/Forfeited ..................... (2,069,005) 9.100 .500-15.750
Exercised .............................. (1,741,903) 3.687 .500- 6.187
----------- ------------- -------------
Outstanding at February 1, 1997 ........ 10,871,374 5.450 .222-17.000
Granted-Option Price Equal to Market ... 1,177,000 5.948 5.063- 6.188
Granted-Option Price Less Than Market .. 35,600 1.000 1.000- 1.000
Canceled/Forfeited ..................... (812,295) 6.733 .500-15.750
Expired ................................ (165,900) 5.813 5.813- 5.813
Exercised .............................. (493,668) 2.751 .333- 6.000
----------- ------------- -------------
Outstanding at January 31, 1998 ........ 10,612,111 $ 5.512 $ .222-17.000
=========== ============= =============
</TABLE>
The weighted average grant date fair value for options granted during Fiscal
1998, as determined under SFAS No. 123 using the Black-Scholes model and
assumptions described above, was $2.69 for options granted with an option price
equal to market and $5.25 for options granted with an option price less than
market.
(52)
<PAGE> 57
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
The table below summarizes information regarding weighted average exercise price
and weighted average remaining contractual life in years for options outstanding
and options exercisable as of January 31, 1998 for the ranges of exercise prices
shown:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Ranges of Option Option Remaining
Option Prices Shares Price Life
- ------------- -------- -------- ---------
<S> <C> <C> <C>
$0.00-$1.00:
Options Outstanding .. 889,359 $ .549 2.9
Options Exercisable .. 791,925 .494 2.3
$1.01-$5.00:
Options Outstanding .. 5,890,104 $ 4.308 4.6
Options Exercisable .. 4,201,104 4.411 3.3
$5.01-$10.00:
Options Outstanding .. 2,490,218 $ 6.026 7.5
Options Exercisable .. 702,700 6.131 5.3
$10.01-$17.00:
Options Outstanding .. 1,342,430 $13.157 5.2
Options Exercisable .. 996,510 13.395 5.1
</TABLE>
At January 31, 1998, 2,929,221 shares were available for future grant under the
1988 Key Employee Stock Option and the 1993 Employees' Stock Incentive plans.
The Company's Restricted Stock Award Plan for Associates was adopted by the
Company's Board of Directors on January 26, 1995. The plan provides for
discretionary awards of rights to receive up to 200,000 shares of restricted
Common Stock to associates who are not directors or executive officers of the
Company. Associates will pay no cash consideration for restricted stock received
under an award. During Fiscal 1998 and Fiscal 1997, no rights were granted under
this plan. During Fiscal 1998 and Fiscal 1997, 11,229 shares and 15,600 shares,
respectively, were issued under this plan.
(53)
<PAGE> 58
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
The Company's Non-Employee Director Compensation Program and the Compensation
Program for the Non-Employee Chairman of the Board of Directors were adopted on
August 21, 1996 and approved by shareholders on June 19, 1997. These programs
stipulate that, effective June 27, 1996, 60% of Non-Employee Director and 50% of
Non-Employee Chairman compensation shall be paid in Common Stock of the Company.
During Fiscal 1998 and Fiscal 1997, rights to receive 44,949 shares and 37,013
shares, respectively, have been granted under these Plans. During Fiscal 1998,
81,962 shares have been issued under these plans. The weighted average fair
value at date of grant for shares granted in Fiscal 1998 was $5.21.
The Company's 1996 Restricted Stock Award Program provides for the grant of
rights to receive shares of the Company's Common Stock subject to attainment of
specified performance goals for Fiscal 1997. During Fiscal 1997, a total of
334,024 rights to receive shares were granted under the Plan. These shares had a
grant date fair value of $3.938. In March 1997, 225,107 shares were issued and
the remaining rights were canceled. Associates pay no cash consideration for
shares received under the plan.
The shares issued and options granted under the above plans are subject to
forfeiture if the employees do not remain employed by the Company for a
specified period of time, or, in the case of the 1989 Non-Employee Director
Stock Option Plan, the Non-Employee Director Compensation Program and the
Compensation Program for the Non-Employee Chairman of the Board of Directors, if
the individual ceases to remain a Director of the Company.
EMPLOYEE STOCK PURCHASE PLAN
The Company's 1994 Employee Stock Purchase Plan permits employees to purchase
shares during each quarterly offering period at a price equal to 85% of the
market price of the Company's Common Stock on either the first day of the
offering period or the fifth business day after the end of the offering period,
whichever is lower. The shares are purchased through the accumulation of payroll
deductions of up to 10% of each participating employee's compensation during
such offering period. Under this plan, 2,000,000 shares have been reserved for
grant. During Fiscal 1998 and Fiscal 1997, 32,323 shares and 60,098 shares,
respectively, were purchased under the plan. The weighted average grant date
fair value for shares
(54)
<PAGE> 59
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
purchased during Fiscal 1998 was $5.313 per share. At January 31, 1998,
1,818,953 shares were available for future purchase under this plan.
SHAREHOLDER RIGHTS PLAN
In April 1989, the Board of Directors adopted a Shareholder Rights Plan and
declared a dividend of one Right for each outstanding share of Common Stock. In
connection with the Company's two-for-one stock split which was effected on
December 7, 1992, the number of Rights associated with each outstanding share of
Common Stock was adjusted from one Right per share of Common Stock to one-half
of a Right per share of Common Stock. Such Rights only become exercisable or
transferable apart from the Common Stock ten days after a person or group
(Acquiring Person) acquires beneficial ownership of, or commences a tender or
exchange offer for, twenty percent (20%) or more of the Company's outstanding
common shares. Each Right then may be exercised to acquire one three-hundredth
of a share of newly created Series A Junior Participating Preferred Stock or a
combination of securities and assets of equivalent value at a price of $70,
subject to adjustment.
Upon the occurrence of certain events (for example, if the Company is a
surviving corporation in a merger with an Acquiring Person), the Rights entitle
holders other than the Acquiring Person to acquire Common Stock having a value
of twice the exercise price of the Rights, or, upon the occurrence of certain
other events (for example, if the Company is acquired in a merger or other
business combination transaction in which the Company is not the surviving
corporation), to acquire Common Stock of the Acquiring Person having a value
twice the exercise price of the Rights. The Rights may be redeemed by the
Company at $.01 per Right at any time until the tenth day following public
announcement that a twenty percent (20%) position has been acquired. The Rights
will expire on April 26, 1999.
EMPLOYEE RETIREMENT BENEFIT PLAN
The Company provides a comprehensive retirement benefit program for its
employees. This plan provides for a noncontributory profit-sharing
(55)
<PAGE> 60
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
contribution which covers substantially all full-time employees who meet age and
service requirements. The contribution is completely discretionary and is
determined by the Board of Directors on an annual basis.
The program also includes a 401(k) employee savings plan, whereby eligible
participating employees may elect to contribute up to 15% of their compensation
to an investment trust. Effective January 1, 1998, the Company's contribution
was increased from 30% to 50% of the participant's elective contribution, on up
to 6% of the participant's compensation.
The total expense for the above plans amounted to $709,000, $668,000 and
$741,000 for Fiscal 1998, 1997 and 1996, respectively.
Also available to officers and certain key executives is a non-qualified
deferred compensation plan. Under this plan, which was adopted January 1, 1998,
participants may contribute up to 22% of their base compensation and 100% of
bonus compensation.
ASSET SECURITIZATION
Asset securitization involves the transfer by the Company of its proprietary
credit card receivables to a special purpose corporation, which in turn
transfers the receivables to a single purpose trust (the "Trust") created for
the securitization. Asset-backed certificates issued by the Trust represent
undivided interests in those credit card receivables transferred into the Trust.
Certificates issued by the Trust are sold to investors, with any seller's
interest retained by the Company. These asset-backed certificates issued to
investors are generally credit-enhanced by a third party to provide various
levels of an investment grade credit rating at the time of issuance. The Company
includes the seller's interest and any other retained interest in investment
securities available for sale in the accompanying balance sheet. The carrying
value of these retained interests approximates their fair value.
In June 1996 the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which was
effective January 1, 1997. The Company prospectively adopted the requirements of
SFAS No. 125 for the
(56)
<PAGE> 61
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
securitization of its proprietary credit card receivables. In connection with
the execution of the Series 1997-1 securitization, the Company evaluated the
fair market value of its retained interests and related recourse provisions and,
as a result, recognized a non-recurring gain of $13,018,000. Additionally, the
effect of applying SFAS No. 125 as related to sales of credit card receivables
during Fiscal 1998 was to increase income before income taxes by $3,941,000. The
Company records gains or losses on the securitization of credit card receivables
based on the estimated fair value of the assets retained and liabilities
incurred in the sale. Gains represent the present value of the estimated cash
flows which the Company has retained over the estimated outstanding period of
the receivables. This excess cash flow essentially represents an "interest-only"
("I/O") strip, consisting of the excess finance charges and past-due fees over
the sum of the return paid to certificate holders and credit losses. During
Fiscal 1998 the Company recognized an I/O strip of $11,688,000 and, of that
amount, $6,453,000 was amortized. In addition, the Company recognized a
servicing liability which is included in accrued expenses in the accompanying
balance sheet and which is initially recorded at fair value. During Fiscal 1998,
the Company recognized a servicing liability of $3,500,000 and, of that amount,
$2,206,000 was amortized. Prior to January 1, 1997, no gains were recorded due
to the relatively short average life of the credit card loans securitized.
Excess servicing fee income was recorded over the life of each sale transaction.
In accordance with SFAS No. 125, prior years have not been restated.
Proceeds from securitization transactions were approximately $376,885,000,
$402,670,000 and $412,464,000 for Fiscal 1998, Fiscal 1997 and Fiscal 1996,
respectively. At January 31, 1998 and February 1, 1997, approximately
$302,674,000 and $321,800,000 of investor certificates remained outstanding,
respectively. The investor certificates mature as follows: $18,674,000 in Fiscal
1999; $210,000,000 in the fiscal year ended January 29, 2000 ("Fiscal 2000");
and $74,000,000 in the fiscal year ended February 1, 2003 ("Fiscal 2003"). The
Company's retained interests in its securitizations, which aggregated
$38,893,000 and $25,856,000 at January 31, 1998 and February 1, 1997,
respectively, are generally subordinated in right of payment to certificates
issued by the Trust to third-party investors.
(57)
<PAGE> 62
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
The Company is active in originating private label credit card lines to the
customers of the Company's retail stores. Holders of credit cards issued by a
subsidiary of the Company are located throughout the United States and have
various available lines of credit which are granted on an unsecured basis after
reviewing each potential cardholders credit application and evaluating their
financial history and ability to repay.
DERIVATIVE FINANCIAL INSTRUMENTS HELD FOR PURPOSES OTHER THAN TRADING
The Company has entered into interest-rate cap agreements with an aggregate
notional amount of $143,500,000 as of January 31, 1998, which mature as follows:
$60,000,000 in 1999, $56,000,000 in 2002 and $27,500,000 in 2003. The aggregate
notional amount of interest-rate cap agreements as of February 1, 1997 was
$353,900,000. The agreements effectively entitle the Company to receive from a
bank the amount, if any, by which the interest rates on the Company's
floating-rate credit card securitizations exceed 9% for $77,500,000 notional
amount, 11% for $56,000,000 notional amount and 12% for $10,000,000 notional
amount. The premiums paid for these interest-rate cap agreements are included in
other assets and are being amortized to selling, general and administrative
expenses over the respective lives of the individual interest-rate cap
agreements. Any payments that may be received as a result of the cap will be
accrued as a reduction of selling, general and administrative expenses.
The Company's credit exposure on interest-rate caps is limited to the value of
interest-rate caps that have become favorable to the Company, but the Company
does not anticipate non-performance by any of these counterparties. The amount
of such exposure is generally the unrealized gains in the contracts.
LEASES
The Company leases substantially all of its stores under non-cancelable
operating lease agreements. Generally, these leases have initial periods of 5 to
20 years and contain provisions for renewal options, additional rentals based on
a percentage of sales and payment of certain real estate taxes. The Company also
leases certain other buildings and equipment.
(58)
<PAGE> 63
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
Rental expense was:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
Minimum Rental...... $80,050 $85,513 $103,440
Contingent Rental... 13,216 12,883 14,841
------- ------- --------
$93,266 $98,396 $118,281
======= ======= ========
</TABLE>
Minimum annual rental commitments for all non-cancelable leases for the next
five fiscal years and thereafter are: 1999 - $87,207,000; 2000 - $74,522,000;
2001 - $66,102,000; 2002 - $57,500,000; 2003 - $46,634,000; Thereafter -
$104,718,000.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following is a summary of the carrying amounts and estimated fair values of
the Company's financial instruments:
<TABLE>
<CAPTION>
January 31, 1998 February 1, 1997
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents ...... $ 12,349 $ 12,349 $ 78,979 $ 78,979
Available-for-Sale Securities .. 292,100 292,100 175,831 175,831
Total Long-term Debt ........... 138,132 125,022 138,144 131,244
Off-Balance-Sheet Financial
Instruments:
Interest Rate Cap Agreements . 0 0 0 20
-------- -------- -------- --------
$442,581 $429,471 $392,954 $386,074
======== ======== ======== ========
</TABLE>
The carrying amount for cash and cash equivalents approximates fair value
because of the short maturities of such instruments. The fair value of
available-for-sale securities is based on quoted market prices of the
securities, except for certain equity securities which are not traded in the
open market. The carrying amount of these equity securities
(59)
<PAGE> 64
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
($6,503,000 at January 31, 1998 and $5,550,000 at February 1, 1997) was used to
approximate fair value. The fair value of long-term debt is based on quoted
market prices for the securities. The fair value of interest rate caps was
determined on the basis of valuation pricing models which take into account
current market and contractual prices of the underlying instruments, as well as
the time value and yield curve or volatility factors underlying the positions.
RESTRUCTURING CHARGE
During Fiscal 1996, the Company's Board of Directors approved a restructuring
plan that resulted in a pre-tax charge of $103,000,000. The restructuring plan
included the planned closing of 290 under-performing "Fashion Bug" and "Fashion
Bug Plus" stores, the reorganization and reduction of foreign merchandise
sourcing operations and reductions in corporate support operations. From
inception of the restructuring plan through February 1, 1997, the Company closed
294 underperforming stores, reduced store employees by 2,300 and reduced
non-store employees by 600. As of January 31, 1998, all costs relating to the
restructuring had been paid.
Sales and Operating Loss (before allocation of fixed overhead and income taxes)
for the 294 stores which were closed, during the periods in which they operated,
were as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997 1996
---- ------- --------
<S> <C> <C> <C>
Sales.............. $0 $34,654 $159,657
Operating Loss..... 0 (3,202) (34,000)
</TABLE>
SUBSEQUENT EVENT
On March 5, 1998, the Company's Board of Directors approved a plan to record a
one-time pre-tax charge of approximately $34,000,000 to account for the cost of
downsizing approximately 100 stores and closing approximately 65 underperforming
stores. This plan was approved in conjunction with the decision to eliminate
men's merchandise from the Company's stores. The charge is to be recorded during
the first quarter of
(60)
<PAGE> 65
Charming Shoppes, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended January 3l, 1998
Fiscal 1999 in accordance with Emerging Issues Task Force ("EITF") Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity," as this plan was approved subsequent to the end of
Fiscal 1998.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
(in thousands) Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fiscal 1998
Net Sales.................. $235,688 $265,696 $236,203 $278,950
Gross Profit............... 52,737 67,374 56,295 67,422
Net Income (Loss).......... (2,342) 6,853 8,626(1) 6,197
Net Income (Loss) per Share (.02) .06 .08(1) .06
Fiscal 1997
Net Sales.................. $237,454 $266,678 $242,368 $269,797
Gross Profit............... 53,332 62,077 54,187 64,030
Net Income (Loss).......... (6,158) 304 (3,604) 2,221
Net Income (Loss) per Share (.06) .00 (.03) .02
</TABLE>
(1) Net income (loss) includes a non-recurring gain from asset
securitization of $8,462 or .08 cents per share.
(61)
<PAGE> 66
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
There are no matters which are required to be reported under this Item 9.
(62)
<PAGE> 67
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding Directors of the Company is set forth under the caption
"Election of Directors" of the Company's definitive proxy statement which is
incorporated herein by reference. Information regarding Executive Officers is
set forth herein under "Item 4A. Executive Officers of the Registrant," in Part
I hereof.
Item 11. Executive Compensation
Information regarding executive compensation is set forth under the captions
"Management Compensation" and "Report of the Compensation and Stock Option
Committees of the Board of Directors on Executive Compensation" of the Company's
definitive proxy statement which is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding the security ownership of certain beneficial owners and
management is set forth under the caption "Principal Shareholders and Management
Ownership" of the Company's definitive proxy statement which is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
Information regarding certain relationships and related transactions is set
forth under the caption "Certain Relationships and Related Transactions" of the
Company's definitive proxy statement which is incorporated herein by reference.
(63)
<PAGE> 68
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
The following Consolidated Financial Statements of Charming Shoppes, Inc. and
its subsidiaries are included in Part II, Item 8:
Report of independent auditors.........................................30
Consolidated Balance Sheets - January 31, 1998 and February 1, 1997....31
Consolidated Statements of Operations - years ended
January 31, 1998, February 1, 1997 and February 3, 1996..............33
Consolidated Statements of Cash Flows - years ended
January 31, 1998, February 1, 1997 and February 3, 1996..............34
Consolidated Statements of Stockholders' Equity - years ended
January 31, 1998, February 1, 1997 and February 3, 1996..............36
Notes to Consolidated Financial Statements.............................38
(a)(2) Financial Statement Schedules
No schedules required to be filed.
(b) Reports on Form 8-K
No reports were filed during the quarter ended January 31, 1998.
(c) Exhibits, including those incorporated by reference
The following is a list of Exhibits filed as part of this Annual Report on Form
10-K. Where so indicated by footnote, Exhibits which were previously filed are
incorporated by reference. For Exhibits incorporated by reference, the location
of the Exhibit in the previous filing is indicated in parenthesis. If page
numbers are listed, they refer to the page numbers where such Exhibits are
located using the sequential numbering system specified by Rule 0-3 under the
Securities Exchange Act of 1934 and Rule 403 under the Securities Act of 1933:
(64)
<PAGE> 69
Articles of Incorporation and By-Laws
3.1 Restated Articles of Incorporation, incorporated by x reference to
Form 10-K of the Registrant for the fiscal year ended January 29, 1994.
(Exhibit 3.1).
3.2 By-Laws, as Amended and Restated, incorporated by reference to Form
10-K of the Registrant for the fiscal year ended January 29, 1994. (Exhibit
3.2).
Instruments Defining the Rights of Security Holders, Including Indentures
4.1 Shareholders' Rights Plan, incorporated by reference to Form 8-K of the
Registrant, filed May 23, 1989.
Material Contracts
10.1.1 Amended and Restated Pooling and Servicing Agreement dated as of
December 24, 1992, as amended and restated as of May 4, 1994, by and between
Spirit of America National Bank, as Seller and Servicer, and First Fidelity
Bank, National Association, as Trustee, incorporated by reference to Form 8-K of
Spirit of America National Bank (No. 33-73884) dated May 4, 1994. (Exhibit No.
4).
10.1.2 Amendment No. 1, dated as of December 22, 1995, to Amended and Restated
Pooling and Service Agreement, dated as of December 24, 1992, as Amended and
Restated as of May 4, 1994, between Spirit of America National Bank as Seller
and Servicer, and First Fidelity Bank, National Association, as Trustee for
Charming Shoppes Master Trust, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.1.11).
10.1.3 Amendment No. 2, dated as of March 22, 1996, to Amended and Restated
Pooling and Service Agreement, dated as of December 24, 1992, as Amended and
Restated as of May 4, 1994, as Amended by Amendment No. 1 as of December 22,
1995, between Spirit of America National Bank as Seller and Servicer, and First
Union National Bank as Trustee for Charming Shoppes Master Trust, incorporated
by reference to Form 10-K of the Registrant for the fiscal year ended February
3, 1996. (Exhibit 10.1.12).
10.1.4 Series 1994-1 Supplement dated as of May 4, 1994 to Amended and
Restated Pooling and Servicing Agreement dated as of December 24, 1992 and
amended and restated as of May 4, 1994, by and between Spirit of America
National Bank, as Seller and Servicer, and First Fidelity Bank, National
(65)
<PAGE> 70
Association, as Trustee, (for $200,000,000 Charming Shoppes Master Trust
Asset-Backed Certificates Series 1994-1), incorporated by reference to Form 8-K
of Spirit of America National Bank (No. 33-73884) dated May 4, 1994. (Exhibit
No. 4).
10.1.5 First Amendment and Assignment dated as of November 25, 1997 to the
Series 1994-1 Supplement, dated as of May 4, 1994 by and between Spirit of
America National Bank, as Seller and Servicer, and First Union National Bank, as
Trustee for Charming Shoppes Master Trust.
10.1.6 Series 1994-2 Supplement dated as of August 15, 1994, to Amended and
Restated Pooling and Servicing Agreement, dated as of December 24, 1992, as
amended and restated as of May 4, 1994 by and between Spirit of America National
Bank, as Seller and Servicer, and First Fidelity Bank, National Association, as
Trustee (for $14,000,000 Charming Shoppes Master Trust Asset-Backed Certificates
Series 1994-2), incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended January 28, 1995. (Exhibit 10.1.14).
10.1.7 Amendment No. 1, dated as of March 29, 1996, to Series 1994-2
Supplement, between Spirit of America National Bank as Seller and Servicer, and
First Union National Bank as Trustee for Charming Shoppes Master Trust,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 3, 1996. (Exhibit 10.1.13).
10.1.8 Second Amendment dated as of November 25, 1997 to the Series 1994-2
Supplement, dated as of August 15, 1994, as amended on March 29, 1996, by and
between Spirit of America National Bank, as Seller and Servicer, and First Union
National Bank, as Trustee for Charming Shoppes Master Trust.
10.1.9 Series 1997-1 Supplement dated as of November 25, 1997 to the Second
Amended and Restated Pooling and Servicing Agreement dated as of November 25,
1997 by and among Charming Shoppes Receivables Corp., as Seller, Spirit of
America National Bank, as Servicer and First Union National Bank, as Trustee on
behalf of the Series 1997-1 Certificate Holders ($83,500,000 Charming Shoppes
Master Trust Series 1997-1).
10.1.10 Amended and Restated Loan and Security Agreement By and Between
Congress Financial Corporation as Lender and Charming Shoppes, Inc., Charming
Shoppes of Delaware, Inc., CSI Industries, Inc., and FB Apparel, Inc. as
Borrowers, and Charming Shoppes of Delaware, Inc. as Borrowers' Agent, Dated
November 30, 1995, incorporated by reference to Form 10-K of the Registrant for
the fiscal year ended February 3, 1996. (Exhibit 10.1.7).
(66)
<PAGE> 71
10.1.11 Release Agreement, dated as of February 28, 1997, among (a) Congress
Financial Corporation (Lender) and (b) Charming Shoppes, Inc., Charming Shoppes
of Delaware, Inc., CSI Industries, Inc. and FB Apparel, Inc. (collectively, the
Borrowers), incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended February 1, 1997. (Exhibit 10.1.15).
10.1.12 Second Amended and Restated Loan and Security Agreement, Dated
February 28, 1997, by and between (a) Congress Financial Corporation, as Lender,
(b) Charming Shoppes, Inc., Charming Shoppes of Delaware, Inc., CSI Industries,
Inc. and FB Apparel, Inc., as borrowers and (c) Charming Shoppes of Delaware,
Inc., as Borrowers Agent, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 1, 1997. (Exhibit 10.1.16).
10.1.13 Receivables Purchase Agreement, dated as of April 4, 1996, among (a)
First Union National Bank, solely in its capacity as the trustee for Charming
Shoppes Master Trust, as the Seller, (b) Fashion SPC, Inc., as the Subordinated
Purchaser, (c) Spirit of America National Bank, as the Owner and as the
Servicer, (d) CXC Incorporated, as the Purchaser, and (e) Citicorp, North
America, Inc., as the Agent, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.1.9).
10.1.14 Receivables Purchase Agreement (Parallel Purchase Commitment), dated as
of April 4, 1996, among (a) First Union National Bank, solely in its capacity as
the trustee for Charming Shoppes Master Trust, as the Seller, (b) Fashion SPC,
Inc., as the Subordinated Purchaser, (c) Spirit of America National Bank, as the
Owner and as the Servicer, and (d) Citibank, N.A. and Citicorp, North America,
Inc., as the Agent, incorporated by reference to Form 10-K of the Registrant for
the fiscal year ended February 3, 1996. (Exhibit 10.1.10).
10.1.15 Amendment to Receivables Purchase Agreement dated as of December 13,
1996 to Receivables Purchase Agreement, dated as of April 4, 1996, among (a)
First Union National Bank, solely in its capacity as the trustee for Charming
Shoppes Master Trust, as the Seller, (b) Fashion SPC, Inc., as the Subordinated
Purchaser, (c) Spirit of America National Bank, as the Owner and as the
Servicer, (d) CXC Incorporated, as the Purchaser, and (e) Citicorp, North
America, Inc. as the Agent, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 1, 1997. (Exhibit 10.1.12).
10.1.16 Amendment to Receivables Purchase Agreement (Parallel Purchase
Commitment) dated as of December 13, 1996 to Receivables Purchase Agreement
(67)
<PAGE> 72
(Parallel Purchase Commitment), dated as of April 4, 1996, among (a) First Union
National Bank, solely in its capacity as the trustee for Charming Shoppes Master
Trust, as the Seller, (b) Fashion SPC, Inc., as the Subordinated Purchaser, (c)
Spirit of America National Bank, as the Owner and as the Servicer, and (d)
Citibank, N. A. and Citicorp, North America, Inc. as the Agent, incorporated by
reference to Form 10-K of the Registrant for the fiscal year ended February 1,
1997. (Exhibit 10.1.13).
10.1.17 Second Amendment to Receivables Purchase Agreement and the Receivables
Purchase Agreement (Parallel Purchase Commitment) dated as of March 31, 1997 to
Receivables Purchase Agreement, dated as of April 4, 1996, among (a) First Union
National Bank, solely in its capacity as the trustee for Charming Shoppes Master
Trust, as the Seller, (b) Fashion SPC, Inc., as the Subordinated Purchaser, (c)
Spirit of America National Bank, as the Owner and as the Servicer, (d) CXC
Incorporated, as the Purchaser, and (e) Citicorp, North America, Inc. as the
Agent; and to Receivables Purchase Agreement (Parallel Purchase Commitment),
dated as of April 4, 1996, among (a) First Union National Bank, solely in its
capacity as the trustee for Charming Shoppes Master Trust, as the Seller, (b)
Fashion SPC, Inc., as the Subordinated Purchaser, (c) Spirit of America National
Bank, as the Owner and as the Servicer, and (d) Citibank, N. A. and Citicorp,
North America, Inc. as the Agent, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 1, 1997. (Exhibit 10.1.14).
10.1.18 Amended and Restated Receivables Purchase Agreement dated as of
November 25, 1997 by and among First Union National Bank, in its capacity as
Trustee for the Charming Shoppes Master Trust, as the Seller, Charming Shoppes
Receivables Corp., as the Owner and the Subordinated Purchaser, Spirit of
America National Bank, as the Servicer and the Originator, Corporate Receivables
Corporation, as the Purchaser, Citibank, N.A., as a Bank, and Citicorp North
America, Inc., as the Agent.
Management Contracts and Compensatory Plans and Arrangements
10.2.1 The 1986 Employees' Stock Option Plan of Charming Shoppes, Inc.,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 1, 1992. (Exhibit 10.2.2, Pg. 240).
10.2.2 The 1988 Key Employee Stock Option Plan of Charming Shoppes, Inc., as
amended, incorporated by reference to Form 10-K of the Registrant for the fiscal
year ended January 30, 1993. (Exhibit 10.2.3, Pg. 486).
(68)
<PAGE> 73
10.2.3 The 1990 Employees' Stock Incentive Plan of Charming Shoppes, Inc., as
amended, incorporated by reference to Form 10-K of the Registrant for the fiscal
year ended January 30, 1993. (Exhibit 10.2.4, Pg. 492).
10.2.4 The 1989 Non-Employee Director Stock Option Plan of Charming Shoppes,
Inc., as amended, incorporated by reference to Form 10-K of the Registrant for
the fiscal year ended January 30, 1993. (Exhibit 10.2.5, Pg. 499).
10.2.5 Non-Employee Director Restricted Stock Plan of Charming Shoppes, Inc.,
as amended, incorporated by reference to Form 10-K of the Registrant for the
fiscal year ended January 30, 1993. (Exhibit 10.2.6, Pg. 503).
10.2.6 Subplan and Summary Description of the Annual Incentive Plan of
Charming Shoppes, Inc., incorporated by reference to Form 10-K of the Registrant
for the fiscal year ended February 1, 1992. (Exhibit 10.2.13, Pg. 251).
10.2.7 The 1993 Employees' Stock Incentive Plan of Charming Shoppes, Inc.,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended January 29, 1994. (Exhibit 10.2.10).
10.2.8 The 1993 Employees' Stock Incentive Plan Stock Option Agreement
(regular vesting schedule) of Charming Shoppes, Inc., incorporated by reference
to Form 10-K of the Registrant for the fiscal year ended January 29, 1994.
(Exhibit 10.2.11).
10.2.9 The 1993 Employees' Stock Incentive Plan Stock Option Agreement
(accelerated vesting schedule) of Charming Shoppes, Inc., incorporated by
reference to Form 10-K of the Registrant for the fiscal year ended January 29,
1994. (Exhibit 10.2.12).
10.2.10 The Charming Shoppes, Inc. Employee Stock Purchase Plan, as amended,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 3, 1996. (Exhibit 10.2.10).
10.2.11 The Charming Shoppes, Inc. Restricted Stock Award Plan for Associates,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 3, 1996. (Exhibit 10.2.11).
10.2.12 The Charming Shoppes, Inc. 1996 Restricted Stock Award Program,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 3, 1996. (Exhibit 10.2.12).
(69)
<PAGE> 74
10.2.13 The Charming Shoppes, Inc. 1996 Restricted Stock Award Program
Restricted Stock Agreement, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.13).
10.2.14 Employment Agreement, dated as of May 17, 1995, by and between Charming
Shoppes, Inc., and David V. Wachs, incorporated by reference to Form 10-K of the
Registrant for the fiscal year ended February 3, 1996. (Exhibit 10.2.14).
10.2.15 Employment Agreement, dated as of August 22, 1995 by and between
Charming Shoppes, Inc., and Dorrit J. Bern, incorporated by reference to Form
10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit
10.2.15).
10.2.16 1993 Employees' Stock Incentive Plan Stock Option Agreement, dated as of
August 23, 1995, by and between Charming Shoppes, Inc., and Dorrit J. Bern,
incorporated by reference to Form 10-K of the Registrant for the fiscal year
ended February 3, 1996. (Exhibit 10.2.16).
10.2.17 1993 Employees' Stock Incentive Plan Restricted Stock and Stock Bonus
Agreement, dated as of March 20, 1996, by and between Charming Shoppes, Inc.,
and Dorrit J. Bern, incorporated by reference to Form 10-K of the Registrant for
the fiscal year ended February 3, 1996. (Exhibit 10.2.17).
10.2.18 Settlement Agreement and Release, dated as of February 9, 1996, by and
between Charming Shoppes, Inc., and Philip Wachs, incorporated by reference to
Form 10-K of the Registrant for the fiscal year ended February 3, 1996. (Exhibit
10.2.20).
10.2.19 Settlement Agreement and Release, dated as of April 25, 1996, by and
between Charming Shoppes, Inc., and Samuel Sidewater, incorporated by reference
to Form 10-K of the Registrant for the fiscal year ended February 3, 1996.
(Exhibit 10.2.21).
10.2.20 The Charming Shoppes, Inc. Non-Employee Directors Compensation Program,
incorporated by reference to Registration Statement on Form S-8 (Registration
No. 333-22323), of the Registrant, dated February 25, 2997. (Exhibit 4.1).
10.2.21 The Charming Shoppes, Inc. Compensation Program for the Non-Employee
Chairman of the Board of Directors, incorporated by reference to Registration
Statement on Form S-8 (Registration No. 333-22323), of the Registrant, dated
February 25, 2997. (Exhibit 4.2).
(70)
<PAGE> 75
10.2.22 Charming Shoppes, Inc. 1998 Restricted Award Program.
Other Exhibits
Exhibit 21 - Subsidiaries of Registrant
Exhibit 23 - Consent of independent auditors
Exhibit 27 - Financial data schedule
All other schedules are omitted because they are not applicable or not required,
or because the required information is included in the consolidated financial
statements or notes thereto.
(71)
<PAGE> 76
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Charming Shoppes, Inc., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHARMING SHOPPES, INC.
/s/ DORRIT J. BERN
By: Dorrit J. Bern
Chairman of the Board
President and Chief Executive Officer
Date: April 24, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
/s/ DORRIT J. BERN /s/ ERIC M. SPECTER
Dorrit J. Bern, April 24, 1998 Eric M. Specter, April 24,1998
Chairman of the Board Executive Vice President
President and Chief Executive Officer Chief Financial Officer And Treasurer
/s/ JOSEPH L. CASTLE II /s/ ALAN ROSSKAMM
Joseph L. Castle II, April 24, 1998 Alan Rosskamm, April 24, 1998
Director Director
/s/ MICHAEL SOLOMON /s/ GEOFFREY W. LEVY
Michael Solomon, April 24, 1998 Geoffrey W. Levy, April 24, 1998
Director Director
/s/ MARJORIE MARGOLIES-MEZVINSKY /s/ MARVIN L. SLOMOWITZ
Marjorie Margolies-Mezvinsky Marvin L. Slomowitz, April 24, 1998
April 24, 1998 Director
Director
/s/ LAURA A. LISWOOD /s/ JON A. GOLDBERG
Laura A. Liswood, April 24, 1998 Jon A. Goldberg, April 24, 1998
Director Vice President Corporate Controller
Chief Accounting Officer
(72)
<PAGE> 1
EXHIBIT 10.1.5
FIRST AMENDMENT AND ASSIGNMENT
THIS FIRST AMENDMENT AND ASSIGNMENT, dated as of November 25, 1997
(this "Amendment") is to the Series 1994-1 Supplement, dated as of May 4, 1994
(the "Supplement"), by and between Spirit of America National Bank ("Spirit"), a
national banking association, as Seller and Servicer, and First Union National
Bank (f/k/a First Fidelity Bank, National Association), a national banking
association, as Trustee. Any capitalized term not herein defined shall have the
meaning assigned to it in the Supplement.
WHEREAS, Spirit, as Seller and Servicer, and the Trustee are parties to
that certain Pooling and Servicing Agreement dated as of December 24, 1992, as
amended and restated as of May 4, 1994, and as amended by Amendment No. 1, dated
as of December 22, 1995, and Amendment No. 2, dated as of March 22, 1996 (the
"Prior PSA");
WHEREAS, Spirit, as Seller and Servicer, the Trustee and the Cash
Collateral Depositor are parties to that certain Loan Agreement dated as of May
4, 1994 (the "Loan Agreement");
WHEREAS, concurrently herewith (x) the parties hereto are entering into
(i) a Second Amended and Restated Pooling and Servicing Agreement, dated even
herewith (the "Amended Pooling Agreement") amending and restating in its
entirety the Prior PSA, and (ii) an amendment dated even herewith to the Loan
Agreement (as so amended, the "Amended Loan Agreement"), in each case, in order
to, among other things, provide for the substitution of Charming Shoppes
Receivables Corp. ("CRSC"), as Seller, and (y) Spirit and CSRC are entering into
a Purchase and Sale Agreement, dated even herewith, pursuant to which Spirit
will sell Receivables to CSRC in accordance with the terms thereof;
WHEREAS, the parties hereto desire to amend the Supplement in order to
provide for the substitution of CSRC as Seller, and make certain other changes
in connection with such substitution; and
WHEREAS, an Opinion of Counsel for the Seller has been delivered to the
Trustee and each Purchaser Representative pursuant to Section 13.1(a) of the
Amended Pooling Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1. AMENDMENT. (a) All references to the "Seller" and to "Spirit
of America", in its capacity as Seller, in the Supplement shall be deemed to be
references to CSRC. All references in the Supplement to the Pooling and
Servicing Agreement and the Loan Agreement shall be references to the Amended
Pooling Agreement and the Amended Loan Agreement, respectively.
(b) Section 9 of the Supplement is hereby amended by deleting the word
"or" at the end of subparagraph (f) thereof, and inserting the following
immediately after subparagraph (g) thereof:
<PAGE> 2
"(h) failure on the part of the Originator or the Seller (A) to make
any payment or deposit required by the terms of the Purchase Agreement,
on or before the date occurring five days after the date such payment
or deposit is required to be made therein or (B) to observe or perform
in any material respect any covenants or agreements of the Originator
or the Seller, as applicable, set forth in the Purchase Agreement,
which failure has a material adverse effect on the Series 1994-1
Certificateholders (which determination shall be made without regard to
whether any funds are on deposit in the Cash Collateral Account) and
which continues unremedied for a period of 60 days after the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given to the Originator or the Seller, as
applicable, by the Seller, Servicer or Trustee, or to the Originator or
the Seller, as applicable, and the Trustee by the Cash Collateral
Depositor or the Holders of Series 1994-1 Certificates evidencing
Undivided Trust Interests aggregating not less than 50% of the Investor
Interest of this Series 1994-1, and continues to affect materially and
adversely the interests of the Series 1994-1 Certificateholders for
such period; or
(i) any representation or warranty made by the Originator in the
Purchase Agreement, or any information contained in a computer file or
microfiche or written list required to be delivered by the Originator
pursuant to Section 1.1 or 2.4 of the Purchase Agreement, (i) shall
prove to have been incorrect in any material respect when made or when
delivered, which continues to be incorrect in any material respect for
a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Seller by the Servicer or the Trustee, or to the Seller and the
Trustee by the Holders of the Series 1994-1 Certificates evidencing
Undivided Interests aggregating more than 50% of the Investor Interest
of this Series 1994-1, and (ii) as a result of which the interests of
the Series 1994-1 Certificateholders are materially and adversely
affected (which determination shall be made without regard to whether
any funds are on deposit in the Cash Collateral Account) and continue
to be materially and adversely affected for such period; provided,
however, that a Series 1994-1 Early Amortization Event pursuant to this
subsection 9(i) shall not be deemed to have occurred hereunder if the
Originator has accepted reassignment of the related Receivable, or all
of such Receivables, if applicable, during such period in accordance
with the provisions of the Purchase Agreement;"
(c) The penultimate clause of Section 9 of the Supplement is hereby
amended by amending the reference to "subparagraph (a), (b) or (e)" to be a
reference to "subparagraph (a), (b), (e), (h) or (i)".
SECTION 2. CASH COLLATERAL ACCOUNT ASSIGNMENT. CSRC, in its capacity as
Seller under the Supplement, as amended herein, hereby assigns, sets-over,
conveys, pledges and grants a security interest and lien to the Trustee for the
benefit of the Series 1994-1 Certificateholders and the Cash Collateral
Depositor, as their interests appear in the Supplement, as amended herein (which
interest in the case of the Cash Collateral Depositor shall be subject to the
prior interest of the Series 1994-1 Certificateholders to the extent provided in
the Supplement, as amended herein, and in the Amended Loan Agreement) in all of
CSRC's right,
<PAGE> 3
title and interest (if any) in and to all property or amounts held or on deposit
in the Cash Collateral Account, and all proceeds thereof, as collateral security
for the amounts payable from time to time to the Series 1994-1
Certificateholders and owing to the Cash Collateral Depositor from the Cash
Collateral Account pursuant to Article IV of the Supplement, as amended herein,
in respect of the Series 1994-1 Certificates.
SECTION 3. EFFECTIVENESS. The amendments set forth in Section 1 and the
assignment set forth in Section 2 above shall become effective on the date on
which (i) the Servicer shall have received counterparts of this Amendment
executed by CSRC, as Seller, Spirit, as Servicer, and the Trustee, and (ii) each
of the conditions precedent to the effectiveness of the Amended Pooling and
Servicing Agreement are satisfied or waived.
SECTION 4. MISCELLANEOUS. (a) As herein amended, the Supplement (as so
amended, the "Amended Supplement"), shall remain in full force and effect and is
hereby ratified and confirmed in all respects. After the effectiveness hereof,
all references in the Loan Agreement, the Pooling and Servicing Agreement, any
other Supplement, and any similar document to the "Series 1994-1 Supplement" or
similar terms shall refer to the Amended Supplement.
(b) This Amendment may be executed in any number of counterparts and by
the different parties on separate counterparts, and each such counterpart shall
be deemed to be an original but all such counterparts shall together constitute
one and the same Amendment.
(c) Spirit agrees to pay the reasonable costs and expenses of the
Trustee (including reasonable attorneys' fees and charges) in connection with
the negotiation, preparation, execution and delivery of this Amendment.
(d) This Amendment shall be construed in accordance with and governed
by the Laws of the State of New York, without giving effect to its conflicts of
law provisions.
(e) All notices to CSRC under the Amended Supplement shall be addressed
to Charming Shoppes Receivables Corp., c/o Charming Shoppes, Inc., 450 Winks
Lane, Bensalem, Pennsylvania 19020, Attention: General Counsel.
[Remainder of page intentionally left blank]
<PAGE> 4
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Amendment to be duly executed by their respective officers as of the
day and year first above written.
SPIRIT OF AMERICA NATIONAL BANK,
as Servicer
By:
Name: Kirk R. Simme
Title: President
CHARMING SHOPPES RECEIVABLES CORP.,
as Seller
By:
Name: Eric M. Specter
Title: President
FIRST UNION NATIONAL BANK, as Trustee
By:
Name: George Rayzis
Title: Vice President
<PAGE> 1
EXHIBIT 10.1.8
SECOND AMENDMENT
THIS SECOND AMENDMENT, dated as of November 25, 1997 (this "Amendment")
is to the Series 1994-2 Supplement, dated as of August 15, 1994, as amended on
March 29, 1996 (the "Supplement"), by and between Spirit of America National
Bank ("Spirit"), a national banking association, as Seller and Servicer, and
First Union National Bank (f/k/a First Fidelity Bank, National Association), a
national banking association, as Trustee. Any capitalized term not herein
defined shall have the meaning assigned to it in the Supplement.
WHEREAS, Spirit, as Seller and Servicer, and the Trustee are parties to
that certain Pooling and Servicing Agreement dated as of December 24, 1992, as
amended and restated as of May 4, 1994, and as amended by Amendment No. 1, dated
as of December 22, 1995, and Amendment No. 2, dated as of March 22, 1996 (the
"Prior PSA");
WHEREAS, Spirit, as Seller and Servicer, the Trustee and State Street
Bank and Trust Company are parties to that certain Loan Agreement dated as of
May 4, 1994 (the "Loan Agreement");
WHEREAS, concurrently herewith (x) the parties hereto are entering into
(i) a Second Amended and Restated Pooling and Servicing Agreement, dated even
herewith (the "Amended Pooling Agreement") amending and restating in its
entirety the Prior PSA, and (ii) an amendment dated even herewith to the Loan
Agreement (as so amended, the "Amended Loan Agreement"), in each case, in order
to, among other things, provide for the substitution of Charming Shoppes
Receivables Corp. ("CRSC"), as Seller, and (y) Spirit and CSRC are entering into
a Purchase and Sale Agreement, dated even herewith, pursuant to which Spirit
will sell Receivables to CSRC in accordance with the terms thereof;
WHEREAS, the parties hereto desire to amend the Supplement in order to
provide for the substitution of CSRC as Seller, and make certain other changes
in connection with such substitution; and
WHEREAS, an Opinion of Counsel for the Seller has been delivered to the
Trustee and each Purchaser Representative pursuant to Section 13.1(a) of the
Amended Pooling Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1. AMENDMENT. (a) All references to the "Seller" and to "Spirit
of America", in its capacity as Seller, in the Supplement shall be deemed to be
references to CSRC. All references in the Supplement to the Pooling and
Servicing Agreement and the Loan Agreement shall be references to the Amended
Pooling Agreement and the Amended Loan Agreement, respectively.
<PAGE> 2
(b) Section 8 of the Supplement is hereby amended by deleting the word
"or" at the end of subparagraph (f) thereof, and inserting the following
immediately after subparagraph (g) thereof:
"(h) failure on the part of the Originator or the Seller (A) to make
any payment or deposit required by the terms of the Purchase Agreement,
on or before the date occurring five days after the date such payment
or deposit is required to be made therein or (B) to observe or perform
in any material respect any covenants or agreements of the Originator
or the Seller, as applicable, set forth in the Purchase Agreement,
which failure has a material adverse effect on the Series 1994-2
Certificateholders and which continues unremedied for a period of 60
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Originator or the
Seller, as applicable, by the Seller, Servicer or Trustee, or to the
Originator or the Seller, as applicable, and the Trustee by the Holders
of Series 1994-2 Certificates evidencing Undivided Trust Interests
aggregating not less than 50% of the Investor Interest of this Series
1994-2, and continues to affect materially and adversely the interests
of the Series 1994-2 Certificateholders for such period; or
(i) any representation or warranty made by the Originator in the
Purchase Agreement, or any information contained in a computer file or
microfiche or written list required to be delivered by the Originator
pursuant to Section 1.1 or 2.4 of the Purchase Agreement, (i) shall
prove to have been incorrect in any material respect when made or when
delivered, which continues to be incorrect in any material respect for
a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Seller by the Servicer or the Trustee, or to the Seller and the
Trustee by the Holders of the Series 1994-2 Certificates evidencing
Undivided Interests aggregating more than 50% of the Investor Interest
of this Series 1994-2, and (ii) as a result of which the interests of
the Series 1994-2 Certificateholders are materially and adversely
affected (which determination shall be made without regard to whether
any funds are on deposit in the Cash Collateral Account) and continue
to be materially and adversely affected for such period; provided,
however, that a Series 1994-2 Early Amortization Event pursuant to this
subsection 8(i) shall not be deemed to have occurred hereunder if the
Originator has accepted reassignment of the related Receivable, or all
of such Receivables, if applicable, during such period in accordance
with the provisions of the Purchase Agreement;"
(c) The penultimate clause of Section 8 of the Supplement is hereby
amended by amending the reference to "subparagraph (a), (b) or (e)" to be a
reference to "subparagraph (a), (b), (e), (h) or (i)".
SECTION 2. EFFECTIVENESS. The amendments set forth in Section 1 above
shall become effective on the date on which (i) the Servicer shall have received
counterparts of this Amendment executed by CSRC, as Seller, Spirit, as Servicer,
and the Trustee, and (ii) each of the conditions precedent to the effectiveness
of the Amended Pooling and Servicing Agreement are satisfied or waived.
<PAGE> 3
SECTION 3. MISCELLANEOUS. (a) As herein amended, the Supplement (as so
amended, the "Amended Supplement"), shall remain in full force and effect and is
hereby ratified and confirmed in all respects. After the effectiveness hereof,
all references in the Loan Agreement, the Pooling and Servicing Agreement, any
other Supplement, and any similar document to the "Series 1994-2 Supplement" or
similar terms shall refer to the Amended Supplement.
(b) This Amendment may be executed in any number of counterparts and by
the different parties on separate counterparts, and each such counterpart shall
be deemed to be an original but all such counterparts shall together constitute
one and the same Amendment.
(c) Spirit agrees to pay the reasonable costs and expenses of the
Trustee (including reasonable attorneys' fees and charges) in connection with
the negotiation, preparation, execution and delivery of this Amendment.
(d) This Amendment shall be construed in accordance with the governed
by the Laws of the State of New York, without giving effect to its conflicts of
law provisions.
(e) All notices to CSRC under the Amended Supplement shall be addressed
to Charming Shoppes Receivables Corp., c/o Charming Shoppes, Inc., 450 Winks
Lane, Bensalem, Pennsylvania 19020, Attention: General Counsel.
[Remainder of page intentionally left blank]
<PAGE> 4
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Amendment to be duly executed by their respective officers as of the
day and year first above written.
SPIRIT OF AMERICA NATIONAL BANK,
as Servicer
By:
Name: Kirk R. Simme
Title: President
CHARMING SHOPPES RECEIVABLES CORP.,
as Seller
By:
Name: Eric M. Specter
Title: President
FIRST UNION NATIONAL BANK, as Trustee
By:
Name: George Rayzis
Title: Vice President
<PAGE> 1
EXHIBIT 10.1.9
SERIES 1997-1 SUPPLEMENT, dated as of November 25, 1997 (this
"Supplement"), by and among CHARMING SHOPPES RECEIVABLES CORP., a Delaware
corporation, as Seller (the "Seller"), SPIRIT OF AMERICA NATIONAL BANK, a
national banking association, as Servicer (the "Servicer"), and FIRST UNION
NATIONAL BANK, as Trustee (the "Trustee") under the Second Amended and Restated
Pooling and Servicing Agreement dated as of November 25, 1997 among the Seller,
the Servicer and the Trustee (as amended from time to time, the "Agreement").
Section 6.9 of the Agreement provides, among other things, that
the Seller, the Servicer and the Trustee may at any time and from time to time
enter into a supplement to the Agreement for the purpose of authorizing the
delivery by the Trustee to the Seller for the execution and redelivery to the
Trustee for authentication of one or more Series of Certificates.
Pursuant to this Supplement, the Seller and the Trustee shall
create a new Series of Investor Certificates and shall specify the Principal
Terms thereof.
SECTION 0.0.1. DESIGNATION.
0.0.1.1. There is hereby created a Series of Investor Certificates
to be issued in four classes pursuant to the Agreement and this Series
Supplement and to be known together as the "Series 1997-1
Certificates." The four classes shall be designated the Class A
Floating Rate Asset Backed Certificates, Series 1997-1 (the "Class A
Certificates"), the Class B Floating Rate Asset Backed Certificates,
Series 1997-1 (the "Class B Certificates"), the Class C Floating Rate
Asset Backed Certificates, Series 1997-1 (the "Class C Certificates")
and the Class D Floating Rate Asset Backed Certificates, Series 1997-1
(the "Class D Certificates"). The Class A Certificates, the Class B
Certificates, the Class C Certificates and the Class D Certificate
shall be substantially in the form of Exhibits A-1, A-2, A-3 and A-4
hereto, respectively.
0.0.1.2. Series 1997-1 shall be included in Group One. Series
1997-1 shall not be subordinated to any other Series.
SECTION 0.0.2. Definitions. In the event that any term or
provision contained herein shall conflict with or be inconsistent with
any provision contained in the Agreement, the terms and provisions of
this Supplement shall govern with respect to this Series. All Article,
Section or subsection references herein shall mean Article, Section or
subsections of the Agreement, except as otherwise provided herein. All
capitalized terms not otherwise defined herein are defined in the
Agreement. Each capitalized term defined herein shall relate only to
the Series 1997-1 Certificates and no other Series of Certificates or
Receivables Purchase Series issued by the Trust.
"Accumulation Period" shall mean, unless an Early Amortization
Event shall have occurred prior thereto, the period commencing on the date
specified by the Seller pursuant to subsection 4.17(d) and ending upon the first
to occur of (a) the commencement of the Early Amortization Period and (b) the
Series 1997-1 Termination Date.
<PAGE> 2
"Accumulation Period Length" shall have the meaning specified in
subsection 4.17(d).
"Adjusted Investor Interest" shall mean, with respect to any date
of determination, an amount equal to the sum of (a) the Class A Adjusted
Investor Interest, (b) the Class B Investor Interest, (c) the Class C Investor
Interest and (d) the Class D Investor Interest for such date.
"Amortization Period" shall not be applicable to this Supplement.
"Available Funds" shall mean, with respect to any Distribution
Date, the sum of Class A Available Funds, Class B Available Funds, Class C
Available Funds and Class D Available Funds, in each case for such Distribution
Date.
"Available Principal Collections" shall mean, with respect to any
Distribution Date, the sum of (a) the Principal Allocation Percentage of all
Collections of Principal Receivables for the related Due Period, minus the
amount of Reallocated Class D Principal Collections, Reallocated Class C
Principal Collections and Reallocated Class B Principal Collections with respect
to such Due Period which pursuant to Section 4.12 are required to fund the Class
A Required Amount, the Class B Required Amount and the Class C Required Amount,
(b) any Shared Principal Collections with respect to other Series in Group One
that are allocated to Series 1997-1 in accordance with Section 4.15 for such
Distribution Date, (c) any other amounts which pursuant to Section 4.9 and
4.11(a) (to the extent allocable to the Class A Investor Loss Amount), (b), (d),
(g), (h), (n) and (o) for such Due Period (other than such amounts paid from
Reallocated Principal Collections) are to be treated as Available Principal
Collections for such Distribution Date and (d) any amounts withdrawn from the
Series Excess Funding Account pursuant to subsection 4.21(d) for such
Distribution Date.
"Available Series Excess Funding Reserve Account Amount" shall
mean, with respect to any Distribution Date, the lesser of (a) the amount on
deposit in the Series Excess Funding Reserve Account (before giving effect to
any deposit to be made to the Series Excess Funding Reserve Account on such
date) and (b) the Series Excess Funding Reserve Account Required Amount for such
Distribution Date.
"Average Principal Balance" shall mean, for a Due Period in which
an Addition Date or Removal Date occurs, the weighted average of the Principal
Receivables in the Trust at the end of the day on the last day of the prior Due
Period and the Principal Receivables in the Trust at the end of the day on the
related Addition Date or Removal Date, weighted, respectively, by a fraction,
the numerator of which is the number of days from and including the first day of
such Due Period to but excluding the related Addition Date or Removal Date, and
the denominator of which is the number of days in such Due Period, and by a
fraction, the numerator of which is the number of days from and including the
related Addition Date or Removal Date to and including the last day of such Due
Period, and the denominator of which is the number of days in such Due Period.
"Base Rate" shall mean, for any Due Period, (a) the sum of Monthly
Interest for the related Distribution Date and the Investor Monthly Servicing
Fee for such Due Period,
<PAGE> 3
divided by (b) the sum of (i) the Series Investor Interest and (ii) the Series
Excess Funding Account Balance, in each case as of the last day of the prior Due
Period, times (c) 12.
"Certificateholder Servicing Fee" shall have the meaning specified
in Section 3.
"Class" shall mean any of the Class A Investor Interest, the Class
B Investor Interest, the Class C Investor Interest or the Class D Investor
Interest.
"Class A Additional Interest" shall have the meaning specified in
subsection 4.6(a).
"Class A Adjusted Investor Interest" shall mean, with respect to
any date of determination, an amount equal to the Class A Investor Interest
minus the Principal Funding Account Balance on such date of determination.
"Class A Allocable Share" shall mean, with respect to a Due
Period, the sum of (a) the Class A Floating Allocation of the Collections of
Finance Charge Receivables allocated to the Investor Certificates and deposited
in the Collection Account for such Due Period (excluding any such Collections
allocated as a result of the application of clause (b) of the definition of
Floating Allocation Percentage) and (b) if such Due Period occurs during the
Accumulation Period, all Collections allocated as a result of the operation of
clause (b) of the definition of Floating Allocation Percentage.
"Class A Available Funds" shall mean, with respect to any
Distribution Date, an amount equal to the sum of (a) the Class A Allocable Share
of the Collections of Finance Charge Receivables allocated to the Investor
Certificates and deposited in the Collection Account for the related Due Period,
(b) the amount of any Class A Cap Payment with respect to such Distribution Date
and the amount of any payments due from the Class A Cap Provider but not paid
with respect to any prior date (to the extent received by the Trustee), (c) with
respect to any Due Period during the Accumulation Period prior to the payment in
full of the Class A Investor Interest, the Principal Funding Investment Proceeds
arising pursuant to subsection 4.17(b), if any, with respect to the related
Distribution Date, (d) the Class A Floating Allocation of amounts, if any, to be
withdrawn from the Series Excess Funding Account and the Series Excess Funding
Reserve Account which will be deposited into the Collection Account on such
Distribution Date pursuant to subsections 4.21(b), 4.22(b) and 4.22(d) and (e)
the amount, if any, withdrawn from the Series Excess Funding Reserve Account on
such Distribution Date pursuant to subsection 4.22(e).
"Class A Cap" shall mean the interest rate cap agreement dated the
Closing Date between Fashion Service Corp. and the Class A Cap Provider and
assigned to the Trust for the benefit of the Class A Certificateholders in
substantially the form attached hereto as Exhibit D-1, or any Replacement
Interest Rate Cap therefor.
"Class A Cap Payment" shall mean, with respect to a Distribution
Date, the payment received from the Class A Cap Provider on the day preceding
such Distribution Date, as determined pursuant to the Class A Cap.
<PAGE> 4
"Class A Cap Provider" shall mean The Bank of Tokyo-Mitsubishi,
Ltd., New York Branch, or any successor or assign thereto appointed as provided
in the Class A Cap, in its individual capacity pursuant to the Class A Cap, or
if any Replacement Interest Rate Cap is obtained therefor pursuant to Section
4.19, the replacement cap provider named therein the short-term debt obligations
of which shall be rated at least A-1 by Standard & Poor's and P-1 by Moody's.
"Class A Certificate Rate" shall mean from the Closing Date
through December 14, 1997, from December 15, 1997 through January 14, 1998 and
with respect to each Interest Period thereafter, a per annum rate equal to 0.35%
per annum in excess of LIBOR as determined on the related LIBOR Determination
Date; provided that if the Class A Certificates are not paid in full on the
Class A Expected Final Payment Date, the Class A Certificate Rate applicable to
the Interest Period commencing on such date and each Interest Period thereafter
will not exceed 11.35% per annum.
"Class A Certificateholder" shall mean each Person in whose name a
Class A Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any of the certificates executed
by the Seller and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-1 hereto.
"Class A Deficiency Amount" shall have the meaning specified in
sub- section 4.6(a).
"Class A Expected Final Payment Date" shall mean the December 2002
Distribution Date.
"Class A Fixed Allocation" shall mean, with respect to any Due
Period other than a Due Period relating to the Revolving Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Class A Investor Interest as of the close of business
on the last day of the Revolving Period ending prior to such Due Period;
provided, however, that if Series 1997-1 is paired with a Paired Series and an
Early Amortization Event occurs with respect to such Paired Series during the
Accumulation Period, the Seller may, by written notice delivered to the Trustee,
the Servicer, Moody's and Standard & Poor's, designate a different numerator
(provided that such numerator is not less than the Class A Adjusted Investor
Interest as of the last day of the revolving period for such Paired Series), and
the denominator of which is equal to the numerator used to determine the
Principal Allocation Percentage with respect to such Due Period.
"Class A Floating Allocation" shall mean, with respect to any Due
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class A Adjusted Investor Interest as
of the close of business on the last day of the preceding Due Period and the
denominator of which is equal to the Adjusted Investor Interest as of the close
of business on such day; provided, however, that, with respect to the first Due
Period, the Class A Floating Allocation shall mean the percentage equivalent of
a fraction, the
<PAGE> 5
numerator of which is the Class A Initial Investor Interest and the denominator
of which is the Initial Investor Interest.
"Class A Initial Investor Interest" shall mean the aggregate
initial principal amount of the Class A Certificates, which is $56,000,000.
"Class A Investor Allocation" shall mean, with respect to any Due
Period, (a) with respect to Loss Amounts and Collections of Finance Charge
Receivables at any time and Collections of Principal Receivables during the
Revolving Period, the Class A Floating Allocation and (b) with respect to
Collections of Principal Receivables during the Accumulation Period or Early
Amortization Period, the Class A Fixed Allocation.
"Class A Investor Charge-Offs" shall have the meaning specified in
subsection 4.10(a).
"Class A Investor Interest" shall mean, on any date of
determination, an amount equal to (a) the Class A Initial Investor Interest,
minus (b) the aggregate amount of principal payments made to Class A
Certificateholders prior to such date and minus (c) the excess, if any, of the
aggregate amount of Class A Investor Charge-Offs pursuant to subsection 4.10(a)
over Class A Investor Charge-Offs reimbursed pursuant to subsection 4.11(b)
prior to such date of determination; provided, however, that the Class A
Investor Interest may not be reduced below zero.
"Class A Investor Loss Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (a) the Investor Loss
Amount for the related Due Period and (b) the Class A Floating Allocation
applicable for the related Due Period.
"Class A Monthly Interest" shall mean the monthly interest
distributable in respect of the Class A Certificates as calculated in accordance
with subsection 4.6(a).
"Class A Monthly Principal" shall mean the monthly principal
distributable in respect of the Class A Certificates as calculated in accordance
with subsection 4.7(a).
"Class A Required Amount" shall have the meaning specified in sub-
section 4.8(a).
"Class A Servicing Fee" shall have the meaning specified in
Section 3.
"Class B Additional Interest" shall have the meaning specified in
subsection 4.6(b).
"Class B Available Funds" shall mean, with respect to any
Distribution Date, an amount equal to the sum of (a) the Class B Floating
Allocation of the Collections of Finance Charge Receivables allocated to the
Investor Certificates and deposited in the Collection Account for the related
Due Period (excluding any such Collections allocated as a result of the
application of clause (b) of the definition of Floating Allocation Percentage);
(b) the amount of any Class B
<PAGE> 6
Cap Payment with respect to such Distribution Date and the amount of any
payments due from the Class B Cap Provider but not paid with respect to any
prior date (to the extent received by the Trustee) and (c) the Class B Floating
Allocation of amounts, if any, to be withdrawn from the Series Excess Funding
Account and the Series Excess Funding Reserve Account which will be deposited
into the Collection Account on the related Distribution Date pursuant to
subsections 4.21(b), 4.22(b) and 4.22(d).
"Class B Cap" shall mean the interest rate cap agreement dated the
Closing Date between Fashion Service Corp. and the Class B Cap Provider, and
assigned to the Trust for the benefit of the Class B Certificateholders, the
Class C Certificateholders and the Class D Certificateholders in substantially
the form attached hereto as Exhibit D-2, or any Replacement Interest Rate Cap
therefor.
"Class B Cap Payment" shall mean, with respect to a Distribution
Date, the payment received from the Class B Cap Provider on the day preceding
such Distribution Date, as determined pursuant to the Class B Cap.
"Class B Cap Provider" shall mean The Bank of Tokyo-Mitsubishi,
Ltd., New York Branch, or any successor or assign thereto appointed as provided
in the Class B Cap, in its individual capacity pursuant to the Class B Cap, or
if any Replacement Interest Rate Cap is obtained therefor pursuant to Section
4.19, the replacement cap provider named therein the short-term debt obligations
of which are rated at least A-1 by Standard & Poor's and P-1 by Moody's.
"Class B Certificate Rate" shall mean, from the Closing Date
through December 14, 1997, from December 15, 1997 through January 14, 1998, and
with respect to each Interest Period thereafter, a per annum rate equal to .70%
per annum in excess of LIBOR as determined on the related LIBOR Determination
Date; provided that if the Class B Certificates are not paid in full on the
Class B Expected Final Payment Date, the Class B Certificate Rate applicable to
the Interest Period commencing on such date and each Interest Period thereafter
will not exceed 9.70% per annum.
"Class B Certificateholder" shall mean each Person in whose name a
Class B Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any of the certificates executed
by the Seller and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-2 hereto.
"Class B Deficiency Amount" shall have the meaning specified in
subsection 4.6(b).
"Class B Expected Final Payment Date" shall mean the January 2003
Distribution Date.
"Class B Fixed Allocation" shall mean, with respect to any Due
Period other than a Due Period relating to the Revolving Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Class B Investor Interest as of the close of business
on the last day of the Revolving Period ending prior to such Due Period;
<PAGE> 7
provided, however, that if Series 1997-1 is paired with a Paired Series and an
Early Amortization Event occurs with respect to such Paired Series during the
Accumulation Period, the Seller may, by written notice delivered to the Trustee,
the Servicer, Moody's and Standard & Poor's, designate a different numerator
(provided that such numerator is not less than the Class B Investor Interest as
of the last day of the revolving period for such Paired Series), and the
denominator of which is equal to the numerator used to determine the Principal
Allocation Percentage with respect to such Due Period.
"Class B Floating Allocation" shall mean, with respect to any Due
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class B Investor Interest as of the
close of business on the last day of the preceding Due Period and the
denominator of which is equal to the Adjusted Investor Interest as of the close
of business on such day; provided, however, that, with respect to the first Due
Period, the Class B Floating Allocation shall mean the percentage equivalent of
a fraction, the numerator of which is the Class B Initial Investor Interest and
the denominator of which is the Initial Investor Interest.
"Class B Initial Investor Interest" shall mean the aggregate
initial principal amount of the Class B Certificates, which is $8,500,000.
"Class B Investor Allocation" shall mean, with respect to any Due
Period (a) with respect to Loss Amounts and Collections of Finance Charge
Receivables at any time and Collections of Principal Receivables during the
Revolving Period, the Class B Floating Allocation and (b) with respect to
Collections of Principal Receivables during the Accumulation Period or Early
Amortization Period, the Class B Fixed Allocation.
"Class B Investor Charge-Offs" shall have the meaning specified in
subsection 4.10(b).
"Class B Investor Interest" shall mean, on any date of
determination, an amount equal to (a) the Class B Initial Investor Interest,
minus (b) the aggregate amount of principal payments made to Class B
Certificateholders prior to such date, minus (c) the aggregate amount of Class B
Investor Charge-Offs for all prior Distribution Dates pursuant to subsection
4.10(b), minus (d) the aggregate amount of Reallocated Class B Principal
Collections allocated pursuant to subsection 4.12 on all prior Distribution
Dates for which the Class C Investor Interest or the Class D Investor Interest
has not been reduced, minus (e) an amount equal to the amount by which the Class
B Investor Interest has been reduced on all prior Distribution Dates pursuant to
subsection 4.10(a) and plus (f) the aggregate amount of Excess Spread and Shared
Excess Finance Charge Collections allocated and available on all prior
Distribution Dates pursuant to subsection 4.11(d) for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c), (d) and (e); provided,
however, that the Class B Investor Interest may not be reduced below zero.
"Class B Investor Loss Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (a) the Investor Loss
Amount for the related Due Period and (b) the Class B Floating Allocation
applicable for the related Due Period.
<PAGE> 8
"Class B Monthly Interest" shall mean the monthly interest
distributable in respect of the Class B Certificates as calculated in accordance
with subsection 4.6(b).
"Class B Monthly Principal" shall mean the monthly principal
distributable in respect of the Class B Certificates as calculated in accordance
with subsection 4.7(b).
"Class B Required Amount" shall have the meaning specified in sub-
section 4.8(b).
"Class B Servicing Fee" shall have the meaning specified in
Section 3.
"Class C Available Funds" shall mean, with respect to any
Distribution Date, an amount equal to the sum of (a) the Class C Floating
Allocation of Collections of Finance Charge Receivables allocated to the
Investor Certificates and deposited in the Collection Account for the related
Due Period (excluding any such Collections allocated as a result of the
application of clause (b) of the definition of Floating Allocation Percentage)
and (b) the Class C Floating Allocation of amounts, if any, to be withdrawn from
the Series Excess Funding Account and the Series Excess Funding Reserve Account
which will be deposited into the Collection Account on the related Distribution
Date pursuant to subsections 4.21(b), 4.22(b) and 4.22(d).
"Class C Certificate Rate" shall mean, from the Closing Date
through December 14, 1997, from December 15, 1997 through January 14, 1998, and
with respect to each Interest Period thereafter, the rate specified in the Class
C Purchase Agreement.
"Class C Certificateholder" shall mean each Person in whose name a
Class C Certificate is registered in the Certificate Register.
"Class C Certificates" shall mean any of the certificates executed
by the Seller and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-3 hereto.
"Class C Deficiency Amount" shall have the meaning specified in
subsection 4.6(c).
"Class C Fixed Allocation" shall mean, with respect to any Due
Period other than a Due Period relating to the Revolving Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Class C Investor Interest as of the close of business
on the last day of the Revolving Period ending prior to such Due Period;
provided, however, that if Series 1997-1 is paired with a Paired Series and an
Early Amortization Event occurs with respect to such Paired Series during the
Accumulation Period, the Seller may, by written notice delivered to the Trustee
and the Servicer, designate a different numerator (provided that such numerator
is not less than the Class C Investor Interest as of the last day of the
revolving period for such Paired Series), and the denominator of which is equal
to the numerator used to determine the Principal Allocation Percentage with
respect to such Due Period.
<PAGE> 9
"Class C Floating Allocation" shall mean, with respect to any Due
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class C Investor Interest as of the
close of business on the last day of the preceding Due Period and the
denominator of which is equal to the Adjusted Investor Interest as of the close
of business on such day; provided, however, that, with respect to the first Due
Period, the Class C Floating Allocation shall mean the percentage equivalent of
a fraction, the numerator of which is the Class C Initial Investor Interest and
the denominator of which is the Initial Investor Interest.
"Class C Initial Investor Interest" shall mean the aggregate
initial principal amount of the Class C Certificates, which is $9,500,000.
"Class C Investor Allocation" shall mean, with respect to any Due
Period (a) with respect to Loss Amounts and Collections of Finance Charge
Receivables at any time and Collections of Principal Receivables during the
Revolving Period, the Class C Floating Allocation and (b) with respect to
Collections of Principal Receivables during the Accumulation Period or Early
Amortization Period, the Class C Fixed Allocation.
"Class C Investor Charge-Offs" shall have the meaning specified in
subsection 4.10(c).
"Class C Investor Interest" shall mean, on any date of
determination, an amount equal to (a) the Class C Initial Investor Interest,
minus (b) the aggregate amount of principal payments made to the Class C
Certificateholders prior to such date, minus (c) the aggregate amount of Class C
Investor Charge-Offs for all prior Distribution Dates pursuant to subsection
4.10(c), minus (d) the aggregate amount of Reallocated Class C Principal
Collections allocated pursuant to subsections 4.12(a) and (b) on all prior
Distribution Dates, minus (e) an amount equal to the amount by which the Class C
Investor Interest has been reduced on all prior Distribution Dates pursuant to
subsections 4.10(a) and (b), and plus (f) the aggregate amount of Excess Spread
and Shared Excess Finance Charge Collections allocated and available on all
prior Distribution Dates pursuant to subsection 4.11(h) for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e);
provided further, however, that the Class C Investor Interest may not be reduced
below zero.
"Class C Investor Loss Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (a) the Investor Loss
Amount for the related Due Period and (b) the Class C Floating Allocation
applicable for the related Due Period.
"Class C Monthly Interest" shall mean the monthly interest
distributable in respect of the Class C Certificates as calculated in accordance
with subsection 4.6(c).
"Class C Monthly Principal" shall mean the monthly principal
distributable in respect of the Class C Certificates as calculated in accordance
with subsection 4.7(c).
"Class C Purchase Agreement" shall mean the agreement among the
Seller, the Servicer, the Trustee and the initial Class C Certificateholders,
dated as of the Closing Date, as amended or modified from time to time.
<PAGE> 10
"Class C Required Amount" shall mean the amount, if any, equal to
the sum of (a) the amount, if any, by which the sum of (i) the Class C Monthly
Interest for such Distribution Date, plus (ii) the Class C Deficiency Amount, if
any, for such Distribution Date, plus (iii) the Class C Loss Amount, if any, for
the prior Due Period exceeds the amount of Excess Spread available to be applied
to such amounts pursuant to subsections 4.11(f) and (g), plus (b) the amount, if
any, by which the sum of (i) the Class C Servicing Fee for the prior Due Period,
plus (ii) the Class C Servicing Fee, if any, due but not paid on any prior
Distribution Date, exceeds the Class C Available Funds for the related Due
Period and the amount of any Excess Spread available to be applied to such
amount pursuant to subsection 4.11(e).
"Class C Servicing Fee" shall have the meaning specified in
Section 3.
"Class D Available Funds" shall mean, with respect to any
Distribution Date, an amount equal to the sum of (a) the Class D Floating
Allocation of Collections of Finance Charge Receivables allocated to the
Investor Certificates and deposited in the Collection Account for the related
Due Period (excluding any such Collections allocated as a result of the
application of clause (b) of the definition of Floating Allocation Percentage)
and (b) the Class D Floating Allocation of amounts, if any, to be withdrawn from
the Series Excess Funding Account and the Series Excess Funding Reserve Account
which will be deposited into the Collection Account on the related Distribution
Date pursuant to subsections 4.21(b), 4.22(b) and 4.22(d).
"Class D Certificate Rate" shall mean, from the Closing Date
through December 14, 1997, from December 15, 1997 through January 14, 1998, and
with respect to any Interest Period thereafter, a per annum rate equal to .25%
per annum in excess of the Class C Certificate Rate.
"Class D Certificateholder" shall mean any person in whose name a
Class D Certificate is registered in the Certificate Register.
"Class D Certificates" shall mean any of the certificates executed
by the Seller and authenticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-4 hereto.
"Class D Fixed Allocation" shall mean, with respect to any Due
Period other than a Due Period relating to the Revolving Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Class D Investor Interest as of the close of business
on the last day of the Revolving Period ending prior to such Due Period;
provided, however, that if Series 1997-1 is paired with a Paired Series and an
Early Amortization Event occurs with respect to such Paired Series during the
Accumulation Period, the Seller may, by written notice delivered to the Trustee
and the Servicer, designate a different numerator (provided that such numerator
is not less than the Class D Investor Interest as of the last day of the
revolving period for such Paired Series), and the denominator of which is equal
to the numerator used to determine the Principal Allocation Percentage with
respect to such Due Period.
<PAGE> 11
"Class D Floating Allocation" shall mean, with respect to any Due
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class D Investor Interest as of the
close of business on the last day of the preceding Due Period and the
denominator of which is equal to the Adjusted Investor Interest as of the close
of business on such day; provided, however, that with respect to the first Due
Period, the Class D Floating Allocation shall mean the percentage equivalent of
a fraction, the numerator of which is the Class D Initial Investor Interest and
the denominator of which is the Initial Investor Interest.
"Class D Initial Investor Interest" shall mean the aggregate
initial principal amount of the Class D Investor Interest, which is $9,500,000.
"Class D Investor Allocation" shall mean, with respect to any Due
Period, (a) with respect to Loss Amounts and Collections of Finance Charge
Receivables at any time and Principal Receivables during the Revolving Period,
the Class D Floating Allocation and (b) with respect to Collections of Principal
Receivables during the Accumulation Period or Early Amortization Period, the
Class D Fixed Allocation.
"Class D Investor Charge-Offs" shall have the meaning specified in
subsection 4.10(d).
"Class D Investor Interest" shall mean, on any date of
determination, an amount equal to (a) the Class D Initial Investor Interest,
minus (b) the aggregate amount of principal payments made to the holders of the
Class D Certificates prior to such date, minus (c) the aggregate amount of Class
D Investor Charge-Offs for all prior Distribution Dates pursuant to subsection
4.10(d), minus (d) the aggregate amount of Reallocated Class D Principal
Collections allocated pursuant to subsections 4.12(a), (b) and (c) on all prior
Distribution Dates, minus (e) an amount equal to the amount by which the Class D
Investor Interest has been reduced on all prior Distribution Dates pursuant to
subsections 4.10(a), (b) and (c), and plus (f) the aggregate amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available on
all prior Distribution Dates pursuant to subsection 4.11(o) for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e);
provided further, however, that the Class D Investor Interest may not be reduced
below zero.
"Class D Investor Loss Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (a) the Investor Loss
Amount for the related Due Period and (b) the Class D Floating Allocation
applicable for the related Due Period.
"Class D Monthly Interest" shall mean the monthly interest
distributable in respect of the Class D Certificates as calculated in accordance
with subsection 4.6(d).
"Class D Monthly Principal" shall mean the monthly principal
distributable in respect of the Class D Certificates as calculated in accordance
with subsection 4.7(d).
"Class D Servicing Fee" shall have the meaning specified in
Section 3.
"Closing Date" shall mean November 25, 1997.
<PAGE> 12
"Controlled Accumulation Amount" shall mean an amount equal to the
Class A Initial Investor Interest divided by the Accumulation Period Length.
"Controlled Deposit Amount" for any Due Period shall mean the
excess, if any, of (a) the product of the Controlled Accumulation Amount and the
number of months elapsed with respect to the Accumulation Period through and
including such Due Period over (b) the Principal Funding Account Balance as of
the end of the day of the last day of the prior Due Period; provided, that from
and after the Distribution Date occurring in such Due Period, the Controlled
Deposit Amount for such Due Period shall be reduced by the amount of Available
Principal Collections that are deposited into the Principal Funding Account on
such Distribution Date.
"Controlling Certificateholders" shall mean (a) on any date of
determination on which the Class A Investor Interest or the Class B Investor
Interest is greater than zero, the Holders of Class A Certificates and Class B
Certificates evidencing more than 50% of the sum of the Class A Investor
Interest and the Class B Investor Interest, and (b) thereafter, the Holders of
Class C Certificates evidencing more than 50% of the Class C Investor Interest.
"Covered Amount" shall mean, for any Distribution Date with
respect to the Accumulation Period, the product of (a) the Class A Certificate
Rate, (b) the Principal Funding Account Balance on the last day of the preceding
Due Period and (c) a fraction, the numerator of which is the actual number of
days in the related Interest Period and the denominator of which is 360.
"Cumulative Principal Shortfall" shall mean the sum of the
Principal Shortfalls (as such term is defined in each of the related Supplements
or Receivables Purchase Agreement) for each Series in Group One that are
Principal Sharing Series.
"Deposit Amount" shall have the meaning specified in subsection
4.21(c).
"Distribution Date" shall mean January 15, 1998 and the fifteenth
day of each calendar month thereafter, or if such fifteenth day is not a
Business Day, the next succeeding Business Day.
"Early Amortization Period" shall mean the period commencing at
the close of business on the Business Day immediately preceding the day on which
an Early Amortization Event with respect to Series 1997-1 is deemed to have
occurred, and ending on the Series 1997-1 Termination Date.
"Enhancement" shall mean (a) with respect to the Class A
Certificates, the subordination of the Class B Certificates, the Class C
Certificates and the Class D Certificates, (b) with respect to the Class B
Certificates, the subordination of the Class C Certificates and the Class D
Certificates and (c) with respect to the Class C Certificates, the subordination
of the Class D Certificates.
"Enhancement Provider" shall mean, collectively, the Class C
Certificateholders.
<PAGE> 13
"Excess Spread" shall mean, with respect to any Distribution Date,
the sum of the amounts with respect to such Distribution Date, if any, specified
pursuant to subsections 4.9(a)(iv), 4.9(b)(iv), 4.9(c)(ii) and 4.9(d)(ii).
"Finance Charge Shortfall" shall have the meaning specified in
subsection 4.14(b).
"Fixed Principal Allocation Date" shall mean the earlier of (a)
the date on which an Early Amortization Event with respect to Series 1997-1 is
deemed to have occurred; and (b) a date selected by the Servicer before the
Class A Expected Final Payment Date, if any. If the Servicer establishes a Fixed
Principal Allocation Date pursuant to clause (b) of the preceding sentence, the
Servicer shall provide notification of such date to the Seller, the Trustee, the
Enhancement Provider and the Rating Agencies no later than two Business Days
prior to such date.
"Floating Allocation Percentage" shall mean, with respect to any
Due Period (including any day within such Due Period), the sum of (a) the
percentage equivalent of a fraction, the numerator of which is the excess of the
Adjusted Investor Interest at the end of the day on the last day of the prior
Due Period (or with respect to the first Due Period ending after the Closing
Date, the Initial Investor Interest) over the Series Excess Funding Account
Balance on such day and the denominator of which is the greater of (i) the sum
of (A) the aggregate amount of Principal Receivables in the Trust at the end of
the day on such date (or with respect to the first Due Period ending after the
Closing Date, at the end of the day on the Closing Date) and (B) the Excess
Funding Amount as of the close of business of the last day of the prior Due
Period, and (ii) the sum of the numerators used to calculate the
Investor/Purchaser Percentages for such Due Period with respect to Finance
Charge Receivables, Principal Receivables or Loss Amounts, as applicable, for
all Series of Certificates and Receivable Purchase Series outstanding and (b)
for any Due Period with respect to the Accumulation Period (including any day
within such Due Period), the percentage equivalent of a fraction which if
multiplied by denominator of the fraction described in clause (a) above would
produce, on the basis of the actual number of days in the related Interest
Period and a year of 360 days, an amount equal to the Principal Funding
Investment Shortfall with respect to such Due Period; provided, that with
respect to any Due Period in which an Addition Date or Removal Date occurs, the
amount in clause (i)(A) above shall be (1) the aggregate amount of Principal
Receivables in the Trust at the end of the day on the last day of the prior Due
Period for the period from and including the first day of such Due Period to but
excluding the related Addition Date or Removal Date and (2) the aggregate amount
of Principal Receivables in the Trust at the end of the day on the related
Addition Date or Removal Date for the period from and including the related
Addition Date or Removal Date to and including the last day of such Due Period;
provided further, that with respect to any Due Period in which an Addition Date
or a Removal Date occurs and the Servicer need not make daily deposits of
Collections into the Collection Account, the amount in (i)(A) above shall be the
Average Principal Balance.
"Group One" shall mean Series 1997-1 and each other Series
specified in the related Supplement or Receivables Purchase Agreement to be
included in Group One.
<PAGE> 14
"Initial Investor Interest" shall mean the sum of the Class A
Initial Investor Interest, the Class B Initial Investor Interest, the Class C
Initial Investor Interest and the Class D Initial Investor Interest.
"Interest Period" shall mean, with respect to any Distribution
Date, the period from and including the previous Distribution Date through the
day preceding such Distribution Date, except that the initial Interest Period
shall be the period from and including the Closing Date through the day
preceding the initial Distribution Date.
"Interest Rate Cap" shall mean either of the Class A Cap or the
Class B Cap.
"Interest Rate Cap Provider" shall mean either of the Class A Cap
Provider or the Class B Cap Provider.
"Investor Certificateholder" shall mean (a) with respect to the
Class A Certificates, any Class A Certificateholder, (b) with respect to the
Class B Certificates, any Class B Certificateholder, (c) with respect to the
Class C Certificates, any Class C Certificateholder and (d) with respect to the
Class D Certificates, any Class D Certificateholder.
"Investor Certificates" shall mean the Class A Certificates, the
Class B Certificates, the Class C Certificates and the Class D Certificates.
"Investor Loss Amount" shall mean, with respect to any
Distribution Date, an amount equal to the product of (a) the aggregate of the
Loss Amounts for the related Due Period and (b) the Floating Allocation
Percentage for such Due Period.
"Investor Monthly Servicing Fee" shall mean, with respect to any
Due Period, an amount equal to one-twelfth of the product of the Series
Servicing Fee Percentage and the Adjusted Investor Interest as of the last day
of the preceding Due Period; provided that with respect to the first Due Period
ending after the Closing Date, the Investor Monthly Servicing Fee shall be
$236,583.34.
"Investor/Purchaser Percentage" shall mean, with respect to
Collections of Principal Receivables, the Principal Allocation Percentage, and
with respect to Collections of Finance Charge Receivables or Loss Amounts, the
Floating Allocation Percentage.
"LIBOR" shall mean, for any Interest Period, the London interbank
offered rate for one-month United States dollar deposits determined by the
Trustee for each Interest Period in accordance with the provisions of Section
4.18.
"LIBOR Determination Date" shall mean November 21, 1997 for the
period from the Closing Date through December 14, 1997, December 11, 1997 for
the period from December 15, 1997 through January 14, 1998, and the second
London Business Day prior to the commencement of the second and each subsequent
Interest Period.
<PAGE> 15
"London Business Day" shall mean a day on which the Trustee and
commercial banks in the City of London are open for the transaction of
commercial banking business.
"Minimum Seller Interest" shall mean, as of any date of
determination, the product of 2% and the excess of the Adjusted Investor
Interest over the Series Excess Funding Account Balance on such date of
determination; provided, however, that the Seller may reduce the Minimum Seller
Interest upon (i) ten Business Days' prior notice to the Trustee, each Rating
Agency and the Class C Certificateholder, (ii) satisfaction of the Rating Agency
Condition, (iii) delivery to the Trustee, each Purchaser Representative and the
Class C Certificateholder of an Officer's Certificate to the effect that such
reduction will not then or thereafter cause an Early Amortization Event to occur
with respect to any Series, (iv) receipt by the Seller of the consent of the
Class C Certificateholder to such reduction, and (v) delivery of a Tax Opinion
to the Trustee with respect to such reduction.
"Monthly Interest" shall mean, with respect to any Distribution
Date, the sum of (a) the Class A Monthly Interest, the Class A Additional
Interest, if any, and the unpaid Class A Deficiency Amount, if any; (b) the
Class B Monthly Interest, the Class B Additional Interest, if any, and the
unpaid Class B Deficiency Amount, if any; (c) the Class C Monthly Interest and
the unpaid Class C Deficiency Amount, if any; and (d) the Class D Monthly
Interest, each with respect to such Distribution Date.
"Portfolio Yield" shall mean, with respect to any Due Period, the
annualized percentage equivalent of a fraction, the numerator of which is an
amount equal to the sum of (a) the Floating Allocation Percentage of Collections
of Finance Charge Receivables allocated to the Investor Certificates for such
Due Period, (b) the amount of any Principal Funding Investment Proceeds for the
related Distribution Date, (c) any Shared Excess Finance Charge Collections that
are allocated to Series 1997-1 pursuant to Section 4.14 for the related
Distribution Date, and (d) the amount of funds, if any, to be withdrawn from the
Series Excess Funding Account and the Series Excess Funding Reserve Account
which, pursuant to subsections 4.21(b), 4.22(b), 4.22(d), 4.22(e) and 4.22(f)
are required to be deposited in the Collection Account with respect to such
Distribution Date, such sum to be calculated on a cash basis after subtracting
the Investor Loss Amount for such Due Period, and the denominator of which is
the Series Investor Interest as of the last day of the preceding Due Period (or
with respect to the initial Due Period, the Initial Investor Interest).
"Principal Allocation Percentage" shall mean, (a) with respect to
any Due Period (including any day within such Due Period) occurring prior to the
Fixed Principal Allocation Date, the Floating Allocation Percentage for such Due
Period, and (b) with respect to any Due Period (including any day within such
Due Period) occurring on or after the Fixed Principal Allocation Date, the
percentage equivalent of a fraction, the numerator of which is the Series
Investor Interest as of the end of the day on the last day of the Due Period
occurring immediately prior to the Fixed Principal Allocation Date, as
applicable and the denominator of which is the greater of (x) the sum of (i) the
aggregate amount of Principal Receivables in the Trust at the end of the day on
the last day of the prior Due Period and (ii) the Excess Funding Amount as of
the close of business of the last day of the prior Due Period, and (y) the sum
of the numerators used to calculate the Investor/Purchaser Percentages for such
Due Period with respect to Principal
<PAGE> 16
Receivables for all Series of Certificates and Receivable Purchase Series
outstanding; provided, that with respect to any Due Period in which an Addition
Date or Removal Date occurs, the amount in (x)(i) above shall be (1) the
aggregate amount of Principal Receivables in the Trust at the end of the day on
the last day of the prior Due Period for the period from and including the first
day of such Due Period to but excluding the related Addition Date or Removal
Date and (2) the aggregate amount of Principal Receivables in the Trust at the
end of the day on the related Addition Date or Removal Date for the period from
and including the related Addition Date or Removal Date to and including the
last day of such Due Period; provided further, that with respect to any Due
Period in which an Addition Date or a Removal Date occurs and the Servicer need
not make daily deposits of Collections into the Collection Account, the amount
in clause (x)(i) above shall be the Average Principal Balance.
"Principal Funding Account" shall have the meaning set forth in
sub- section 4.17(a).
"Principal Funding Account Balance" shall mean, with respect to
any date of determination during the Accumulation Period, the principal amount,
if any, on deposit in the Principal Funding Account on such date of
determination.
"Principal Funding Investment Proceeds" shall mean, with respect
to each Due Period during the Accumulation Period, the investment earnings on
funds in the Principal Funding Account (net of investment expenses and losses)
for such Due Period.
"Principal Funding Investment Shortfall" shall mean, with respect
to each Due Period during the Accumulation Period, the amount, if any, by which
the Principal Funding Investment Proceeds are less than the Covered Amount;
provided that for purposes of determining the Principal Funding Investment
Shortfall for purposes of clause (b) of the definition of Floating Allocation
Percentage, on any date when the Principal Funding Investment Proceeds or the
Covered Amount cannot be determined, Principal Funding Investment Proceeds for
such Due Period will be assumed to be the product of (x) 1/12, (y) 2.5% and (z)
the Principal Funding Account Balance as of the first day of such Due Period and
the Covered Amount shall be determined as if the Class A Certificate Rate was
65% greater than the Class A Certificate Rate applicable to the then-current
Interest Period.
"Principal Shortfall" shall mean, as the context requires, any of
the following: (a) on any Distribution Date with respect to the Accumulation
Period, the amount by which the Controlled Deposit Amount for the prior Due
Period exceeds the amount of Available Principal Collections for such
Distribution Date (excluding any portion thereof attributable to Shared
Principal Collections); and (b) on any Distribution Date with respect to the
Early Amortization Period, the amount by which the sum of the Adjusted Investor
Interest exceeds the Available Principal Collections for such Distribution Date
(excluding any portion thereof attributable to Shared Principal Collections).
"Rating Agency" shall mean Moody's and Standard & Poor's.
<PAGE> 17
"Reallocated Class B Principal Collections" shall mean, with
respect to any Distribution Date, Collections of Principal Receivables applied
in accordance with subsection 4.12(a) in an amount not to exceed the amount
described in subsection 4.5(a)(iv) during the Revolving Period and subsection
4.5(b)(iv) during the Accumulation Period; provided, however, that such amount
shall not exceed the Class B Investor Interest after giving effect to any Class
B Investor Charge-Offs for such Distribution Date.
"Reallocated Class C Principal Collections" shall mean, with
respect to any Distribution Date, Collections of Principal Receivables applied
in accordance with subsection 4.12(a) in an amount not to exceed the amount
described in subsection 4.5(a)(iii) during the Revolving Period and subsection
4.5(b)(iii) during the Accumulation Period; provided, however, that such amount
shall not exceed the Class C Investor Interest after giving effect to any Class
C Investor Charge-Offs for such Distribution Date.
"Reallocated Class D Principal Collections" shall mean, with
respect to any Distribution Date, Collections of Principal Receivables applied
in accordance with subsection 4.12(a) in an amount not to exceed the amount
described in subsection 4.5(a)(ii) during the Revolving Period and subsection
4.5(b)(ii) during the Accumulation Period; provided, however, that such amount
shall not exceed the Class D Investor Interest after giving effect to any Class
D Investor Charge-Offs for such Distribution Date.
"Reallocated Principal Collections" shall mean the sum of (a)
Reallocated Class B Principal Collections, (b) Reallocated Class C Principal
Collections and (c) Reallocated Class D Principal Collections.
"Reference Banks" shall mean four major banks in the London
interbank market selected by the Servicer.
"Remitted Amount" shall have the meaning specified in subsection
4.21(c).
"Replacement Interest Rate Cap" shall mean any replacement
interest cap having substantially similar terms and conditions as the Interest
Rate Cap it replaces.
"Revolving Period" shall mean the period from and including the
Closing Date to, but not including, the earlier of (a) the day the Accumulation
Period commences or (b) the day the Early Amortization Period commences.
"Series Accounts" means the Principal Funding Account, the Series
Excess Funding Account and the Series Excess Funding Reserve Account.
"Series Excess Funding Account" shall have the meaning set forth
in subsection 4.21(a).
"Series Excess Funding Account Balance" means, with respect to any
date of determination, the principal amount, if any, on deposit in the Series
Excess Funding Account on such date of determination.
<PAGE> 18
"Series Excess Funding Account Covered Amount" shall mean, for any
Distribution Date, the product of (a) a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is 360, (b) the weighted average of the Class A Certificate Rate, the
Class B Certificate Rate, the Class C Certificate Rate and the Class D
Certificate Rate, weighted based on the Class A Investor Interest, the Class B
Investor Interest, the Class C Investor Interest and the Class D Investor
Interest and (c) the Series Excess Funding Account Balance on the last day of
the preceding Due Period.
"Series Excess Funding Account Investment Proceeds" shall mean,
with respect to each Due Period, the investment earnings on funds in the Series
Excess Funding Account (net of investment expenses and losses) for such Due
Period.
"Series Excess Funding Account Investment Shortfall" shall mean,
(x) with respect to each Due Period occurring prior to the payment in full of
all Certificate Series outstanding prior to the Closing Date, the amount, if
any, by which the Series Excess Funding Account Investment Proceeds are less
than the Series Excess Funding Account Covered Amount and (y) thereafter, $0.
"Series Excess Funding Account Required Amount" shall mean, as of
any date of determination, the amount, if any, by which the Minimum Aggregate
Principal Receivables exceeds the aggregate amount of Principal Receivables.
"Series Excess Funding Account Surplus" shall mean as of any date
of determination, the amount, if any, which, if withdrawn from the Series Excess
Funding Account, would not cause the Minimum Aggregate Principal Receivables to
exceed the aggregate amount of Principal Receivables.
"Series Excess Funding Reserve Account" shall have the meaning set
forth in subsection 4.22(a).
"Series Excess Funding Reserve Account Required Amount" shall
mean, with respect to any Distribution Date, an amount equal to (a) the product
of .50% and the Series Excess Funding Account Balance or (b) any other amount
designated by the Seller; provided, that if such designation is of a lesser
amount, the Seller shall (i) provide the Servicer, the Class C Certificateholder
and the Trustee with evidence that the Rating Agency Condition shall have been
satisfied and (ii) deliver to the Trustee a certificate of an authorized officer
to the effect that, based on the facts known to such officer at such time, in
the reasonable belief of the Seller, such designation will not cause an Early
Amortization Event or an event that, after the giving of notice or the lapse of
time, would cause an Early Amortization Event to occur with respect to Series
1997-1.
"Series Excess Funding Reserve Account Surplus" shall mean, as of
any date of determination, the amount, if any, by which the amount on deposit in
the Series Excess Funding Reserve Account exceeds the Series Excess Funding
Reserve Account Required Amount.
<PAGE> 19
"Series Excess Funding Reserve Draw Amount" shall have the meaning
set forth in subsection 4.22(c).
"Series Investor Interest" shall mean, on any date of
determination, an amount equal to (a) the sum of (i) the Class A Investor
Interest, (ii) the Class B Investor Interest, (iii) the Class C Investor
Interest and (iv) the Class D Investor Interest, each as of such date minus (b)
the Series Excess Funding Account Balance on such date.
"Series 1997-1" shall mean the Series of the Charming Shoppes
Master Trust represented by the Investor Certificates.
"Series 1997-1 Certificateholder" shall mean the Holder of record
of any Series 1997-1 Certificate.
"Series 1997-1 Certificates" shall mean the Class A Certificates,
the Class B Certificates, the Class C Certificates and the Class D Certificates.
"Series 1997-1 Early Amortization Event" shall have the meaning
specified in Section 9 of this Supplement.
"Series 1997-1 Termination Date" shall mean the earliest to occur
of (a) the Distribution Date on which the Series 1997-1 Certificates are paid in
full, (b) the April 2006 Distribution Date or (c) the date of termination of the
Trust pursuant to Section 12.1.
"Series Servicing Fee Percentage" shall mean 2.0%.
"Shared Excess Finance Charge Collections" shall mean, with
respect to any Distribution Date, as the context requires, either (a) the
aggregate amount of Collections of Finance Charge Receivables allocated to the
Investor Certificates but available to cover Finance Charge Shortfalls for other
Series in Group One, if any, or (b) the aggregate amount of Collections of
Finance Charge Receivables and other amounts allocable to other Series in Group
One in excess of the amounts necessary to make required payments with respect to
such Series, if any, and available to cover any Finance Charge Shortfall with
respect to the Investor Certificates as described in Section 4.14.
"Shared Principal Collections" shall mean, as the context
requires, either (a) the amount allocated to the Investor Certificates which may
be applied to cover Principal Shortfalls with respect to other outstanding
Series in Group One, or (b) the amounts allocated to the Investor Certificates
of other Series in Group One that the applicable Supplements for such Series
specify are to be treated as "Shared Principal Collections" and which may be
applied to cover Principal Shortfalls with respect to the Investor Certificates
pursuant to Section 4.15.
"Telerate Page 3750" shall mean the display page currently so
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service for displaying comparable rates or prices).
<PAGE> 20
SECTION 0.0.3. SERVICING COMPENSATION. The share of the Monthly
Servicing Fee allocable to Series 1997-1 with respect to any Due Period (the
"Investor Monthly Servicing Fee") shall be equal to one-twelfth of the product
of (i) the Series Servicing Fee Percentage and (ii) the Adjusted Investor
Interest less the Series Excess Funding Account Balance, in each case, as of the
last day of such Due Period; provided, however, that with respect to the first
Due Period ending after the Closing Date, the Investor Monthly Servicing Fee
shall be equal to $236,583.34. The share of the Investor Monthly Servicing Fee
allocable to the Class A Investor Interest with respect to any Due Period (the
"Class A Servicing Fee") shall be equal to one-twelfth of the product of (i) the
Class A Floating Allocation, (ii) the Series Servicing Fee Percentage, and (iii)
the Adjusted Investor Interest, less the Series Excess Funding Account Balance,
in each case, as of the last day of such Due Period; provided, however, that
with respect to the first Due Period ending after the Closing Date, the Class A
Servicing Fee shall be equal to $158,666.67. The share of the Investor Monthly
Servicing Fee allocable to the Class B Investor Interest with respect to any Due
Period (the "Class B Servicing Fee") shall be equal to one-twelfth of the
product of (i) the Class B Floating Allocation, (ii) the Series Servicing Fee
Percentage and (iii) the Adjusted Investor Interest less the Series Excess
Funding Account Balance, in each case, as of the last day of such Due Period;
provided, however, that with respect to the first Due Period ending after the
Closing Date, the Class B Servicing Fee shall be equal to $24,083.33. The share
of the Investor Monthly Servicing Fee allocable to the Class C Investor Interest
with respect to any Due Period (the "Class C Servicing Fee") shall be equal to
one-twelfth of the product of (i) the Class C Floating Allocation, (ii) the
Series Servicing Fee Percentage and (iii) the Adjusted Investor Interest less
the Series Excess Funding Account Balance, in each case, as of the last day of
such Due Period; provided, however, that with respect to the first Due Period
ending after the Closing Date, the Class C Servicing Fee shall be equal to
$26,916.67. The share of the Investor Monthly Servicing Fee allocable to the
Class D Investor Interest with respect to any Due Period (the "Class D Servicing
Fee"; together with the Class A Servicing Fee, the Class B Servicing Fee and the
Class C Servicing Fee, the "Certificateholder Servicing Fee") shall be equal to
one-twelfth of the product of (i) the Class D Floating Allocation, (ii) the
Series Servicing Fee Percentage and (iii) the Adjusted Investor Interest less
the Series Excess Funding Account Balance, in each case, as of the last day of
such Due Period; provided, however, that with respect to the first Due Period
ending after the Closing Date, the Class D Servicing Fee shall be equal to
$26,916.67. Except as specifically provided above, the Investor Monthly
Servicing Fee shall be paid by the cash flows from the Trust allocated to the
Seller or the Certificateholders of other Series (as provided in the related
Supplements or Receivables Purchase Agreements) and in no event shall the Trust,
the Trustee or the Investor Certificateholders be liable therefor. The Class A
Servicing Fee shall be payable to the Servicer solely to the extent amounts are
available for distribution in respect thereof pursuant to subsections 4.9(a)(ii)
and 4.11(a). The Class B Servicing Fee shall be payable solely to the extent
amounts are available for distribution in respect thereof pursuant to
subsections 4.9(b)(ii) and 4.11(c). The Class C Servicing Fee shall be payable
solely to the extent amounts are available for distribution in respect thereof
pursuant to subsections 4.9(c)(i) and 4.11(e). The Class D Servicing Fee shall
be
<PAGE> 21
payable solely to the extent amounts are available for distribution in respect
thereof pursuant to subsections 4.9(d)(i) and 4.11(l).
SECTION 0.0.4. REASSIGNMENT AND TRANSFER TERMS. The Investor
Certificates shall be subject to retransfer to the Seller at its option, in
accordance with the terms specified in subsection 12.2(a), on any Distribution
Date on or after the Distribution Date on which the Series Investor Interest is
less than or equal to 5% of the Initial Investor Interest. The deposit required
in connection with any such repurchase shall be equal to the Series Investor
Interest plus accrued and unpaid interest on the Investor Certificates through
the day preceding the Distribution Date on which the repurchase occurs.
SECTION 0.0.5. DELIVERY AND PAYMENT FOR THE INVESTOR CERTIFICATES.
The Seller shall execute and deliver the Investor Certificates to the Trustee
for authentication in accordance with Section 6.1. The Trustee shall deliver the
Investor Certificates when authenticated in accordance with Section 6.2.
SECTION 0.0.6. DEPOSITORY; FORM OF DELIVERY OF SERIES 1997-1
CERTIFICATES.
0.0.6.1. The Class A Certificates and the Class B Certificates
shall be delivered as Book-Entry Certificates as provided in Sections 6.2 and
6.10.
0.0.6.2. The Depository for Series 1997-1 shall be The Depository
Trust Company, and the Class A Certificates and Class B Certificates shall be
initially registered in the name of Cede & Co., its nominee.
SECTION 0.0.7. ARTICLE IV OF AGREEMENT. Sections 4.1, 4.2 and 4.3
of the Agreement shall be read in their entirety as provided in the Agreement.
Article IV of the Agreement (except for Sections 4.1, 4.2 and 4.3 thereof) shall
read in its entirety as follows and shall be applicable only to the Series
1997-1 Certificates.
<PAGE> 22
ARTICLE 1.
RIGHTS OF CERTIFICATEHOLDERS AND RECEIVABLES
PURCHASERS AND ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 1.1. RIGHTS OF INVESTOR CERTIFICATEHOLDERS. The Investor
Certificates shall represent undivided interests in the Trust, consisting of the
right to receive, to the extent necessary to make the required payments with
respect to such Investor Certificates at the times and in the amounts specified
in this Agreement, (a) the Floating Allocation Percentage and Principal
Allocation Percentage (as applicable from time to time) of Collections received
with respect to the Receivables and (b) funds on deposit in the Collection
Account, the Principal Funding Account, the Series Excess Funding Account and
the Series Excess Funding Reserve Account. The Class D Certificate shall be
subordinate to the Class A Certificates, the Class B Certificates and the Class
C Certificates. The Class C Certificates shall be subordinate to the Class A
Certificates and the Class B Certificates. The Class B Certificates shall be
subordinate to the Class A Certificates. The Exchangeable Seller Certificate
shall not represent any interest in the Collection Account, the Principal
Funding Account, the Series Excess Funding Account or the Series Excess Funding
Reserve Account, except as specifically provided in this Article IV.
SECTION 1.2. Allocations.
1.2.0.1. Allocations During the Revolving Period. During the
Revolving Period, the Servicer shall, prior to the close of business on the
day any Collections are deposited in the Collection Account, allocate to
the Investor Certificateholders, the Certificateholders of other Series and
the Holder of the Exchangeable Seller Certificate the following amounts as
set forth below:
1.2.0.1.1. Allocate to the Investor Certificateholders an amount
equal to the product of (A) the Floating Allocation Percentage on
such date and (B) the aggregate amount of Collections processed in
respect of Finance Charge Receivables on such date to be applied in
accordance with Section 4.9.
1.2.0.1.2. An amount equal to the product of (A) the Class D
Investor Allocation on such date, (B) the Investor/ Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied first in accordance with Section 4.12 and then in accordance
with subsection 4.9(e).
1.2.0.1.3. An amount equal to the product of (A) the Class C
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on
<PAGE> 23
such date, to be applied first in accordance with Section 4.12 and
then in accordance with subsection 4.9(e).
1.2.0.1.4. An amount equal to the product of (A) the Class B
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied first in accordance with Section 4.12 and then in accordance
with subsection 4.9(e).
1.2.0.1.5. An amount equal to the product of (A) the Class A
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied in accordance with subsection 4.9(e).
1.2.0.2. Allocations During the Accumulation Period. During the
Accumulation Period, the Servicer shall, prior to the close of business
on the any Collections are deposited in the Collection Account,
allocate to the Investor Certificateholders, the Certificateholders of
other Series or the Holder of the Exchangeable Seller Certificate the
following amounts as set forth below:
1.2.0.2.1. Allocate to the Investor Certificateholders an amount
equal to the product of (A) the Floating Allocation Percentage on
such date and (B) the aggregate amount of Collections processed in
respect of Finance Charge Receivables on such date, to be applied in
accordance with Section 4.9.
1.2.0.2.2. An amount equal to the product of (A) the Class D
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied first in accordance with Section 4.12 and then in accordance
with subsection 4.9(f).
1.2.0.2.3. An amount equal to the product of (A) the Class C
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied first in accordance with Section 4.12 and then in accordance
with subsection 4.9(f).
1.2.0.2.4. An amount equal to the product of (A) the Class B
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied first in accordance with Section 4.12 and then in accordance
with subsection 4.9(f).
1.2.0.2.5. An amount equal to the product of (A) the Class A
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied in accordance with subsection 4.9(f).
<PAGE> 24
1.2.0.3. Allocations During the Early Amortization Period. During
the Early Amortization Period, the Servicer shall, prior to the close
of business on the day any Collections are deposited in the Collection
Account, allocate to the Investor Certificateholders, the
Certificateholders of other Series or the Holder of the Exchangeable
Seller Certificate the following amounts as set forth below:
1.2.0.3.1. Allocate to the Investor Certificateholders an amount
equal to the product of (A) the Floating Allocation Percentage on
such date and (B) the aggregate amount of such Collections processed
in respect of Finance Charge Receivables on such date, to be applied
in accordance with Section 4.9.
1.2.0.3.2. An amount equal to the product of (A) the Class D
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied first in accordance with Section 4.12 and then in accordance
with subsection 4.9(f).
1.2.0.3.3. An amount equal to the product of (A) the Class C
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied first in accordance with Section 4.12 and then in accordance
with subsection 4.9(f).
1.2.0.3.4. An amount equal to the product of (A) the Class B
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied first in accordance with Section 4.12 and then in accordance
with subsection 4.9(f).
1.2.0.3.5. An amount equal to the product of (A) the Class A
Investor Allocation on such date, (B) the Investor/Purchaser
Percentage on such date and (C) the aggregate amount of Collections
processed in respect of Principal Receivables on such date, to be
applied in accordance with subsection 4.9(f).
SECTION 1.3. DETERMINATION OF MONTHLY INTEREST.
1.3.0.1. The amount of monthly interest distributable in respect
of the Class A Certificates on each Distribution Date shall be an
amount equal to the product of (i) a fraction, the numerator of which
is the actual number of days in the related Interest Period and the
denominator of which is 360, (ii) the Class A Certificate Rate, and
(iii) the outstanding principal balance of the Class A Certificates
determined as of the Record Date preceding such Distribution Date (the
"Class A Monthly Interest"); provided, however, that with respect to
the first Distribution Date, Class A Monthly Interest will be equal to
interest accrued on the initial outstanding principal balance of the
Class A Certificates at the Class A Certificate Rate from the Closing
Date through January 14, 1998; provided further, however,
<PAGE> 25
that in addition to Class A Monthly Interest an amount equal to the
amount of any unpaid Class A Deficiency Amounts, as defined below,
plus an amount equal to the product of (A) a fraction, the numerator
of which is the actual number of days in the related Interest Period
and the denominator of which is 360, (B) the sum of the Class A
Certificate Rate, and 2.0% per annum, and (C) any Class A Deficiency
Amounts from the prior Distribution Date, as defined below (or the
portion thereof which has not theretofore been paid to Class A
Certificateholders) (the "Class A Additional Interest") shall also be
distributable in respect of the Class A Certificates. The "Class A
Deficiency Amount" for any Distribution Date shall be equal to the
excess, if any, of the aggregate amount accrued pursuant to this
subsection 4.6(a) for all prior Interest Periods over the amount
actually paid to Class A Certificateholders in respect of such
amounts.
(b) The amount of monthly interest distributable in respect of the
Class B Certificates on each Distribution Date shall be an amount equal to the
product of (i) a fraction, the numerator of which is the actual number of days
in the related Interest Period and the denominator of which is 360, (ii) the
Class B Certificate Rate, and (iii) the outstanding principal balance of the
Class B Certificates determined as of the Record Date preceding such
Distribution Date (the "Class B Monthly Interest"); provided, however, that with
respect to the first Distribution Date, Class B Monthly Interest will be equal
to interest accrued on the initial outstanding principal balance of the Class B
Certificates at the Class B Certificate Rate from the Closing Date through
January 14, 1998; provided further, however, that in addition to the Class B
Monthly Interest an amount equal to the amount of any unpaid Class B Deficiency
Amounts, as defined below, plus an amount equal to the product of (A) a
fraction, the numerator of which is the actual number of days in the related
Interest Period and the denominator of which is 360, (B) the sum of the Class B
Certificate Rate and 2.0% per annum, and (C) any Class B Deficiency Amount from
the prior Distribution Date, as defined below (or the portion thereof which has
not theretofore been paid to Class B Certificateholders) (the "Class B
Additional Interest") shall also be distributable in respect of the Class B
Certificates. The "Class B Deficiency Amount" for any Distribution Date shall be
equal to the excess, if any, of the aggregate amount accrued pursuant to this
subsection 4.6(b) for all prior Interest Periods over the amount actually paid
to the Class B Certificateholders in respect of such amounts.
(c) The amount of monthly interest distributable in respect of the
Class C Certificates on each Distribution Date shall be an amount equal to the
product of (i) a fraction, the numerator of which is the actual number of days
in the related Interest Period and the denominator of which is 360, (ii) the
Class C Certificate Rate in effect with respect to the related Interest Period,
and (iii) the Class C Investor Interest determined as of the Record Date
preceding such Distribution Date (the "Class C Monthly Interest"); provided,
however, that in addition to the Class C Monthly Interest an amount equal to any
unpaid Class C Deficiency Amounts, as defined below, shall also be distributed
to the Class C Certificateholders. The "Class C Deficiency Amount" for any
Distribution Date shall be equal to the excess, if any, of the aggregate amount
accrued pursuant to this subsection 4.6(c) for all prior Interest Periods over
the amount actually paid to the Class C Certificateholders in respect of such
amounts.
(d) The amount of monthly interest distributable in respect of the
Class D Certificates on each Distribution Date shall be an amount equal to the
product of (i) a fraction,
<PAGE> 26
the numerator of which is the actual number of days in the related Interest
Period and the denominator of which is 360, (ii) the Class D Certificate Rate in
effect with respect to the related Interest Period, and (iii) the Class D
Investor Interest determined as of the Record Date preceding such Distribution
Date (the "Class D Monthly Interest").
SECTION 1.4. DETERMINATION OF MONTHLY PRINCIPAL.
1.4.0.1. The amount of monthly principal distributable with
respect to the Class A Certificates or to be deposited into the
Principal Funding Account on each Distribution Date (the "Class A
Monthly Principal"), beginning with the Distribution Date in the month
following the month in which the Accumulation Period or, if earlier,
the Early Amortization Period, begins, shall be equal to the least of
(i) the Available Principal Collections with respect to such
Distribution Date, (ii) for each Distribution Date with respect to the
Accumulation Period prior to the Class A Expected Final Payment Date,
the Controlled Deposit Amount for such Distribution Date and (iii) the
Class A Adjusted Investor Interest on such Distribution Date prior to
any deposit into the Principal Funding Account on such Distribution
Date (and after taking into account any adjustments to be made on such
Distribution Date pursuant to Section 4.10 and Section 4.12).
1.4.0.2. The amount of monthly principal distributable with
respect to the Class B Certificates on each Distribution Date (the
"Class B Monthly Principal") beginning with the Distribution Date
following the Due Period in which the Class A Investor Interest has
been paid in full, and during the Early Amortization Period, beginning
with the Distribution Date on which the Class A Investor Interest has
been paid in full, shall be an amount equal to the lesser of (i) the
Available Principal Collections with respect to such Distribution Date
(minus the portion of such Available Principal Collections applied to
Class A Monthly Principal on such Distribution Date) and (ii) the Class
B Investor Interest (after taking into account any adjustments to be
made on such Distribution Date pursuant to Sections 4.10 and 4.12) on
such Distribution Date.
1.4.0.3. The amount of monthly principal distributable with
respect to the Class C Certificates on each Distribution Date (the
"Class C Monthly Principal") shall be, beginning with the Distribution
Date on which the Class B Investor Interest has been paid in full, an
amount equal to the lesser of (i) the Available Principal Collections
with respect to such Distribution Date (minus the portion of such
Available Principal Collections applied to Class A Monthly Principal
and Class B Monthly Principal on such Distribution Date) and (ii) the
Class C Investor Interest (after taking into account any adjustments to
be made on such Distribution Date pursuant to Sections 4.10 and 4.12)
on such Distribution Date.
1.4.0.4. The amount of monthly principal distributable with
respect to the Class D Certificates on each Distribution Date (the
"Class D Monthly Principal") shall be, beginning with the Distribution
Date on which the Class C Investor Interest has been paid in full, an
amount equal to the lesser of (i) the Available Principal Collections
with respect to such Distribution Date (minus the portion of such
Available Principal Collections applied to Class A Monthly Principal,
Class B Monthly Principal and Class C Monthly Principal on such
Distribution Date) and (ii) the Class D Investor Interest (after taking
into account any
<PAGE> 27
adjustments to be made on such Distribution Date pursuant to Sections
4.10 and 4.12) on such Distribution Date.
SECTION 1.5. COVERAGE OF CLASS A AND CLASS B REQUIRED AMOUNTS.
1.5.0.1. On or before each Distribution Date, the Servicer shall
determine the amount (the "Class A Required Amount"), if any, by which
the sum of (i) the Class A Monthly Interest for such Distribution Date,
plus (ii) the Class A Deficiency Amount, if any, for such Distribution
Date, plus (iii) the Class A Additional Interest, if any, for such
Distribution Date, plus (iv) the Class A Servicing Fee for the prior
Due Period, plus (v) the Class A Servicing Fee, if any, due but not
paid on any prior Distribution Date, plus (vi) the Class A Investor
Loss Amount, if any, for the prior Due Period, exceeds the Class A
Available Funds for the related Due Period.
1.5.0.2. On or before each Distribution Date, the Servicer shall
also determine the amount (the "Class B Required Amount"), if any, by
which the sum of (i) the Class B Monthly Interest for such Distribution
Date, plus (ii) the Class B Deficiency Amount, if any, for such
Distribution Date, plus (iii) the Class B Additional Interest, if any,
for such Distribution Date, plus (iv) the Class B Servicing Fee for the
prior Due Period, plus (v) the Class B Servicing Fee, if any, due but
not paid on any prior Distribution Date, plus (vi) the Class B Investor
Loss Amount, if any, for the prior Due Period, exceeds the Class B
Available Funds for the related Due Period.
1.5.0.3. In the event that the Class A Required Amount or the
Class B Required Amount for such Distribution Date is greater than
zero, the Servicer shall give written notice to the Trustee of such
positive Class A Required Amount or Class B Required Amount on or
before such Distribution Date. For any Distribution Date other than
Distribution Dates relating to the Early Amortization Period, in the
event that the Class A Required Amount for such Distribution Date is
greater than zero, all or a portion of the Excess Spread and Shared
Excess Finance Charge Collections with respect to such Distribution
Date in an amount equal to the Class A Required Amount, to the extent
available, for such Distribution Date shall be distributed on such
Distribution Date pursuant to subsection 4.11(a). In the event that the
Class A Required Amount for such Distribution Date exceeds the amount
of Excess Spread and Shared Excess Finance Charge Collections with
respect to such Distribution Date, the Collections of Principal
Receivables allocable to the Class D Certificates, the Collections of
Principal Receivables allocable to the Class C Certificates and the
Collections of Principal Receivables allocable to the Class B
Certificates with respect to the prior Due Period shall be applied as
specified in Section 4.12. In the event that the Class B Required
Amount for such Distribution Date exceeds the amount of Excess Spread
and Shared Excess Finance Charge Collections available to fund the
Class B Required Amount pursuant to subsection 4.11(c), the Collections
of Principal Receivables allocable to the Class D Certificates and the
Collections of Principal Receivables allocable to the Class C
Certificates (after application, in each case, to the Class A Required
Amount) shall be applied as specified in Section 4.12; provided,
however, that the sum of any payments pursuant to this paragraph shall
not exceed the sum of the Class A Required Amount and the Class B
Required Amount.
<PAGE> 28
SECTION 1.6. MONTHLY PAYMENTS. On or before each Distribution
Date, the Servicer shall instruct the Trustee in writing (which writing shall be
substantially in the form of Exhibit B hereto) to withdraw and the Trustee,
acting in accordance with such instructions, shall withdraw on such Distribution
Date, to the extent of available funds, the amounts required to be withdrawn
from the Collection Account as follows:
1.6.0.1. An amount equal to the Class A Available Funds for the
related Due Period shall be distributed on each Distribution Date in the
following priority:
1.6.0.1.1. an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Deficiency Amount
for such Distribution Date, plus the amount of any Class A Additional
Interest for such Distribution Date, shall be distributed to the
Class A Certificateholders;
1.6.0.1.2. an amount equal to the Class A Servicing Fee for such
Distribution Date plus the amount of any Class A Servicing Fee due
but not paid to the Servicer on any prior Distribution Date shall be
distributed to the Servicer;
1.6.0.1.3. an amount equal to the Class A Investor Loss Amount, if
any, for the preceding Due Period shall be treated as a portion of
Available Principal Collections for such Distribution Date; and
1.6.0.1.4. the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed as set forth in Section 4.11.
1.6.0.2. An amount equal to the Class B Available Funds for the
related Due Period shall be distributed on each Distribution Date in the
following priority:
1.6.0.2.1. an amount equal to the Class B Monthly Interest for
such Distribution Date, plus the amount of any Class B Deficiency
Amount for such Distribution Date, plus the amount of any Class B
Additional Interest for such Distribution Date, shall be distributed
to the Class B Certificateholders;
1.6.0.2.2. an amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B Servicing Fee due
but not paid to the Servicer on any prior Distribution Date shall be
distributed to the Servicer; and
1.6.0.2.3. an amount equal to the Class B Investor Loss Amount, if
any, for the preceding Due Period shall be treated as a portion of
Available Principal Collections for such Distribution Date; and
1.6.0.2.4. the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed as set forth in Section 4.11.
<PAGE> 29
1.6.0.3. An amount equal to the Class C Available Funds for the
related Due Period shall be distributed on each Distribution Date in the
following priority:
1.6.0.3.1. an amount equal to the Class C Servicing Fee for such
Distribution Date plus the amount of any Class C Servicing Fee due
but not paid to the Servicer on any prior Distribution Date shall be
distributed to the Servicer; and
1.6.0.3.2. the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed as set forth in Section 4.11.
1.6.0.4. An amount equal to the Class D Available Funds for the
related Due Period shall be distributed on each Distribution Date in the
following priority:
1.6.0.4.1. an amount equal to the Class D Servicing Fee for such
Distribution Date plus the amount of any Class D Servicing Fee due
but not paid to the Servicer on any prior Distribution Date shall be
distributed to the Servicer; and
1.6.0.4.2. the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed as set forth in Section 4.11.
1.6.0.5. During the Revolving Period, an amount equal to the
Available Principal Collections for the related Due Period shall be
distributed on each Distribution Date in the following priority:
1.6.0.5.1. an amount equal to any amounts required to be applied
on such date from Available Principal Collections pursuant to the
Class C Purchase Agreement shall be so applied;
1.6.0.5.2. an amount equal to the lesser of (A) Available
Principal Collections for such Distribution Date after giving effect
to the applications specified in subsections 4.9(e)(i) above, (B) the
product of (1) a fraction, the numerator of which is equal to the
Available Principal Collections and the denominator of which is equal
to the sum of the Available Principal Collections available for
sharing as specified in the related Supplement and Receivables
Purchase Agreement for each Series (including this Series 1997-1) in
Group One that are Principal Sharing Series and (2) the Cumulative
Principal Shortfall and (C) Available Principal Collections, shall be
treated as Shared Principal Collections and applied to Series in
Group One that are Principal Sharing Series other than this Series
1997-1; and
1.6.0.5.3. subject to Section 4.21(c), an amount equal to the
excess, if any, of (A) the Available Principal Collections for such
Distribution Date over (B) the applications specified in subsections
4.9(e)(i) and (ii) above shall be paid to the Holder of the
Exchangeable Seller Certificate; provided, however, that in no event
shall the amount payable to the Holder of the Exchangeable Seller
Certificate pursuant to this subsection 4.9(e)(iii) be greater than
the Seller Interest on such Distribution Date.
<PAGE> 30
1.6.0.6. During the Accumulation Period or the Early Amortization
Period, an amount equal to the Available Principal Collections for the
related Due Period shall be distributed on each Distribution Date in the
following priority:
1.6.0.6.1. an amount equal to the Class A Monthly Principal for
such Distribution Date shall be (A) during the Accumulation Period,
deposited into the Principal Funding Account, and (B) during the
Early Amortization Period, distributed to the Class A
Certificateholders;
1.6.0.6.2. after giving effect to the distribution referred to in
clause (i) above, an amount equal to the Class B Monthly Principal
shall be distributed to the Class B Certificateholders;
1.6.0.6.3. after giving effect to the distribution referred to in
clauses (i) and (ii) above, an amount equal to the Class C Monthly
Principal shall be distributed to the Class C Certificateholders in
accordance with the Class C Purchase Agreement;
1.6.0.6.4. after giving effect to the distributions referred to in
clauses (i), (ii) and (iii) above, an amount equal to the Class D
Monthly Principal shall be distributed to the Class D
Certificateholders;
1.6.0.6.5. after giving effect to the distribution referred to in
clause (i), (ii), (iii) and (iv) above, an amount equal to any
amounts required to be applied from Available Principal Collections
on such date pursuant to the Class C Purchase Agreement shall be so
applied;
1.6.0.6.6. an amount equal to the lesser of (A) the product of (1)
a fraction, the numerator of which is equal to the Available
Principal Collections remaining after the application specified in
clauses (i), (ii), (iii), (iv) and (v) above and the denominator of
which is equal to the sum of the Available Principal Collections
available for sharing as specified in the related Supplement or
Receivables Purchase Agreement for each Series (including this Series
1997-1) in Group One which is a Principal Sharing Series and (2) the
Cumulative Principal Shortfall and (B) the Available Principal
Collections, shall be treated as Shared Principal Collections and
applied to Series in Group One which are Principal Sharing Series
other than this Series 1997-1; and
1.6.0.6.7. an amount equal to the excess, if any, of (A) the
Available Principal Collections over (B) the applications specified
in clauses (i) through (vi) above shall be paid to the Holder of the
Exchangeable Seller Certificate; provided, however, that in no event
shall the amount payable to the Holder of the Exchangeable Seller
Certificate pursuant to this subsection 4.9(f)(vii) be greater than
the Seller Interest on such Distribution Date.
1.6.0.7. On the earlier to occur of (i) the Distribution Date in
the month following the commencement of the Early Amortization Period and
(ii) the Class A Expected
<PAGE> 31
Final Payment Date, the Trustee, acting in accordance with instructions
from the Servicer, shall withdraw from the Principal Funding Account and
distribute to the Class A Certificateholders the amount on deposit in the
Principal Funding Account.
SECTION 1.7. INVESTOR CHARGE-OFFS.
1.7.0.1. On or before each Distribution Date, the Servicer shall
calculate the Class A Investor Loss Amount. If on any Distribution Date,
the Class A Investor Loss Amount for the prior Due Period exceeds the sum
of the amounts allocated with respect thereto pursuant to subsection
4.9(a)(iii), subsection 4.11(a) and Section 4.12 with respect to such Due
Period, the Class D Investor Interest (after giving effect to reductions
for any Class D Investor Charge-Offs and any Reallocated Class D
Principal Collections on such Distribution Date) will be reduced by the
amount of such excess. In the event that such reduction would cause the
Class D Investor Interest to be a negative number, the Class D Investor
Interest will be reduced to zero, and the Class C Investor Interest
(after giving effect to reductions for any Class C Investor Charge-Offs
and any Reallocated Class C Principal Collections on such Distribution
Date) will be reduced by the amount by which the Class D Investor
Interest would have been reduced below zero. In the event that such
reduction would cause the Class C Investor Interest to be a negative
number, the Class C Investor Interest will be reduced to zero, and the
Class B Investor Interest (after giving effect to reductions for any
Class B Investor Charge-Offs and any Reallocated Class B Principal
Collections on such Distribution Date) will be reduced by the amount by
which the Class C Investor Interest would have been reduced below zero.
In the event that such reduction would cause the Class B Investor
Interest to be a negative number, the Class B Investor Interest will be
reduced to zero, and the Class A Investor Interest will be reduced by the
amount by which the Class B Investor Interest would have been reduced
below zero, but not by more than the Class A Investor Loss Amount for
such Distribution Date (a "Class A Investor Charge-Off"). If the Class A
Investor Interest has been reduced by the amount of any Class A Investor
Charge-Offs, it will be reimbursed on any Distribution Date (but not by
an amount in excess of the aggregate Class A Investor Charge-Offs) by the
amount of Excess Spread allocated and available for such purpose pursuant
to subsection 4.11(b).
1.7.0.2. On or before each Distribution Date, the Servicer shall
calculate the Class B Investor Loss Amount. If on any Distribution Date,
the Class B Investor Loss Amount for the prior Due Period exceeds the
amounts allocated with respect thereto pursuant to sub- section
4.9(b)(iii), subsection 4.11(c) and Section 4.12 with respect to such Due
Period, the Class D Investor Interest (after giving effect to reductions
for any Class D Investor Charge-Offs and any Reallocated Class D
Principal Collections on such Distribution Date and any adjustments with
respect thereto as described in subsection 4.10(a) above) will be reduced
by the amount of such excess. In the event that such reduction would
cause the Class D Investor Interest to be a negative number, the Class D
Investor Interest will be reduced to zero, and the Class C Investor
Interest (after giving effect to reductions for any Class C Investor
Charge-Offs and any Reallocated Class C Principal Collections on such
Distribution Date and any adjustment with respect thereto as described in
subsection 4.10(a) above) will be reduced by the amount by which the
Class D Investor Interest would have been reduced below zero. In the
event that such reduction would cause the Class C Investor
<PAGE> 32
Interest to be a negative number, the Class C Investor Interest shall be
reduced to zero and the Class B Investor Interest shall be reduced by the
amount by which the Class C Investor Interest would have been reduced
below zero, but not by more than the Class B Investor Loss Amount for
such Distribution Date (a "Class B Investor Charge-Off"). The Class B
Investor Interest will also be reduced by the amount of Reallocated Class
B Principal Collections in excess of the Class C Investor Interest
pursuant to Section 4.12 and the amount of any portion of the Class B
Investor Interest allocated to the Class A Certificates to avoid a
reduction in the Class A Investor Interest pursuant to subsection 4.10(a)
above. The Class B Investor Interest will thereafter be reimbursed (but
not to an amount in excess of the unpaid principal balance of the Class B
Certificates) on any Distribution Date by the amount of Excess Spread
allocated and available for that purpose as described under subsection
4.11(d).
1.7.0.3. On or before each Distribution Date, the Servicer shall
calculate the Class C Investor Loss Amount. If on any Distribution Date,
the Class C Investor Loss Amount for the prior Due Period exceeds the
amount of Excess Spread, Shared Excess Finance Charge Collections and
Reallocated Class D Principal Collections which are allocated and
available to fund such amount pursuant to subsection 4.11(g) and Section
4.12, the Class D Investor Interest (after giving effect to reductions
for any Class D Investor Charge-Offs and any Reallocated Class D
Principal Collections on such Distribution Date and any adjustments
thereto as described in subsection 4.10(a) or (b) above) will be reduced
by the amount of such excess. In the event that such reduction would
cause the Class D Investor Interest to be a negative number, the Class D
Investor Interest will be reduced to zero, and the Class C Investor
Interest (after giving effect to reductions for any Class C Investor
Charge-Offs and any Reallocated Class C Principal Collections on such
Distribution Date and any adjustments with respect thereto as described
in subsection 4.10(a) or 4.10(b) above) will be reduced by the amount by
which the Class D Investor Interest would have been reduced below zero (a
"Class C Investor Charge-Off"). The Class C Investor Interest will also
be reduced by the amount of Reallocated Class C Principal Collections
pursuant to Section 4.12 and the amount of any portion of the Class C
Investor Interest allocated to the Class A Certificates or the Class B
Certificates to avoid a reduction in the Class A Investor Interest,
pursuant to subsection 4.10(a), or the Class B Investor Interest,
pursuant to subsection 4.10(b), respectively. The Class C Investor
Interest will thereafter be reimbursed on any Distribution Date by the
amount of the Excess Spread allocated and available under subsection
4.11(h).
1.7.0.4. On or before each Distribution Date, the Servicer shall
calculate the Class D Investor Loss Amount. If on any Distribution Date,
the Class D Investor Loss Amount for the prior Due Period exceeds the
amount of Excess Spread which is allocated and available to fund such
amount pursuant to subsection 4.11(n), the Class D Investor Interest will
be reduced by the amount of such excess (a "Class D Investor
Charge-Off"). The Class D Investor Interest will also be reduced by the
amount of Class D Reallocated Principal Collections pursuant to Section
4.12 and the amount of any portion of the Class D Investor Interest
allocated to the Class A Certificates, the Class B Certificates or the
Class C Certificates to avoid a reduction in the Class A Investor
Interest, pursuant to subsection 4.10(a), the Class B Investor Interest,
pursuant to subsection 4.10(b), or the Class C Investor Interest,
pursuant to Section 4.10(c), respectively. The Class D Investor Interest
will
<PAGE> 33
thereafter be reimbursed on any Distribution Date by the amount of the
Excess Spread allocated and available for that purpose as described under
subsection 4.11(o).
SECTION 1.8. EXCESS SPREAD; SHARED EXCESS FINANCE CHARGE
COLLECTIONS. On or before each Distribution Date, the Servicer shall instruct
the Trustee in writing (which writing shall be substantially in the form of
Exhibit B hereto) to apply Excess Spread and Shared Excess Finance Charge
Collections allocated to Series 1997-1 with respect to the related Due Period to
make the following distributions on each Distribution Date in the following
priority:
1.8.0.1. an amount equal to the Class A Required Amount, if any,
with respect to such Distribution Date shall be used to fund the Class A
Required Amount and be applied in accordance with, and in the priority
set forth in, subsection 4.9(a);
1.8.0.2. an amount equal to the aggregate amount of Class A
Investor Charge-Offs which have not been previously reimbursed shall be
treated as a portion of Available Principal Collections for such
Distribution Date;
1.8.0.3. an amount equal to the Class B Required Amount, if any,
with respect to such Distribution Date shall be used to fund the Class B
Required Amount and be applied in accordance with, and in the priority
set forth in, subsection 4.9(b);
1.8.0.4. an amount equal to the aggregate amount by which the
Class B Investor Interest has been reduced below the Class B Initial
Investor Interest for reasons other than the payment of principal to the
Class B Certificateholders (but not in excess of the aggregate amount of
such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections for such
Distribution Date;
1.8.0.5. an amount equal to the excess, if any, of the Class C
Servicing Fee for such Distribution Date plus the amount of any Class C
Servicing Fee due but not paid to the Servicer on any prior Distribution
Date over the Class C Available Funds for such Distribution Date shall be
paid to the Servicer;
1.8.0.6. an amount equal to the Class C Monthly Interest plus the
Class C Deficiency Amount for such Distribution Date shall be distributed
to the Class C Certificateholders in accordance with the Class C Purchase
Agreement;
1.8.0.7. an amount equal to the Class C Investor Loss Amount, if
any, for the prior Due Period shall be treated as a portion of Available
Principal Collections for such Distribution Date;
1.8.0.8. an amount equal to the aggregate amount by which the
Class C Investor Interest has been reduced below the Class C Initial
Investor Interest for reasons other than the payment of principal to the
Class C Certificateholders (but not in excess of the aggregate amount of
such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections for such
Distribution Date;
<PAGE> 34
1.8.0.9. [Reserved];
1.8.0.10. an amount up to the excess, if any, of the Series Excess
Funding Reserve Account Required Amount over the amount on deposit in the
Series Excess Funding Reserve Account shall be deposited into the Series
Excess Funding Reserve Account;
1.8.0.11. an amount equal to the aggregate of any other amounts
then due to the Class C Certificateholders or required to be applied
pursuant to the Class C Purchase Agreement out of Excess Spread and
Shared Excess Finance Charge Collections allocated to Series 1997-1
pursuant to the Class C Purchase Agreement shall be distributed for
application in accordance with the Class C Purchase Agreement;
1.8.0.12. an amount equal to the excess, if any, of the Class D
Servicing Fee over the Class D Available Funds for such Distribution Date
shall be paid to the Servicer;
1.8.0.13. an amount equal to the Class D Monthly Interest plus the
amount of any past due Class D Monthly Interest for such Distribution
Date shall be distributed to the Class D Certificateholders;
1.8.0.14. an amount equal to the Class D Investor Loss Amount, if
any, for the prior Due Period shall be treated as a portion of Available
Principal Collections for such Distribution Date;
1.8.0.15. an amount equal to the aggregate amount by which the
Class D Investor Interest has been reduced below the Class D Initial
Investor Interest for reasons other than the payment of principal to the
Class D Certificateholders (but not in excess of the aggregate amount of
such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections for such
Distribution Date; and
1.8.0.16. the balance, if any, will constitute a portion of Shared
Excess Finance Charge Collections for such Distribution Date and will be
available for allocation to other Series in Group One and, to the extent
not required to be applied as Shared Excess Finance Charge Collections
with respect to any Series in Group One, shall be distributed to the
Holder of the Exchangeable Seller Certificate.
SECTION 1.9. REALLOCATED PRINCIPAL COLLECTIONS. On or before each
Distribution Date, the Servicer shall instruct the Trustee in writing (which
writing shall be substantially in the form of Exhibit B hereto) to apply
Reallocated Principal Collections (applying all Reallocated Class C Principal
Collections in accordance with subsections 4.12(a) and (b) prior to applying any
Reallocated Class B Principal Collections in accordance with subsection 4.12(a)
for any amounts still owing after the application of Reallocated Class C
Principal Collections and applying all Reallocated Class D Principal Collections
in accordance with subsections 4.12(a), (b) and (c) prior to applying any
Reallocated Class C Principal Collections in accordance with subsections 4.12(a)
or (b) for any amounts still owing after the application of Reallocated Class D
Principal Collections)
<PAGE> 35
with respect to such Distribution Date, to make the following distributions on
each Distribution Date in the following priority:
1.9.0.1. an amount equal to the excess, if any, of (i) the Class A
Required Amount, if any, with respect to such Distribution Date over (ii)
the amount of Excess Spread and Shared Excess Finance Charge Collections
allocated to Series 1997-1 with respect to the related Due Period, shall
be applied in accordance with, and in the priority set forth in,
subsections 4.9(a)(i), (ii) and (iii);
1.9.0.2. an amount equal to the excess, if any, of (i) the Class B
Required Amount, if any, with respect to such Distribution Date over (ii)
the amount of Excess Spread and Shared Excess Finance Charge Collections
allocated and available to the Class B Certificates pursuant to
subsection 4.11(c) on such Distribution Date shall be applied in
accordance with, and in the priority set forth in subsections 4.9(b)(i),
(ii) and (iii); and
1.9.0.3. an amount equal to the excess, if any, of (i) the Class C
Required Amount, if any, with respect to such Distribution Date over (ii)
the amount of Excess Spread and Shared Excess Finance Charge Collections
allocated and available to the Class C Investor Interest pursuant to
subsections 4.11(e), 4.11(f) and 4.11(g) on such Distribution Date shall
be applied first pursuant to subsection 4.9(c)(i), and then pursuant to
and in the priority set forth in subsections 4.11(f) and 4.11(g).
On each Distribution Date, the Class D Investor Interest shall be
reduced by the amount of Reallocated Class D Principal Collections for such
Distribution Date, the Class C Investor Interest shall be reduced by the amount
of Reallocated Class C Principal Collections for such Distribution Date, and the
Class B Investor Interest shall be reduced by the amount of Reallocated Class B
Principal Collections for such Distribution Date.
SECTION 1.10. SELLER'S OR SERVICER'S FAILURE TO MAKE A DEPOSIT OR
PAYMENT. If the Servicer or the Seller fails to make, or give instructions to
make, any payment or deposit required to be made or given by the Servicer or
Seller, respectively, at the time specified in the Agreement (including
applicable grace periods), the Trustee shall make such payment or deposit from
the applicable account without instruction from the Servicer or Seller. The
Trustee shall be required to make any such payment, deposit or withdrawal
hereunder only to the extent that the Trustee has sufficient information to
allow it to determine the amount thereof; provided, however, that the Trustee
shall in all cases be deemed to have sufficient information to determine the
amount of interest payable to the Investor Certificateholders on each
Distribution Date. The Servicer shall, upon request of the Trustee, promptly
provide the Trustee with all information necessary to allow the Trustee to make
such payment, deposit or withdrawal. Such funds or the proceeds of such
withdrawal shall be applied by the Trustee in the manner in which such payment
or deposit should have been made by the Seller or the Servicer, as the case may
be.
<PAGE> 36
SECTION 1.11. SHARED EXCESS FINANCE CHARGE COLLECTIONS.
1.11.0.1. The balance of any Available Funds on deposit in the
Collection Account after giving effect to subsections 4.11(a) through (o)
will constitute a portion of Shared Excess Finance Charge Collections and
will be available for allocation to other Series in Group One or to the
Holder of the Exchangeable Seller Certificate as described in Section
4.3(g).
(b) Series 1997-1 shall be included in Group One. Subject to
subsection 4.3(g) of the Agreement, Shared Excess Finance Charge Collections
with respect to the Series in Group One for any Distribution Date will be
allocated to Series 1997-1 in an amount equal to the product of (x) the
aggregate amount of Shared Excess Finance Charge Collections with respect to all
Series in Group One for such Distribution Date and (y) a fraction, the numerator
of which is the Finance Charge Shortfall for Series 1997-1 for such Distribution
Date and the denominator of which is the aggregate amount of Finance Charge
Shortfalls for all Series in Group One for such Distribution Date. The "Finance
Charge Shortfall" for Series 1997-1 for any Distribution Date will be equal to
the excess, if any, of (a) the full amount required to be paid, without
duplication, pursuant to subsections 4.11(a) through (o) on such Distribution
Date over (b) the Available Funds for such Distribution Date.
SECTION 1.12. SHARED PRINCIPAL COLLECTIONS. Subject to subsection
4.3(f) of the Agreement, Shared Principal Collections for any Distribution Date
will be allocated to Series 1997-1 in an amount equal to the product of (x) the
aggregate amount of Shared Principal Collections with respect to all Series in
Group One that are Principal Sharing Series for such Distribution Date and (y) a
fraction, the numerator of which is the Principal Shortfall for Series 1997-1
for such Distribution Date and the denominator of which is the Cumulative
Principal Shortfall for such Distribution Date.
<PAGE> 37
SECTION 1.13. [Reserved].
SECTION 1.14. THE PRINCIPAL FUNDING ACCOUNT.
1.14.0.1. The Trustee, for the benefit of the Class A
Certificateholders, shall establish or shall cause to be established and
maintained with a Qualified Depository Institution in the name of the
Trustee, on behalf of the Trust, a segregated trust account (the
"Principal Funding Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Class A
Certificateholders. The Principal Funding Account shall be under the sole
dominion and control of the Trustee for the benefit of the Investor
Certificateholders. If, at any time, the institution holding the
Principal Funding Account ceases to be a Qualified Depository
Institution, the Seller shall notify the Trustee and the Trustee upon
being notified shall, promptly (but, in any event within twenty Business
Days) establish a new Principal Funding Account meeting the conditions
specified above with a Qualified Depository Institution, transfer any
cash or any investments to such new Principal Funding Account and from
the date such new Principal Funding Account is established, it shall be
the "Principal Funding Account." Neither the Seller nor the Servicer, nor
any Person claiming by, through or under the Seller or Servicer, shall
have any right, title or interest in, or any right to withdraw any amount
from, the Principal Funding Account except to the extent provided in this
Supplement and the Agreement. Pursuant to the authority granted to the
Servicer in subsection 3.1(b), the Servicer shall have the revocable
power to instruct the Trustee to make withdrawals and payments from the
Principal Funding Account for the purposes of carrying out the Servicer's
duties under this Supplement.
1.14.0.2. Funds on deposit in the Principal Funding Account shall
be invested by the Trustee at the direction of the Servicer in Permitted
Investments that will mature so that such funds will be available prior
to the Distribution Date following such investment. Any request by the
Servicer to invest funds on deposit in the Principal Funding Account
shall be in writing and shall certify that the requested investment is a
Permitted Investment that matures at or prior to the time required
hereby. The Trustee shall maintain possession of the negotiable
instruments or securities, if any, evidencing such Permitted Investments.
No Permitted Investment shall be disposed of prior to its maturity.
1.14.0.3. On each Distribution Date with respect to the
Accumulation Period, the Trustee, acting at the Servicer's direction
given on the related Determination Date, shall transfer from the
Principal Funding Account to the Collection Account the Principal Funding
Investment Proceeds on such date, for application as Class A Available
Funds for such Distribution Date. Principal Funding Investment Proceeds
shall not be considered to be principal amounts on deposit in the
Principal Funding Account for purposes of this Supplement.
1.14.0.4. On or prior to the Distribution Date commencing 13
months prior to the Class A Expected Final Payment Date, the Seller shall
designate the number of months in the Accumulation Period (the
"Accumulation Period Length") and, correspondingly, the
<PAGE> 38
first day of the Due Period on which the Accumulation Period will
commence. The Seller may change such designation at any time prior to the
commencement of the Accumulation Period. The Seller shall provide the
Servicer, the Trustee, the Rating Agencies and the Class C
Certificateholders with notice of each such designation. Such
designations shall be effective hereunder for all purposes if the Seller
shall (i) have provided the Servicer, the Trustee and the Enhancement
Provider evidence that the Rating Agency Condition shall have been
satisfied, and (ii) have delivered to the Trustee a certificate of an
authorized officer to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of the Seller, such
designation will not cause an Early Amortization Event or an event that,
after the giving of notice or the lapse of time, would cause an Early
Amortization Event to occur with respect to Series 1997-1.
SECTION 1.15. DETERMINATION OF LIBOR.
1.15.0.1. On each LIBOR Determination Date, the Trustee will
determine LIBOR on the basis of the rate for deposits in United States
dollars for a one-month period which appears on Telerate page 3750 as of
11:00 a.m., London time, on such date. If such rate does not appear on
Telerate Page 3750, the rate for that LIBOR Determination Date will be
determined on the basis of the rates at which deposits in United States
dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on that day to prime banks in the London interbank market
for a one-month period. The Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, the rate for that LIBOR
Determination Date will be the arithmetic mean of the quotations. If
fewer than two quotations are provided as requested, the rate for that
LIBOR Determination Date will be the arithmetic mean of the rates quoted
by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in
United States dollars to leading European banks for a one-month period.
1.15.0.2. The Class A Certificate Rate and the Class B Certificate
Rate applicable to the then current and the immediately preceding
Interest Periods may be obtained by any Investor Certificateholder by
telephoning the Trustee at its Corporate Trust Office at (215) 985-7321.
1.15.0.3. On each LIBOR Determination Date prior to 12:00 noon New
York City time, the Trustee shall send to the Servicer by facsimile,
notification of LIBOR for the following Interest Period.
<PAGE> 39
SECTION 1.16. INTEREST RATE CAPS.
1.16.0.1. The Servicer hereby represents that Fashion Service Corp
has obtained and assigned to the Trust (i) the Class A Cap in favor of
the Trust for the benefit of the Class A Certificateholders and (ii) the
Class B Cap in favor of the Trust for the benefit of the Class B
Certificateholders, the Class C Certificateholders and the Class D
Certificateholders. The Class A Cap shall entitle the Trust to receive
monthly the Class A Cap Payment, if any, as set forth in the Class A Cap.
The Class B Cap shall entitle the Trust to receive monthly the Class B
Cap Payment, if any, as set forth in the Class B Cap.
1.16.0.2. Upon the effectiveness of any Replacement Interest Rate
Cap, the Interest Rate Cap being replaced shall terminate and the
applicable Interest Rate Cap Provider shall be released of all future
obligations thereunder, provided that such Interest Rate Cap shall not be
released from any obligations which have previously accrued thereunder
and shall continue to be obligated to perform such obligations.
1.16.0.3. The Trustee hereby appoints the Servicer to act as
calculation agent under the Interest Rate Caps and the Servicer accepts
such appointment.
SECTION 1.17. PAIRED SERIES. Any other Series in Group One may be
designated (but only with the consent of the Class C Certificateholders) as a
Paired Series for Series 1997-1. Such Paired Series either shall be prefunded
with an initial deposit to a prefunding account in an amount up to the initial
principal balance of such Paired Series and primarily from the sale of such
Paired Series or shall have a variable principal amount. Any such prefunding
account shall be held for the benefit of such Paired Series and not for the
benefit of the Series 1997-1 Certificateholders. As funds in the Collection
Account are allocated for distribution as Available Principal Collections during
the Early Amortization Period or Accumulation Period, either (i) in the case of
a prefunded Paired Series, an equal amount of funds in any prefunding account
for such Paired Series shall be released and distributed pursuant to the terms
of such Paired Series or (ii) in the case of a Paired Series having a variable
principal amount, an interest in such variable Paired Series in an equal or
lesser amount may be sold by the Trust and the proceeds thereof will be
distributed pursuant to the terms of such Paired Series, and, in either case,
the Series Investor Interest of such Paired Series will increase by up to a
corresponding amount. Upon payment in full of the Series 1997-1 Certificates and
payment of all amounts due to the Class C Certificateholders, assuming that
there have been no unreimbursed Loss Amounts with respect to any related Paired
Series, the aggregate amount of such Paired Series shall have been increased by
an amount up to an aggregate amount equal to the Series Investor Interest paid
to the Series 1997-1 Certificateholders and the Class C Certificateholders (or
such other amount as the holders of such Paired Series shall agree).
<PAGE> 40
SECTION 1.18. SERIES EXCESS FUNDING ACCOUNT.
1.18.0.1. The Servicer, for the benefit of the Investor
Certificateholders, shall establish and maintain in the name of the
Trustee, on behalf of the Trust, a segregated trust account with a
Qualified Depository Institution bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Investor
Certificateholders (the "Series Excess Funding Account"). The Trustee
shall possess all right, title and interest in all funds on deposit from
time to time in the Series Excess Funding Account and in all proceeds
thereof. The Series Excess Funding Account shall be under the sole
dominion and control of the Trustee for the benefit of the Investor
Certificateholders. 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
Series Excess Funding Account for any amount owed to it by the Trustee,
the Trust, or any Investor Certificateholder. If, at any time, the
institution holding the Series Excess Funding Account ceases to be a
Qualified Depository Institution, the Trustee upon notice by the Servicer
(or the Servicer on its behalf) shall promptly (but in any event within
20 Business Days) establish a new Series Excess Funding Account with a
Qualified Depository Institution meeting the conditions specified above,
transfer any cash or any investments to such new Series Excess Funding
Account and from the date such new Series Excess Funding Account is
established, it shall be the "Series Excess Funding Account."
1.18.0.2. On the Closing Date, the Servicer shall deposit into the
Series Excess Funding Account an amount equal to the Series Excess
Funding Account Required Amount. Funds on deposit in the Series Excess
Funding Account shall at the direction of the Servicer be invested by the
Trustee in Permitted Investments selected by the Servicer. All such
Permitted Investments shall be held by the Trustee for the benefit of the
Investor Certificateholders. The Trustee shall maintain for the benefit
of the Investor Certificateholders possession of the negotiable
instruments or securities, if any, evidencing such Permitted Investments.
Funds on deposit in the Series Excess Funding Account on any date (after
giving effect to any withdrawals from the Series Excess Funding Account
on such date) will be invested in Permitted Investments that will mature
so that funds will be available at the close of business on the
Distribution Date following such date. On each Determination Date, the
Servicer shall instruct the Trustee to withdraw on the related
Distribution Date from the Series Excess Funding Account and deposit in
the Collection Account all Series Excess Funding Account Investment
Proceeds on funds on deposit in the Series Excess Funding Account, for
application as Available Funds on such Distribution Date.
1.18.0.3. On any day on which, pursuant to subsection 4.3(c), the
Servicer would otherwise pay amounts from Collections in respect of
Principal Receivables to the Holder of the Exchangeable Seller
Certificate, the Servicer shall be entitled to deposit all or part of
such amount into the Series Excess Funding Account, it being understood
that such amount may be attributable to Series 1997-1 or any other
Series. On the Business Day immediately prior to each Determination Date,
Servicer shall reconcile the amounts that were so deposited during the
related Due Period (the "Deposit Amount"), together with other amounts
paid to the Holder of the Exchangeable Seller Certificate or the
Originator pursuant
<PAGE> 41
to subsection 4.3(c) during such Due Period in respect of Collections on
Principal Receivables (the "Remitted Amount"), taking into account
amounts required to be allocated on or prior to the related Distribution
Date to each Series (including without limitation any deposit to the
Excess Funding Amount required under subsection 4.3(f) and any
reallocation of Principal Collections required under Section 4.12 of the
Supplement for Series 1997-1 or the comparable section of any other
Supplement). If such reconciliation showed that the sum of the Deposit
Amount plus the Remitted Amount exceeded the aggregate amount permitted
to be paid to the Holder of the Seller Exchangeable Certificate in
respect thereof, the Servicer shall withdraw the amount by which such
excess is greater than the Remitted Amount from the Series Excess Funding
Account on such Business Day and deposit such amount into the Collection
Account for allocation to the appropriate Series.
1.18.0.4. On any Determination Date with respect to the
Accumulation Period or Early Amortization Period, the Servicer shall
determine the aggregate amount of Principal Shortfalls, if any, with
respect to Series 1997-1 (after giving effect to the allocation and
payment provisions herein), and the Servicer shall instruct the Trustee
to withdraw such amount from the Series Excess Funding Account on the
succeeding Distribution Date (up to the amount on deposit therein) and
allocate such amount as Available Principal Collections for such
Distribution Date.
1.18.0.5. On any Determination Date on which a Series Excess
Funding Account Surplus exists (after taking into account all withdrawals
and deposits to be made on the following Distribution Date), the Trustee
shall withdraw such from the Series Excess Funding Account the amount of
such Series Excess Funding Account Surplus on the related Distribution
Date and pay such amount to the Holder of the Exchangeable Seller
Certificate; provided, however, in no event shall the amount payable to
the Holder of the Exchangeable Seller Certificate pursuant to this
subsection 4.21(e) be greater than the Sellers Interest on such
Distribution Date.
1.18.0.6. On each Determination Date on which funds are on deposit
in the Series Excess Funding Account, the Servicer will determine whether
(after giving effect to the withdrawals and deposits provided for in
clauses (c), (d) and (e) above on or prior to the following Distribution
Date) the amount on deposit in the Series Excess Funding Account is equal
to or greater than 20% of the Initial Investor Interest. If such
determination shows the amount on deposit to be equal to or greater than
20% of the Initial Investor Interest on that Determination Date and the
five preceding Determination Dates, on the next Distribution Date the
Trustee shall withdraw funds from the Series Excess Funding Account, in
an amount equal to 20% of the Initial Investor Interest, and distribute
such amount as a payment of principal to the Holders of the Investor
Certificates pro rata based on the Class A Investor Interest, the Class B
Investor Interest, the Class C Investor Interest and the Class D Investor
Interest, respectively.
<PAGE> 42
SECTION 1.19. SERIES EXCESS FUNDING RESERVE ACCOUNT.
1.19.0.1. The Servicer shall establish and maintain with a
Qualified Depository Institution, in the name of the Trustee, on behalf
of the Trust, for the benefit of the Investor Certificateholders, a
segregated trust account with the corporate trust department of such
Qualified Depository Institution (the "Series Excess Funding Reserve
Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Investor
Certificateholders. The Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Series Excess
Funding Reserve Account and in all proceeds thereof. The Series Excess
Funding Reserve Account shall be under the sole dominion and control of
the Trustee for the benefit of the Series 1997-1 Certificateholders. If
at any time the institution holding the Series Excess Funding Reserve
Account ceases to be a Qualified Depository Institution the Seller shall
notify the Trustee and the Trustee upon being notified (or the Servicer
on its behalf) shall promptly (but in any event within 20 Business Days)
establish a new Series Excess Funding Reserve Account meeting the
conditions specified above with a Qualified Depository Institution, and
shall transfer any cash or any investments to such new Series Excess
Funding Reserve Account. The Trustee, at the direction of the Servicer,
shall (i) make withdrawals from the Series Excess Funding Reserve Account
from time to time in an amount up to the Available Series Excess Funding
Reserve Account Amount at such time, for the purposes set forth in this
Supplement, and (ii) on each Distribution Date make a deposit into the
Series Excess Funding Reserve Account in the amount specified in, and
otherwise in accordance with, subsection 4.11(j).
1.19.0.2. Funds on deposit in the Series Excess Funding Reserve
Account shall be invested at the direction of the Servicer by the Trustee
in Permitted Investments. Funds on deposit in the Series Excess Funding
Reserve Account on any Distribution Date, after giving effect to any
withdrawals from the Series Excess Funding Reserve Account on such
Distribution Date, shall be invested in such investments that will mature
so that such funds will be available for withdrawal on or prior to the
following Distribution Date. The Trustee shall maintain for the benefit
of the Investor Certificateholders possession of the negotiable
instruments or securities, if any, evidencing such Permitted Investments.
No Permitted Investment shall be disposed of prior to its maturity. On
each Distribution Date, all interest and earnings (net of losses and
investment expenses) accrued since the preceding Distribution Date on
funds on deposit in the Series Excess Funding Reserve Account shall be
retained in the Series Excess Funding Reserve Account (to the extent that
the Available Series Excess Funding Reserve Account Amount is less than
the Series Excess Funding Reserve Account Required Amount) and the
balance, if any, shall be deposited in the Collection Account for
application as Available Funds on such Distribution Date. For purposes of
determining the availability of funds or the balance in the Series Excess
Funding Reserve Account for any reason under this Supplement, except as
otherwise provided in the preceding sentence, investment earnings on such
funds shall be deemed not to be available or on deposit.
1.19.0.3. On the Determination Date preceding each Distribution
Date, the Servicer shall calculate the "Series Excess Funding Reserve
Draw Amount" which shall be
<PAGE> 43
equal to the Series Excess Funding Account Investment Shortfall with
respect to such Distribution Date.
1.19.0.4. In the event that for any Distribution Date the Series
Excess Funding Reserve Draw Amount is greater than zero, the Series
Excess Funding Reserve Draw Amount, up to the amount on deposit in the
Series Excess Funding Reserve Account, shall be withdrawn from the Series
Excess Funding Reserve Account on such Distribution Date by the Trustee
(acting in accordance with the instructions of the Servicer), and
deposited into the Collection Account for application as provided herein
on such Distribution Date.
1.19.0.5. In the event that the Series Excess Funding Reserve
Account Surplus on any Distribution Date, after giving effect to all
deposits to and withdrawals from the Series Excess Funding Reserve
Account with respect to such Distribution Date, is greater than zero, the
Trustee, acting in accordance with the instructions of the Servicer,
shall withdraw from the Series Excess Funding Reserve Account and deposit
such Series Excess Funding Reserve Account Surplus in the Collection
Account, for application as Class A Available Funds for such Distribution
Date.
1.19.0.6. Upon the earliest to occur of (i) the termination of the
Trust pursuant to Article XII of the Agreement and (ii) the day on which
the Adjusted Investor Interest is paid in full, the Trustee, acting in
accordance with the instructions of the Servicer, after the prior payment
of all amounts owing to the Investor Certificateholders that are payable
from the Series Excess Funding Reserve Account as provided herein, shall
withdraw from the Series Excess Funding Reserve Account amounts, if any,
on deposit in the Series Excess Funding Reserve Account and pay such
amount to the Holder of the Exchangeable Seller Certificate and the
Series Excess Funding Reserve Account shall be deemed to have terminated
for purposes of this Supplement.
SECTION 1.19.1. ARTICLE V OF THE AGREEMENT. Article V of the
Agreement shall read in its entirety as follows and shall be applicable only to
the Investor Certificates:
ARTICLE 2.
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS; NOTIFICATION OF CAP PAYMENTS
SECTION 2.1. DISTRIBUTIONS.
2.1.0.1. On each Distribution Date, the Trustee shall distribute
(in accordance with the certificate delivered by the Servicer to the
Trustee pursuant to subsection 3.4(b)) to each Class A Certificateholder
of record on the immediately preceding Record Date (other than as
provided in Section 12.3 respecting a final distribution) such
Certificateholder's pro rata share (based on the aggregate Undivided
Trust Interests represented by Class A Certificates held by such
Certificateholder) of amounts on deposit in the Collection Account
<PAGE> 44
and the Principal Funding Account as are payable to the Class A
Certificateholders pursuant to Section 4.9 by check mailed to each Class
A Certificateholder (at such Certificateholder's address as it appears in
the Certificate Register), except that with respect to Class A
Certificates registered in the name of the nominee of a Clearing Agency,
such distribution shall be made in immediately available funds.
2.1.0.2. On each Distribution Date, the Trustee shall distribute
(in accordance with the certificate delivered by the Servicer to the
Trustee pursuant to subsection 3.4(b)) to each Class B Certificateholder
of record on the immediately preceding Record Date (other than as
provided in Section 12.3 respecting a final distribution) such
Certificateholder's pro rata share (based on the aggregate Undivided
Trust Interests represented by Class B Certificates held by such
Certificateholder) of amounts on deposit in the Collection Account as are
payable to the Class B Certificateholders pursuant to Section 4.9 by
check mailed to each Class B Certificateholder (at such
Certificateholder's address as it appears in the Certificate Register),
except that with respect to Class B Certificates registered in the name
of the nominee of a Clearing Agency, such distribution shall be made in
immediately available funds.
2.1.0.3. On each Distribution Date, the Trustee shall distribute
(in accordance with the Class C Purchase Agreement) to each Class C
Certificateholder of record on the immediately preceding Record Date
(other than as provided in Section 12.3 respecting a final distribution)
such Certificateholder's pro rata share (based on the aggregate Undivided
Trust Interests represented by Class C Certificates held by such
Certificateholder) of amounts on deposit in the Collection Account as are
payable to the Class C Certificateholders pursuant to the Class C
Purchase Agreement by check mailed to each Class C Certificateholder (at
such Certificateholder's address as it appears in the Certificate
Register) or by wire transfer of immediately available funds to such
account designated in writing by such Certificateholder to the Trustee
not later than the Determination Date preceding such Distribution Date.
2.1.0.4. On each Distribution Date, the Trustee shall distribute
(in accordance with the certificate delivered by the Servicer to the
Trustee pursuant to subsection 3.4(b)) to each Class D Certificateholder
of record on the immediately preceding Record Date (other than as
provided in Section 12.3 respecting a final distribution) such
Certificateholder's pro rata share (based on the aggregate Undivided
Trust Interests represented by Class D Certificates held by such
Certificateholder) of amounts on deposit in the Collection Account as are
payable to the Class D Certificateholders pursuant to Section 4.11 by
check mailed to each Class D Certificateholder (at such
Certificateholder's address as it appears in the Certificate Register) or
by wire transfer of immediately available funds to such account
designated in writing by such Certificateholder to the Trustee not later
than the Determination Date preceding such Distribution Date.
2.1.0.5. The Trustee shall promptly notify the Seller and the
Servicer if it does not receive a payment under any Interest Rate Cap on
the date on which such payment is due pursuant to the terms of such
Interest Rate Cap.
<PAGE> 45
SECTION 2.2. MONTHLY CERTIFICATEHOLDERS' STATEMENT.
2.2.0.1. On or before each Distribution Date, the Paying Agent
shall forward to each Series 1997-1 Certificateholder, each Rating Agency
and the Class C Certificateholders a statement substantially in the form
of Exhibit C to this Supplement prepared by the Servicer setting forth,
among other things, the following information (which, in the case of
subclauses (i) and (ii) below, shall be stated on the basis of an
original principal amount of $1,000 per Series 1997-1 Certificate and, in
the case of subclauses (viii) and (ix) shall be stated on an aggregate
basis and on the basis of an original principal amount of $1,000 per
Series 1997-1 Certificate):
2.2.0.1.1. the amount of the current distribution allocable to
Class A Monthly Principal, Class B Monthly Principal, Class C Monthly
Principal and Class D Monthly Principal, respectively;
2.2.0.1.2. the amount of the current distribution allocable to
Class A Monthly Interest, Class A Deficiency Amounts, Class A
Additional Interest, Class B Monthly Interest, Class B Deficiency
Amounts, Class B Additional Interest, Class C Monthly Interest, Class
C Deficiency Amounts, Class D Monthly Interest and any accrued and
unpaid Class D Monthly Interest, respectively;
2.2.0.1.3. the amount of Collections of Principal Receivables
processed during the related Due Period and allocated in respect of
the Class A Certificates, the Class B Certificates, the Class C
Certificates and the Class D Certificates, respectively;
2.2.0.1.4. the amount of Collections of Finance Charge Receivables
processed during the related Due Period and allocated in respect of
the Class A Certificates, the Class B Certificates, the Class C
Certificates and the Class D Certificates, respectively;
2.2.0.1.5. the aggregate amount of Principal Receivables, the
Series Investor Interest, the Series Adjusted Investor Interest, the
Adjusted Investor Interest, the Class A Investor Interest, the Class
A Adjusted Investor Interest, the Class B Investor Interest, the
Class C Investor Interest, the Class D Investor Interest, the
Floating Allocation Percentage, the Class A Floating Allocation, the
Class B Floating Allocation, the Class C Floating Allocation, the
Class D Floating Allocation and the Principal Allocation Percentage,
the Class A Fixed Allocation, the Class B Fixed Allocation, the Class
C Fixed Allocation and the Class D Fixed Allocation with respect to
the Principal Receivables in the Trust as of the end of the day on
the Record Date;
2.2.0.1.6. the aggregate outstanding balance of Accounts which were
30 to 59, 60 to 89, 90 to 119 and 120 or more days delinquent as of
the end of the day on the Record Date;
<PAGE> 46
2.2.0.1.7. the Investor Loss Amount, the Class A Investor Loss
Amount, the Class B Investor Loss Amount, the Class C Investor Loss
Amount and the Class D Investor Loss Amount for the related Due
Period;
2.2.0.1.8. the aggregate amount of Class A Investor Charge-Offs,
Class B Investor Charge-Offs, Class C Investor Charge-Offs and Class
D Investor Charge-Offs for the related Due Period;
2.2.0.1.9. the aggregate amount of Class A Investor Charge-Offs,
Class B Investor Charge-Offs, Class C Investor Charge-Offs and Class
D Investor Charge-Offs reimbursed on the Distribution Date
immediately preceding such Distribution Date;
2.2.0.1.10. the amount of the Class A Servicing Fee, the Class B
Servicing Fee, the Class C Servicing Fee and the Class D Servicing
Fee for the related Due Period;
2.2.0.1.11. the Portfolio Yield for the preceding Due Period;
2.2.0.1.12. the amount of Reallocated Class D Principal
Collections, Reallocated Class C Principal Collections and
Reallocated Class B Principal Collections with respect to such
Distribution Date;
2.2.0.1.13. the Class A Investor Interest, the Class B Investor
Interest, the Class C Investor Interest and the Class D Investor
Interest as of the close of business on such Distribution Date;
2.2.0.1.14. LIBOR on such Distribution Date;
2.2.0.1.15. the Principal Funding Account Balance on the related
Distribution Date;
2.2.0.1.16. the Principal Shortfall;
2.2.0.1.17. the Principal Funding Investment Proceeds transferred
to the Collection Account on the related Distribution Date;
2.2.0.1.18. the Principal Funding Investment Shortfall on the
related Distribution Date;
2.2.0.1.19. the amount of Class A Available Funds, Class B
Available Funds, Class C Available Funds and Class D Available Funds
on deposit in the Collection Account on the related Distribution
Date;
2.2.0.1.20. the Series Excess Funding Account Balance on the
related Distribution Date;
<PAGE> 47
2.2.0.1.21. the Series Excess Funding Account Investment Proceeds
transferred to the Collection Account on the related Distribution
Date;
2.2.0.1.22. the Series Excess Funding Account Investment Shortfall
on the related Distribution Date;
2.2.0.1.23. the amount on deposit in the Series Excess Funding
Reserve Account and the Series Excess Funding Reserve Account
Required Amount on the related Distribution Date; and
2.2.0.1.24. such other items as are set forth in Exhibit C to this
Supplement.
2.2.0.2. Annual Certificateholders' Tax Statement. On or before
January 31 of each calendar year, beginning with calendar year 1998,
the Trustee shall distribute to each Person who at any time during the
preceding calendar year was a Series 1997-1 Certificateholder, a
statement prepared by the Servicer containing the information required
to be contained in the regular monthly report to Series 1997-1
Certificateholders, as set forth in subclauses (i) and (ii) above,
aggregated for such calendar year or the applicable portion thereof
during which such Person was a Series 1997-1 Certificateholder,
together with such other customary information (consistent with the
treatment of the Class A Certificates and the Class B Certificates as
debt) as the Servicer deems necessary or desirable to enable the Series
1997-1 Certificateholders to prepare their tax returns. The Servicer
will provide such information to the Trustee as soon as possible after
January 1 of each calendar year. Such obligations of the Trustee shall
be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.
SECTION 2.2.1. SERIES 1997-1 EARLY AMORTIZATION EVENTS. If any one
of the following events shall occur with respect to the Investor Certificates:
2.2.1.1. failure on the part of the Seller or the Originator (i)
to make any payment or deposit required by the terms of (A) the
Agreement, (B) this Supplement or (C) the Purchase Agreement, on or
before the date occurring five days after the date such payment or
deposit is required to be made herein or (ii) duly to observe or
perform in any material respect any covenants or agreements of the
Seller set forth in the Agreement, this Supplement (including, without
limitation, the covenant of the Seller contained in Section 11 of this
Supplement) or the Purchase Agreement, which failure has a material
adverse effect on the Series 1997-1 Certificateholders (which
determination shall be made without reference to the amount of the
Class C Investor Interest or the Class D Investor Interest for such
period) and which continues unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to
be remedied, shall have been given to the Seller by the Trustee, or to
the Seller and the Trustee by the Controlling Certificateholders, and
continues to affect materially and adversely the interests of the
Series 1997-1 Certificateholders for such period (which determination
shall be made without reference to the amount of the Class C Investor
Interest or the Class D Investor Interest for such period);
<PAGE> 48
2.2.1.2. any representation or warranty made by the Seller or the
Originator in the Agreement, this Supplement or the Purchase Agreement,
or any information contained in a computer file or microfiche or
written list required to be delivered by the Seller pursuant to Section
2.1 or 2.6 or by the Originator pursuant to Section 1.1 or 2.4(e) of
the Purchase Agreement, (i) shall prove to have been incorrect in any
material respect when made or when delivered, which continues to be
incorrect in any material respect for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Seller by the Trustee, or to the
Seller and the Trustee by the Controlling Certificateholders, and (ii)
as a result of which the interests of the Series 1997-1
Certificateholders are materially and adversely affected (which
determination shall be made without reference to the amount of the
Class C Investor Interest or the Class D Investor Interest) and
continue to be materially and adversely affected for such period;
provided, however, that a Series 1997-1 Early Amortization Event
pursuant to this subsection 9(b) shall not be deemed to have occurred
hereunder if the Seller has accepted reassignment of the related
Receivable, or all of such Receivables, if applicable, during such
period in accordance with the provisions of the Agreement;
2.2.1.3. the average Portfolio Yield for any three consecutive Due
Periods is reduced to a rate which is less than the average Base Rate
for such period;
2.2.1.4. the Seller shall fail to convey Receivables arising under
Additional Accounts to the Trust, as required by subsection 2.6(a);
2.2.1.5. any Servicer Default shall occur which would have a
material adverse effect on the Class A or Class B Certificateholders;
2.2.1.6. the Class A Investor Interest shall not be paid in full
on the Class A Expected Final Payment Date;
2.2.1.7. the failure on the part of an Interest Rate Cap Provider
to make a Class A Cap Payment or a Class B Cap Payment, as applicable,
in full within five calendar days of the date on which such Class A Cap
Payment or Class B Cap Payment was due;
2.2.1.8. the failure on the part of the Servicer (and the
applicable Interest Rate Cap Provider pursuant to its obligations under
the related Interest Rate Cap), within 30 calendar days of the
withdrawal or reduction below A-1 in the unsecured, unguaranteed,
short-term debt rating of an Interest Rate Cap Provider by Standard &
Poor's or a withdrawal of or reduction below P-1 in the unsecured,
unguaranteed, short-term debt rating of an Interest Rate Cap Provider
by Moody's to (i) obtain a Replacement Interest Rate Cap with a
replacement cap provider having terms substantially the same as the
replaced Interest Rate Cap or (ii) enter into any other arrangement
satisfactory to the applicable Rating Agency, such that the rating of
Class A Certificates or Class B Certificates by the applicable Rating
Agency will not be withdrawn or reduced; or
2.2.1.9. on any Determination Date, the sum of (x) the amount, if
any, distributed to the Investor Certificateholders pursuant to
subsection 4.21(f) plus (y) the
<PAGE> 49
amount on deposit in the Series Excess Funding Account (after giving
effect to all withdrawals and deposits to be made on such date) plus
(2) the amount on deposit in the Excess Funding Account, to the extent,
but only to the extent, such amount is held therein to maintain the
Minimum Seller Interest with respect to Series 1997-1 exceeds 33-1/3%
of the Initial Investor Interest.
then, in the case of any event described in subparagraph (a), (b), (e), (g) or
(h) after the applicable grace period set forth in such subparagraphs, either
the Trustee or the Controlling Certificateholders by notice then given in
writing to the Seller and the Servicer (and to the Trustee if given by the
Certificateholders) may declare that an early amortization event (a "Series
1997-1 Early Amortization Event") has occurred as of the date of such notice,
and in the case of any event described in subparagraphs (c), (d), (f) or (i), a
Series 1997-1 Early Amortization Event shall occur without any notice or other
action on the part of the Trustee or the Investor Certificateholders immediately
upon the occurrence of such event.
SECTION 2.2.2. SERIES 1997-1 TERMINATION. The right of the
Investor Certificateholders to receive payments from the Trust will
terminate on the first Business Day following the Series 1997-1
Termination Date.
SECTION 2.2.3. LIMITATIONS ON ADDITION OF ACCOUNTS. The Seller
agrees that it shall not designate any Additional Accounts pursuant to
subsection 2.6(b) unless on or prior to the related Addition Date, the
Seller shall have provided the Class C Certificateholders with an
Officer's Certificate certifying that such designation of such
Additional Accounts will not, as of the related Addition Date, (x) be
reasonably expected by the Seller to result in a reduction or
withdrawal by either Rating Agency of its rating for the Series 1997-1
Certificates, (y) cause a Series 1997-1 Early Amortization Event, or
(z) be reasonably expected by the Seller to materially adversely affect
in any manner the timing or amount of payments to the Class C
Certificateholders.
SECTION 2.2.4. RATIFICATION OF AGREEMENT. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and
the Agreement as so supplemented by this Supplement shall be read,
taken, and construed as one and the same instrument.
SECTION 2.2.5. COUNTERPARTS. This Supplement may be executed in
any number of counterparts, each of which so executed shall be deemed
to be an original, but all of such counterparts shall together
constitute but one and the same instrument.
SECTION 2.2.6. GOVERNING LAW. THIS SUPPLEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK 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.
<PAGE> 50
SECTION 2.2.7. NO PETITION.
2.2.7.1. The Seller, the Servicer and the Trustee, by entering
into this Supplement and each Investor Certificateholder, by accepting
an Investor Certificate, hereby covenant and agree that they will not
at any time institute against the Trust, or join in any institution
against the Trust of, any bankruptcy proceedings under any United
States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Investor Certificates, the Agreement or
this Supplement.
2.2.7.2. The Servicer and the Trustee, by entering into this
Supplement and each Investor Certificateholder, by accepting a Series
Investor Certificate, hereby covenant and agree that they will not at
any time institute against the Seller, or join in any institution
against the Seller of, any bankruptcy proceedings under any United
States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Investor Certificates, the Agreement or
this Supplement.
SECTION 2.2.8. TAX REPRESENTATION AND COVENANT. Notwithstanding
Section 6.3 of the Pooling and Servicing Agreement, Seller shall not
execute, and the Transfer Agent and Registrar shall not register the
transfer of, (i) any Class C Certificate, if after giving effect to the
execution or transfer of such Class Certificate, there would be more
than 10 Private Holders of Class C Certificates or (ii) any Class D
Certificate, if after giving effect to the execution or transfer of
such Class D Certificate, there would be more than 3 Private Holders of
Class D Certificates. For purposes of this Supplement and the Pooling
Agreement, each Holder of a Class C Certificate or a Class D
Certificate shall be a "Private Holder."
SECTION 2.2.9. CERTAIN TAX RELATED AMENDMENTS. In addition to any
other provisions relating to amendments in either the Agreement or this
Supplement, this Supplement may be amended by the Seller without the
consent of the Servicer, Trustee or any Investor Certificateholder if
the Seller provides the Trustee with (i) an Opinion of Counsel to the
effect that such amendment or modification would reduce the risk the
Trust would be treated as taxable as a publicly traded partnership
pursuant to Code section 7704 and (ii) a certificate that such
amendment or modification would not materially and adversely affect any
Investor Certificateholder; provided, however, that no such amendment
shall be deemed effective without the Trustee's consent, if the
Trustee's rights, duties and obligations hereunder are thereby
modified.
<PAGE> 51
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Series 1997-1 Supplement to be duly executed by their respective
officers as of the day and year first above written.
CHARMING SHOPPES RECEIVABLES
CORP.,
Seller
By:
Name:
Title:
SPIRIT OF AMERICA NATIONAL BANK,
Servicer
By:
Name:
Title:
FIRST UNION NATIONAL BANK,
Trustee
By:
Name:
Title:
<PAGE> 52
EXHIBIT A-1
FORM OF CLASS A CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "1933 ACT"). NEITHER THIS CERTIFICATE NOR ANY PORTION HEREOF MAY BE
OFFERED OR SOLD 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 CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW):
THIS CERTIFICATE 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
OR THAT IS DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986
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
CERTIFICATE, THE HOLDER HEREOF SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED
THAT IT IS NOT A BENEFIT PLAN. BY ACQUIRING ANY INTEREST IN THIS CERTIFICATE,
THE APPLICABLE CERTIFICATE OWNER OR OWNERS SHALL BE DEEMED TO HAVE REPRESENTED
AND WARRANTED THAT IT OR THEY ARE NOT BENEFIT PLANS.
Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Charming
Shoppes Receivables Corp. or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
in such other name as requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
<PAGE> 53
No. __ $__________
CUSIP No. 1161137 AB0
CHARMING SHOPPES MASTER TRUST
FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 1997-1, CLASS A
Each $1,000 minimum denomination represents
a 1/83,500th Undivided Interest in the
Charming Shoppes Master Trust Series 1997-1
Evidencing an Undivided Interest in a trust, the corpus of which consists of a
portfolio of credit card receivables acquired by Charming Shoppes Receivables
Corp. and other assets and interests constituting the Trust under the Pooling
and Servicing Agreement described below.
(Not an interest in or obligation of,
Charming Shoppes Receivables Corp., Spirit of America National Bank,
Charming Shoppes, Inc. or any Affiliate thereof.)
This certifies that CEDE & CO. (the "Class A Certificateholder")
is the registered owner of the Undivided Interest in a trust (the "Trust"), the
corpus of which consists of a portfolio of receivables (the "Receivables") now
existing or hereafter created under credit card accounts (the "Accounts") of
Spirit of America National Bank, a national banking association organized under
the laws of the United States, all monies due or to become due in payment of the
Receivables (including all Finance Charge Receivables), the benefits of the
subordination of the Class B Certificates, the Class C Certificates and Class D
Certificates and the other assets and interests constituting the Trust pursuant
to a Second Amended and Restated Pooling and Servicing Agreement dated as of
November 25, 1997 (the "Pooling and Servicing Agreement"), by and among Charming
Shoppes Receivables Corp., as Seller, Spirit of America National Bank, as
Servicer, and First Union National Bank, as Trustee (the "Trustee").
The Series 1997-1 Certificates are issued in four classes, the
Class A Certificates (of which this certificate is one), the Class B
Certificates, which are subordinated to the Class A Certificates in certain
rights of payment as described herein and in the Pooling and Servicing
Agreement, the Class C Certificates, which are subordinated to the Class A
Certificates and the Class B Certificates in certain rights of payment as
described herein and in the Pooling and Servicing Agreement, and the Class D
Certificates, which are subordinated to the Class A Certificates, the Class B
Certificates and the Class C Certificates in certain rights of payments as
described herein and in the Pooling and Servicing Agreement.
The Seller has structured the Pooling and Servicing Agreement and
the Class A Certificates with the intention that the Class A Certificates will
qualify under applicable tax law as indebtedness, and the Seller, the Holder of
the Exchangeable Seller Certificate, the Servicer and each Class A
Certificateholder (or Certificate Owner with respect to a Class A Certificate (a
"Class A Certificate Owner")) by acceptance of its Class A Certificate (or in
the case of a Class A Certificate Owner, by virtue of such Class A Certificate
Owner's acquisition of a beneficial interest therein), agrees to treat and to
take no action inconsistent with the treatment of
<PAGE> 54
the Class A Certificates (or beneficial interest therein) for purposes of
federal, state, local and foreign income or franchise taxes and any other tax
imposed on or measured by income, as indebtedness. Each Class A
Certificateholder agrees that it will cause any Class A Certificate Owner
acquiring an interest in a Class A Certificate through it to comply with the
Pooling and Servicing Agreement as to treatment as indebtedness for certain tax
purposes.
To the extent not defined herein, capitalized terms used herein
have the meanings assigned in the Pooling and Servicing Agreement. This Class A
Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the Class A Certificateholder
by virtue of the acceptance hereof assents and by which the Class A
Certificateholder is bound.
The Receivables consist of Principal Receivables which arise from
the purchase of goods and services and of Finance Charge Receivables which arise
generally from periodic rate finance charges and other fees and charges, as more
fully specified in the Pooling and Servicing Agreement. The Trust corpus
consists of the Receivables now existing in the Accounts or hereafter created in
the Accounts, all monies due or to become due with respect thereto (including
all Finance Charge Receivables), all proceeds of the Receivables and Recoveries
and Insurance Proceeds relating thereto, and such funds as from time to time are
deposited in the Collection Account. This Certificate is one of a series of
Certificates entitled "Charming Shoppes Master Trust, Floating Rate Asset Backed
Certificates, Series 1997-1, Class A" (the "Class A Certificates"), each of
which represents an Undivided Interest in the Trust, including the right to
receive the Collections and other amounts at the times and in the amounts
specified in the Pooling and Servicing Agreement to be deposited in the
Collection Account or paid to the Class A Certificate-holders. The aggregate
interest represented by the Class A Certificates at any time in the Principal
Receivables in the Trust shall not exceed an amount equal to the Class A
Investor Interest at such time. "Class A Investor Interest" shall mean, on any
date of determination, an amount equal to (a) the Class A Initial Series
Investor Interest, minus (b) the aggregate amount of principal payments made to
Class A Certificateholders prior to such date and minus (c) the excess, if any,
of the aggregate amount of Class A Investor Charge-Offs over Class A Investor
Charge-Offs reimbursed prior to such date of determination; provided, however,
that the Class A Investor Interest may not be reduced below zero. The Class A
Initial Series Investor Interest is $56,000,000. In addition to the Series
1997-1 Certificates, an Exchangeable Seller Certificate will be reissued to the
Seller pursuant to the Pooling and Servicing Agreement, which will represent an
undivided interest in the Trust. The Exchangeable Seller Certificate will
represent the interest in the Principal Receivables not represented by all of
the Series of Investor Certificates issued by the Trust or Series of Receivables
Purchase Interests sold by the Trust. The Exchangeable Seller Certificate may be
exchanged by the Seller pursuant to the Pooling and Servicing Agreement for a
newly issued Series of Investor Certificates and a reissued Exchangeable Seller
Certificate upon the conditions set forth in the Pooling and Servicing
Agreement.
This Class A Certificate does not represent an obligation of, or
an interest in, the Seller or the Servicer, and neither the Class A Certificates
nor the Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental
<PAGE> 55
agency. This Class A Certificate is limited in right of payment to certain
collections respecting the Receivables, all as more specifically set forth in
the Pooling and Servicing Agreement.
The transfer of this Class A Certificate shall be registered in
the Certificate Register upon surrender of this Class A Certificate for
registration of transfer at any office or agency maintained by the Transfer
Agent and Registrar accompanied by a written instrument of transfer in a form
satisfactory to the Trustee and the Transfer Agent and Registrar duly executed
by the Class A Certificateholder or such Class A Certificateholder's
attorney-in-fact duly authorized in writing, and thereupon one or more new Class
A Certificates of authorized denominations and for the same aggregate Undivided
Interests will be issued to the designated transferee or transferees.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class A Certificates are exchangeable for
new Class A Certificates evidencing like aggregate Undivided Interests, as
requested by the Class A Certificateholder surrendering such Class A
Certificates. No service charge may be imposed for any such exchange but the
Servicer or Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent
and Registrar, and any agent of any of them, may treat the person in whose name
this Class A Certificate is registered as the owner hereof for all purposes, and
neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them or of any such agent shall be affected
by notice to the contrary except in certain circumstances described in the
Pooling and Servicing Agreement.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Class A Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.
<PAGE> 56
IN WITNESS WHEREOF, Charming Shoppes Receivables Corp. has caused this
Class A Certificate to be duly executed under its official seal.
CHARMING SHOPPES RECEIVABLES CORP.
By:
Authorized Officer
[Seal]
Attested to:
By:
Assistant Secretary
Date: _____ __, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
FIRST UNION NATIONAL BANK,
Trustee
By:
Authorized Officer
<PAGE> 57
EXHIBIT A-2
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "1933 ACT"). NEITHER THIS CERTIFICATE NOR ANY PORTION HEREOF MAY BE
OFFERED OR SOLD 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 CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW).
THIS CERTIFICATE 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
OR THAT IS DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986
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
CERTIFICATE, THE HOLDER HEREOF SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED
THAT IT IS NOT A BENEFIT PLAN. BY ACQUIRING ANY INTEREST IN THIS CERTIFICATE,
THE APPLICABLE CERTIFICATE OWNER OR OWNERS SHALL BE DEEMED TO HAVE REPRESENTED
AND WARRANTED THAT IT OR THEY ARE NOT BENEFIT PLANS.
Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Charming
Shoppes Receivables Corp. or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of Cede & Co. or
in such other name as requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
<PAGE> 58
No. __ $__________
CUSIP No.161137 AC8
CHARMING SHOPPES MASTER TRUST
FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 1997-1, CLASS B
Each $1,000 minimum denomination represents
a 1/83,500th Undivided Interest in the
Charming Shoppes Master Trust Series 1997-1
Evidencing an Undivided Interest in a trust, the corpus of which consists of a
portfolio of credit card receivables acquired by Charming Shoppes Receivables
Corp. and other assets and interests constituting the Trust under the Pooling
and Servicing Agreement described below.
(Not an interest in or obligation of,
Charming Shoppes Receivables Corp., Spirit of America National Bank,
Charming Shoppes, Inc. or any Affiliate thereof.)
This certifies that CEDE & CO. (the "Class B Certificateholder")
is the registered owner of the Undivided Interest in a trust (the "Trust"), the
corpus of which consists of a portfolio of receivables (the "Receivables") now
existing or hereafter created under credit card accounts (the "Accounts") of
Spirit of America National Bank, a national banking association organized under
the laws of the United States, all monies due or to become due in payment of the
Receivables (including all Finance Charge Receivables), the benefits of the
subordination of the Class C Certificates and the Class D Certificate and the
other assets and interests constituting the Trust pursuant to a Second Amended
and Restated Pooling and Servicing Agreement dated as of November 25, 1997 (the
"Pooling and Servicing Agreement"), by and among Charming Shoppes Receivables
Corp., as Seller, Spirit of America National Bank, as Servicer, and First Union
National Bank, as Trustee (the "Trustee").
The Series 1997-1 Certificates are issued in four classes, the
Class A Certificates, the Class B Certificates (of which this certificate is
one), which are subordinated to the Class A Certificates in certain rights of
payment as described herein and in the Pooling and Servicing Agreement, the
Class C Certificates, which are subordinated to the Class A Certificates and the
Class B Certificates in certain rights of payment as described herein and in the
Pooling and Servicing Agreement, and the Class D Certificates, which are
subordinated to the Class A Certificates, the Class B Certificates and the Class
C Certificates in certain rights of payments as described herein and in the
Pooling and Servicing Agreement.
The Seller has structured the Pooling and Servicing Agreement and
the Class B Certificates with the intention that the Class B Certificates will
qualify under applicable tax law as indebtedness, and the Seller, the Holder of
the Exchangeable Seller Certificate, the Servicer and each Class B
Certificateholder (or Certificate Owner with respect to a Class B Certificate (a
"Class B Certificate Owner")) by acceptance of its Class B Certificate (or in
the case of a Class B Certificate Owner, by virtue of such Class B Certificate
Owner's acquisition of a beneficial interest therein), agrees to treat and to
take no action inconsistent with the treatment of the
<PAGE> 59
Class B Certificates (or beneficial interest therein) for purposes of federal,
state, local and foreign income or franchise taxes and any other tax imposed on
or measured by income, as indebtedness. Each Class B Certificateholder agrees
that it will cause any Class B Certificate Owner acquiring an interest in a
Class B Certificate through it to comply with the Pooling and Servicing
Agreement as to treatment as indebtedness for certain tax purposes.
To the extent not defined herein, capitalized terms used herein
have the meanings assigned in the Pooling and Servicing Agreement. This Class B
Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the Class B Certificateholder
by virtue of the acceptance hereof assents and by which the Class B
Certificateholder is bound.
The Receivables consist of Principal Receivables which arise from
the purchase of goods and services and of Finance Charge Receivables which arise
generally from periodic rate finance charges and other fees and charges, as more
fully specified in the Pooling and Servicing Agreement. The Trust corpus
consists of the Receivables now existing in the Accounts or hereafter created in
the Accounts, all monies due or to become due with respect thereto (including
all Finance Charge Receivables), all proceeds of the Receivables and Recoveries
and Insurance Proceeds relating thereto, and such funds as from time to time are
deposited in the Collection Account. This Certificate is one of a series of
Certificates entitled "Charming Shoppes Master Trust, Floating Rate Asset Backed
Certificates, Series 1997-1, Class B" (the "Class B Certificates"), each of
which represents an Undivided Interest in the Trust, including the right to
receive the Collections and other amounts at the times and in the amounts
specified in the Pooling and Servicing Agreement to be deposited in the
Collection Account or paid to the Class B Certificate-holders. The aggregate
interest represented by the Class B Certificates at any time in the Principal
Receivables in the Trust shall not exceed an amount equal to the Class B
Investor Interest at such time. "Class B Investor Interest" shall mean, on any
date of determination, an amount equal to (a) the Class B Initial Investor
Interest, minus (b) the aggregate amount of principal payments made to Class B
Certificateholders prior to such date, minus (c) the aggregate amount of Class B
Investor Charge-Offs for all prior Distribution Dates minus (d) the aggregate
amount of Reallocated Class B Principal Collections allocated on all prior
Distribution Dates for which the Class C Investor Interest or the Class D
Investor Interest has not been reduced, minus (e) an amount equal to the amount
by which the Class B Investor Interest has been reduced on all prior
Distribution Dates pursuant to Section 4.10 of the Pooling and Servicing
Agreement and plus (f) the aggregate amount of Excess Spread and Shared Excess
Finance Charge Collections allocated and available on all prior Distribution
Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c), (d) and (e); provided, however, that the Class B Investor Interest
may not be reduced below zero. The Class B Initial Series Investor Interest is
$8,500,000. In addition to the Series 1997-1 Certificates, an Exchangeable
Seller Certificate will be reissued to the Seller pursuant to the Pooling and
Servicing Agreement, which will represent an undivided interest in the Trust.
The Exchangeable Seller Certificate will represent the interest in the Principal
Receivables not represented by all of the Series of Investor Certificates issued
by the Trust or Series of Receivables Purchase Interests sold by the Trust. The
Exchangeable Seller Certificate may be exchanged by the Seller pursuant to the
Pooling and Servicing Agreement for a newly issued
<PAGE> 60
Series of Investor Certificates and a reissued Exchangeable Seller Certificate
upon the conditions set forth in the Pooling and Servicing Agreement.
This Class B Certificate does not represent an obligation of, or
an interest in, the Seller or the Servicer, and neither the Class B Certificates
nor the Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. This Class B Certificate
is limited in right of payment to certain collections respecting the
Receivables, all as more specifically set forth in the Pooling and Servicing
Agreement.
The transfer of this Class B Certificate shall be registered in
the Certificate Register upon surrender of this Class B Certificate for
registration of transfer at any office or agency maintained by the Transfer
Agent and Registrar accompanied by a written instrument of transfer in a form
satisfactory to the Trustee and the Transfer Agent and Registrar duly executed
by the Class B Certificateholder or such Class B Certificateholder's
attorney-in-fact duly authorized in writing, and thereupon one or more new Class
B Certificates of authorized denominations and for the same aggregate Undivided
Interests will be issued to the designated transferee or transferees.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class B Certificates are exchangeable for
new Class B Certificates evidencing like aggregate Undivided Interests, as
requested by the Class B Certificateholder surrendering such Class B
Certificates. No service charge may be imposed for any such exchange but the
Servicer or Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent
and Registrar, and any agent of any of them, may treat the person in whose name
this Class B Certificate is registered as the owner hereof for all purposes, and
neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them or of any such agent shall be affected
by notice to the contrary except in certain circumstances described in the
Pooling and Servicing Agreement.
<PAGE> 61
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Class B Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.
IN WITNESS WHEREOF, Charming Shoppes Receivables Corp. has caused
this Class B Certificate to be duly executed under its official seal.
CHARMING SHOPPES RECEIVABLES CORP.
By:
Authorized Officer
[Seal]
Attested to:
By:
Assistant Secretary
Date: _______ __, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
FIRST UNION NATIONAL BANK,
Trustee
By:
Authorized Officer
<PAGE> 62
EXHIBIT A-3
FORM OF CLASS C CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "1933 ACT"). NEITHER THIS CERTIFICATE NOR ANY PORTION HEREOF MAY BE
OFFERED OR SOLD 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 CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW).
THIS CERTIFICATE 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
OR THAT IS DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986
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
CERTIFICATE, THE HOLDER HEREOF SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED
THAT IT IS NOT A BENEFIT PLAN. BY ACQUIRING ANY INTEREST IN THIS CERTIFICATE,
THE APPLICABLE CERTIFICATE OWNER OR OWNERS SHALL BE DEEMED TO HAVE REPRESENTED
AND WARRANTED THAT IT OR THEY ARE NOT BENEFIT PLANS.
NEITHER THIS CERTIFICATE, NOR ANY PORTION OF THIS CERTIFICATE, MAY BE
TRANSFERRED (X) IF AFTER GIVING EFFECT TO THE EXECUTION OR TRANSFER OF SUCH
CERTIFICATE, THERE WOULD BE MORE THAN (I) 10 PRIVATE HOLDERS OF CLASS C
CERTIFICATES OR (II) 100 PRIVATE HOLDERS, OR (Y) ON OR THROUGH (I) AN
"ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND ANY PROPOSED, TEMPORARY OR FINAL
TREASURY REGULATION THEREUNDER, INCLUDING, WITHOUT LIMITATION, AN
OVER-THE-COUNTER-MARKET OR AN INTERDEALER QUOTATIONS SYSTEM THAT REGULARLY
DISSEMINATES FIRM BUY OR SELL QUOTATIONS OR (II) "SECONDARY MARKET" OR
"SUBSTANTIAL EQUIVALENT THEREOF" WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND ANY PROPOSED, TEMPORARY OR FINAL
TREASURY REGULATIONS THEREUNDER, INCLUDING A MARKET WHEREIN INTERESTS IN THE
TRUST ARE REGULARLY QUOTED BY ANY PERSON MAKING A MARKET IN SUCH
<PAGE> 63
INTERESTS AND A MARKET WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID OR OFFER
QUOTES WITH RESPECT TO INTERESTS IN THE TRUST AND STANDS READY TO EFFECT BUY OR
SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS. ANY
ATTEMPTED TRANSFER, ASSIGNMENT, CONVEYANCE, PARTICIPATION OR SUBDIVISION IN
CONTRAVENTION OF THE PRECEDING RESTRICTIONS, AS REASONABLY DETERMINED BY THE
SELLER, SHALL BE VOID AB INITIO AND THE PURPORTED TRANSFEROR, SELLER OR
SUBDIVIDER OF SUCH CERTIFICATE SHALL BE CONSTRUED TO BE TREATED AS THE
CERTIFICATEHOLDER OF ANY SUCH CERTIFICATE FOR ALL PURPOSES OF THE POOLING AND
SERVICING AGREEMENT (DEFINED BELOW).
CUSIP No.161137 AD6
CHARMING SHOPPES MASTER TRUST
FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 1997-1, CLASS C
Each $1,000 minimum denomination represents
a 1/83,500th Undivided Interest in the
Charming Shoppes Master Trust Series 1997-1
Evidencing an Undivided Interest in a trust, the corpus of which consists of a
portfolio of credit card receivables acquired by Charming Shoppes Receivables
Corp. and other assets and interests constituting the Trust under the Pooling
and Servicing Agreement described below.
(Not an interest in or obligation of,
Charming Shoppes Receivables Corp., Spirit of America National Bank, Charming
Shoppes, Inc. or any Affiliate thereof.)
This certifies that ______________ (the "Class C
Certificateholder") is the registered owner of the Undivided Interest in a trust
(the "Trust"), the corpus of which consists of a portfolio of receivables (the
"Receivables") now existing or hereafter created under credit card accounts (the
"Accounts") of Spirit of America National Bank, a national banking association
organized under the laws of the United States, all monies due or to become due
in payment of the Receivables (including all Finance Charge Receivables), the
subordination of the Class D Certificate and the other assets and interests
constituting the Trust pursuant to a Second Amended and Restated Pooling and
Servicing Agreement dated as of November 25, 1997 (the "Pooling and Servicing
Agreement"), by and among Charming Shoppes Receivables Corp., as Seller, Spirit
of America National Bank, as Servicer, and First Union National Bank, as Trustee
(the "Trustee").
The Series 1997-1 Certificates are issued in four classes, the
Class A Certificates, the Class B Certificates, which are subordinated to the
Class A Certificates in certain rights of payment as described herein and in the
Pooling and Servicing Agreement, the Class C Certificates (of which this
certificate is one), which are subordinated to the Class A Certificates and the
Class B Certificates in certain rights of payment as described herein and in the
Pooling
<PAGE> 64
and Servicing Agreement, and the Class D Certificates, which are subordinated to
the Class A Certificates, the Class B Certificates and the Class C Certificates
in certain rights of payments as described herein and in the Pooling and
Servicing Agreement.
To the extent not defined herein, capitalized terms used herein
have the meanings assigned in the Pooling and Servicing Agreement. This Class C
Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the Class C Certificateholder
by virtue of the acceptance hereof assents and by which the Class C
Certificateholder is bound.
The Receivables consist of Principal Receivables which arise from
the purchase of goods and services and of Finance Charge Receivables which arise
generally from periodic rate finance charges and other fees and charges, as more
fully specified in the Pooling and Servicing Agreement. The Trust corpus
consists of the Receivables now existing in the Accounts or hereafter created in
the Accounts, all monies due or to become due with respect thereto (including
all Finance Charge Receivables), all proceeds of the Receivables and Recoveries
and Insurance Proceeds relating thereto, and such funds as from time to time are
deposited in the Collection Account. This Certificate is one of a series of
Certificates entitled "Charming Shoppes Master Trust, Floating Rate Asset Backed
Certificates, Series 1997-1, Class C" (the "Class C Certificates"), each of
which represents an Undivided Interest in the Trust, including the right to
receive the Collections and other amounts at the times and in the amounts
specified in the Pooling and Servicing Agreement to be deposited in the
Collection Account or paid to the Class C Certificateholders. The aggregate
interest represented by the Class C Certificates at any time in the Principal
Receivables in the Trust shall not exceed an amount equal to the Class C
Investor Interest at such time. "Class C Investor Interest" shall mean, on any
date of determination, an amount equal to (a) the Class C Initial Investor
Interest, minus (b) the aggregate amount of principal payments made to Class C
Certificateholders prior to such date, minus (c) the aggregate amount of Class C
Investor Charge-Offs for all prior Distribution Dates minus (d) the aggregate
amount of Reallocated Class C Principal Collections allocated on all prior
Distribution Dates for which the Class D Investor Interest has not been reduced,
minus (e) an amount equal to the amount by which the Class C Investor Interest
has been reduced on all prior Distribution Dates pursuant to Section 4.10 of the
Pooling and Servicing Agreement and plus (f) the aggregate amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available on
all prior Distribution Dates for the purpose of reimbursing amounts deducted
pursuant to the foregoing clauses (c), (d) and (e); provided, however, that the
Class C Investor Interest may not be reduced below zero. The Class C Initial
Series Investor Interest is $9,500,000. In addition to the Series 1997-1
Certificates, an Exchangeable Seller Certificate will be reissued to the Seller
pursuant to the Pooling and Servicing Agreement, which will represent an
undivided interest in the Trust. The Exchangeable Seller Certificate will
represent the interest in the Principal Receivables not represented by all of
the Series of Investor Certificates issued by the Trust or Series of Receivables
Purchase Interests sold by the Trust. The Exchangeable Seller Certificate may be
exchanged by the Seller pursuant to the Pooling and Servicing Agreement for a
newly issued Series of Investor Certificates and a reissued Exchangeable Seller
Certificate upon the conditions set forth in the Pooling and Servicing
Agreement.
<PAGE> 65
This Class C Certificate does not represent an obligation of, or
an interest in, the Seller or the Servicer, and neither the Class C Certificates
nor the Accounts or Receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. This Class C Certificate
is limited in right of payment to certain collections respecting the
Receivables, all as more specifically set forth in the Pooling and Servicing
Agreement.
The transfer of this Class C Certificate shall be registered in
the Certificate Register upon surrender of this Class C Certificate for
registration of transfer at any office or agency maintained by the Transfer
Agent and Registrar accompanied by a written instrument of transfer in a form
satisfactory to the Trustee and the Transfer Agent and Registrar duly executed
by the Class C Certificateholder or such Class C Certificateholder's
attorney-in-fact duly authorized in writing, and thereupon one or more new Class
C Certificates of authorized denominations and for the same aggregate Undivided
Interests will be issued to the designated transferee or transferees.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth and in the Class C Purchase Agreement,
Class C Certificates are exchangeable for new Class C Certificates evidencing
like aggregate Undivided Interests, as requested by the Class C
Certificateholder surrendering such Class C Certificates. No service charge may
be imposed for any such exchange but the Servicer or Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent
and Registrar, and any agent of any of them, may treat the person in whose name
this Class C Certificate is registered as the owner hereof for all purposes, and
neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them or of any such agent shall be affected
by notice to the contrary except in certain circumstances described in the
Pooling and Servicing Agreement.
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Class C Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.
IN WITNESS WHEREOF, Charming Shoppes Receivables Corp. has caused
this Class C Certificate to be duly executed under its official seal.
CHARMING SHOPPES RECEIVABLES CORP.
By:
Authorized Officer
[Seal]
<PAGE> 66
Attested to:
By:
Assistant Secretary
Date: _______ __, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Class C Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
FIRST UNION NATIONAL BANK,
Trustee
By:
Authorized Officer
<PAGE> 67
EXHIBIT A-4
FORM OF CLASS D CERTIFICATE
No. __ $__________
CHARMING SHOPPES MASTER TRUST
FLOATING RATE ASSET BACKED CERTIFICATE, SERIES 1997-1,
CLASS D CERTIFICATE
THIS CERTIFICATE WAS ISSUED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY BE SOLD ONLY PURSUANT TO A REGISTRATION
STATEMENT EFFECTIVE UNDER THE ACT OR AN EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE ACT. IN ADDITION, THE TRANSFER
OF THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. A COPY
OF THE POOLING AND SERVICING AGREEMENT WILL BE FURNISHED TO
THE HOLDER OF THIS CERTIFICATE BY THE TRUSTEE UPON WRITTEN
REQUEST.
THIS CERTIFICATE 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 OR THAT IS DESCRIBED IN SECTION 4975(E)(1) OF THE
INTERNAL REVENUE CODE OF 1986 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 CERTIFICATE, THE HOLDER
HEREOF SHALL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT
A BENEFIT PLAN. BY ACQUIRING ANY INTEREST IN THIS CERTIFICATE, THE
APPLICABLE CERTIFICATE OWNER OR OWNERS SHALL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED THAT IT OR THEY ARE NOT BENEFIT PLANS.
NEITHER THIS CERTIFICATE, NOR ANY PORTION OF THIS CERTIFICATE, MAY BE
TRANSFERRED (X) IF AFTER GIVING EFFECT TO THE EXECUTOR OR TRANSFER OF
SUCH CERTIFICATE, THERE WOULD BE MORE THAN (I) 3 PRIVATE HOLDERS OF
CLASS D CERTIFICATES OR (II) 100 PRIVATE HOLDERS, OR (Y) ON OR THROUGH
(I) AN "ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF SECTION
7704(b)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND ANY
PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING,
WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATIONS SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR
<PAGE> 68
SELL QUOTATIONS OR (II) "SECONDARY MARKET" OR "SUBSTANTIAL EQUIVALENT
THEREOF" WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, AND ANY PROPOSED, TEMPORARY OR FINAL
TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN INTERESTS IN
THE TRUST ARE REGULARLY QUOTED BY ANY PERSON MAKING A MARKET IN SUCH
INTERESTS AND A MARKET WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID
OR OFFER QUOTES WITH RESPECT TO INTEREST IN THE TRUST AND STANDS READY
TO EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR
ON BEHALF OF OTHERS. ANY ATTEMPTED TRANSFER, ASSIGNMENT, CONVEYANCE,
PARTICIPATION OR SUBDIVISION IN CONTRAVENTION OF THE PRECEDING
RESTRICTIONS, AS REASONABLY DETERMINED BY THE SELLER, SHALL BE VOID AB
INITIO AND THE PURPORTED TRANSFEROR, SELLER, OR SUBDIVIDER OF SUCH
CERTIFICATE SHALL BE CONSTRUED TO BE TREATED AS THE CERTIFICATEHOLDER
OF ANY SUCH CERTIFICATE FOR ALL PURPOSES OF THE POOLING AND SERVICING
AGREEMENT (DEFINED BELOW).
Each $1,000 minimum denomination represents
a 1/83,500th Undivided Interest in the
Charming Shoppes Master Trust Series 1997-1
Evidencing an Undivided Interest in a trust, the corpus of which consists of a
portfolio of credit card receivables acquired by Charming Shoppes Receivables
Corp. and other assets and interests constituting the Trust under the Pooling
and Servicing Agreement described below.
(Not an interest in or obligation of,
Charming Shoppes Receivables Corp., Spirit of America National Bank,
Charming Shoppes, Inc. or any Affiliate thereof.)
This certifies that ____________ (the "Class D Certificateholder")
is the registered owner of the Undivided Interest in a trust (the "Trust"), the
corpus of which consists of a portfolio of credit card receivables (the
"Receivables") now existing or hereafter created under credit card accounts (the
"Accounts") of Spirit of America National Bank, a national banking association
organized under the laws of the United States, all monies due or to become due
in payment of the Receivables (including all Finance Charge Receivables), and
the other assets and interests constituting the Trust pursuant to a Second
Amended and Restated Pooling and Servicing Agreement dated as of November 25,
1997 (the "Pooling and Servicing Agreement"), by and among Charming Shoppes
Receivables Corp., as Seller, Spirit of America National Bank, as Servicer, and
First Union National Bank, as Trustee (the "Trustee").
The Series 1997-1 Certificates are issued in four classes, the
Class A Certificates, the Class B Certificates, which are subordinated to the
Class A Certificates in certain rights of payment as described herein and in the
Pooling and Servicing Agreement, the Class C Certificates, which are
subordinated to the Class A Certificates and the Class B Certificates in certain
rights of payment as described herein, and in the Pooling and Servicing
Agreement, and
<PAGE> 69
the Class D Certificates (of which this certificate is one), which are
subordinated to the Class A Certificates, the Class B Certificates and the Class
C Certificates in certain rights of payments as described herein, and in the
Pooling and Servicing Agreement.
To the extent not defined herein, capitalized terms used herein
have the meanings assigned in the Pooling and Servicing Agreement. This Class D
Certificate is issued under and is subject to the terms, provisions and
conditions of the Pooling and Servicing Agreement, to which Pooling and
Servicing Agreement, as amended from time to time, the Class D Certificateholder
by virtue of the acceptance hereof assents and by which the Class D
Certificateholder is bound.
The Receivables consist of Principal Receivables which arise from
the purchase of goods and services and of Finance Charge Receivables which arise
generally from periodic rate finance charges and other fees and charges, as more
fully specified in the Pooling and Servicing Agreement. The Trust corpus
consists of the Receivables now existing in the Accounts or hereafter created in
the Accounts, all monies due or to become due with respect thereto (including
all Finance Charge Receivables), all proceeds of the Receivables and Recoveries
and Insurance Proceeds relating thereto, and such funds as from time to time are
deposited in the Collection Account. This Certificate is one of a series of
Certificates entitled "Charming Shoppes Master Trust, Floating Rate Asset Backed
Certificates, Series 1997-1, Class D Certificates" (the "Class D Certificates"),
each of which represents an Undivided Interest in the Trust, including the right
to receive the Collections and other amounts at the times and in the amounts
specified in the Pooling and Servicing Agreement to be deposited in the
Collection Account or paid to the Class D Certificateholders. The aggregate
interest represented by the Class D Certificates at any time in the Principal
Receivables in the Trust shall not exceed an amount equal to the Class D
Investor Interest at such time. "Class D Investor Interest" shall mean, on any
date of determination, an amount equal to (a) the Class D Series Initial
Interest, minus (b) the aggregate amount of principal payments made to the
holders of the Class D Certificates prior to such date, minus (c) the aggregate
amount of Class D Charge-Offs for all prior Distribution Dates, minus (d) the
aggregate amount of Reallocated Class D Principal Collections allocated, (b) and
(c) on all prior Distribution Dates, minus (e) an amount equal to the amount by
which the Class D Investor Interest has been reduced on all prior Distribution
Dates pursuant to Section 4.10 of the Pooling and Servicing Agreement, and plus
(f) the aggregate amount of Excess Spread and Shared Excess Finance Charge
Collections allocated and available on all prior Distribution Dates for the
purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c),
(d) and (e); provided further, however, that the Class D Interest may not be
reduced below zero. The Class D Initial Investor Interest is $9,500,000. In
addition to the Series 1997-1 Certificates, an Exchangeable Seller Certificate
will be reissued to the Seller pursuant to the Pooling and Servicing Agreement,
which will represent an undivided interest in the Trust. The Exchangeable Seller
Certificate will represent the interest in the Principal Receivables not
represented by all of the Series of Investor Certificates issued by the Trust or
Series of Receivables Purchase Interests sold by the Trust. The Exchangeable
Seller Certificate may be exchanged by the Seller pursuant to the Pooling and
Servicing Agreement for a newly issued Series of Investor Certificates and a
reissued Exchangeable Seller Certificate upon the conditions set forth in the
Pooling and Servicing Agreement.
This Class D Certificate does not represent an obligation of, or
an interest in, the Seller or the Servicer, and neither the Class D Certificates
nor the Accounts or Receivables are
<PAGE> 70
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. This Class D Certificate is limited in right of payment to
certain collections respecting the Receivables, all as more specifically set
forth in the Pooling and Servicing Agreement.
The transfer of this Class D Certificate shall be registered in
the Certificate Register upon surrender of this Class D Certificate for
registration of transfer at any office or agency maintained by the Transfer
Agent and Registrar accompanied by a written instrument of transfer in a form
satisfactory to the Trustee and the Transfer Agent and Registrar duly executed
by the Class D Certificateholder or such Class D Certificateholder's
attorney-in-fact duly authorized in writing, and thereupon one or more new Class
D Certificates of authorized denominations and for the same aggregate Undivided
Interests will be issued to the designated transferee or transferees.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, Class D Certificates are exchangeable for
new Class D Certificates evidencing like aggregate Undivided Interests, as
requested by the Class D Certificateholder surrendering such Class D
Certificates. No service charge may be imposed for any such exchange but the
Servicer or Transfer Agent and Registrar may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
The Servicer, the Trustee, the Paying Agent and the Transfer Agent
and Registrar, and any agent of any of them, may treat the person in whose name
this Class D Certificate is registered as the owner hereof for all purposes, and
neither the Servicer, the Trustee, the Paying Agent, the Transfer Agent and
Registrar, nor any agent of any of them or of any such agent shall be affected
by notice to the contrary except in certain circumstances described in the
Pooling and Servicing Agreement.
<PAGE> 71
Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Class D Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.
IN WITNESS WHEREOF, Charming Shoppes Receivables Corp. has caused
this Class D Certificate to be duly executed under its official seal.
CHARMING SHOPPES RECEIVABLES CORP.
By:
Authorized Officer
[Seal]
Attested to:
By:
Assistant Secretary
Date: _______ __, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Class D Certificates referred to in the
within-mentioned Pooling and Servicing Agreement.
FIRST UNION NATIONAL BANK,
Trustee
By:
Authorized Officer
<PAGE> 72
EXHIBIT B
FORM OF MONTHLY PAYMENT INSTRUCTIONS AND
NOTIFICATION TO THE TRUSTEE
SPIRIT OF AMERICA NATIONAL BANK
CHARMING SHOPPES MASTER TRUST
SERIES 1997-1
The undersigned, a duly authorized representative of Spirit of America
National Bank ("Spirit"), as Servicer pursuant to the Second Amended and
Restated Pooling and Servicing Agreement dated as of November 25, 1997 (the
"Pooling and Servicing Agreement") by and among Charming Shoppes Receivables
Corp., as Seller, Spirit and First Union National Bank, as trustee (the
"Trustee"), does hereby certify as follows:
2.2.9.0.0.1. Capitalized terms used in this notice have their
respective meanings set forth in the Pooling and Servicing Agreement;
provided, that the "preceding Due Period" shall mean the Due Period
immediately preceding the calendar month in which this notice is
delivered. References herein to certain sections and subsections are
references to the respective sections and subsections of the Pooling
and Servicing Agreement. This notice is delivered pursuant to Section
4.9 of the Pooling and Servicing Agreement.
2.2.9.0.0.2. Spirit is the Servicer under the Pooling and
Servicing Agreement.
2.2.9.0.0.3. The undersigned is a Servicing Officer.
2.2.9.0.0.4. The date of this notice is a Determination Date
under the Pooling and Servicing Agreement.
3. INSTRUCTION TO MAKE A WITHDRAWAL
The Servicer does hereby instruct the Trustee (i) to make withdrawals
from the Collection Account, the Principal Funding Account and the Series Excess
Funding Reserve Account on ______________ __, _____, which date is a
Distribution Date under the Pooling and Servicing Agreement, in aggregate
amounts set forth below in respect of the following amounts and (ii) to
<PAGE> 73
apply the proceeds of such withdrawals in accordance with Section 3 of the
Series 1997-1 Supplement, as applicable and Section 4.9 of the Pooling and
Servicing Agreement, as applicable:
<TABLE>
<S> <C>
3.0.0.0.0.1. Pursuant to subsection 4.9(a)(i):
3.0.0.0.0.1.1. Class A Monthly Interest at
the Class A Certificate Rate
on the Class A Investor Interest $
--------
3.0.0.0.0.1.2. Class A Deficiency Amount $
--------
3.0.0.0.0.1.3. Class A Additional Interest $
--------
3.0.0.0.0.2. Pursuant to subsection 4.9(a)(ii):
3.0.0.0.0.2.1. Class A Servicing Fee $
--------
3.0.0.0.0.2.2. Accrued and unpaid Class A
Servicing Fee $
--------
3.0.0.0.0.3. Pursuant to subsection 4.9(a)(iii):
3.0.0.0.0.3.1. Class A Investor Loss Amount $
--------
3.0.0.0.0.4. Pursuant to subsection 4.9(a)(iv):
3.0.0.0.0.4.1. Portion of Excess Spread from
Class A Available Funds to be
allocated and distributed as
provided in Section 4.11 $
--------
3.0.0.0.0.5. Pursuant to subsection 4.9(b)(i):
3.0.0.0.0.5.1. Class B Monthly Interest at the
Class B Certificate Rate on the
Class B Investor Interest $
--------
3.0.0.0.0.5.2. Class B Deficiency Amount $
--------
3.0.0.0.0.5.3. Class B Additional Interest $
--------
</TABLE>
<PAGE> 74
<TABLE>
<S> <C>
3.0.0.0.0.6. Pursuant to subsection 4.9(b)(ii):
3.0.0.0.0.6.1. Class B Servicing Fee $
--------
3.0.0.0.0.6.2. Accrued and unpaid Class B
Servicing Fee $
--------
3.0.0.0.0.7. Pursuant to subsection 4.9(b)(iii):
3.0.0.0.0.7.1. Class B Investor Loss Amount $
--------
3.0.0.0.0.8. Pursuant to subsection 4.9(b)(iv):
3.0.0.0.0.8.1. Portion of Excess Spread from
Class B Available Funds to be
allocated and distributed as
provided in Section 4.11 $
--------
3.0.0.0.0.9. Pursuant to subsection 4.9(c)(i):
3.0.0.0.0.9.1. Class C Servicing
Fee $
--------
3.0.0.0.0.9.2. Accrued and unpaid Class C
Servicing Fee, if applicable $
--------
3.0.0.0.0.10. Pursuant to subsection 4.9(c)(ii):
3.0.0.0.0.10.1. Portion of Excess Spread from
Class C Available Funds to
be allocated and distributed as
provided in Section 4.11 $
--------
3.0.0.0.0.11. Pursuant to subsection 4.9(d)(i):
3.0.0.0.0.11.1. Class D Servicing Fee
3.0.0.0.0.11.2. Accrued and unpaid Class D
Servicing Fee, if applicable $
--------
</TABLE>
<PAGE> 75
<TABLE>
<S> <C>
3.0.0.0.0.12. Pursuant to subsection 4.9(d)(ii):
3.0.0.0.0.12.1. Portion of Excess Spread from
Class D Available Funds to be
allocated and distributed as
provided in Section 4.11 $
--------
Total $
========
3.0.0.0.0.13. Pursuant to subsection 4.9(e)(i):
3.0.0.0.0.13.1. Amount to be applied pursuant
to Class C Purchase Agreement $
--------
3.0.0.0.0.14. Pursuant to subsection 4.9(e)(ii):
3.0.0.0.0.14.1. Amount to be treated as Shared
Excess Principal Collections $
--------
3.0.0.0.0.15. Pursuant to subsection 4.9(e)(iii):
3.0.0.0.0.15.1. Amount to be paid to the Holder
of the Exchangeable Seller's
Certificate $
--------
3.0.0.0.0.16. Pursuant to subsection 4.9(f)(i):
3.0.0.0.0.16.1. Class A Monthly Principal $
--------
3.0.0.0.0.17. Pursuant to subsection 4.9(f)(ii):
3.0.0.0.0.17.1. Class B Monthly Principal $
--------
3.0.0.0.0.18. Pursuant to subsection 4.9(f)(iii):
3.0.0.0.0.18.1. Class C Monthly Principal to be
applied in accordance with the
Class C Purchase Agreement $
--------
3.0.0.0.0.19. Pursuant to subsection 4.9(f)(iv):
3.0.0.0.0.19.1. Class D Monthly Principal $
--------
</TABLE>
<PAGE> 76
<TABLE>
<S> <C>
3.0.0.0.0.20. Pursuant to subsection 4.9(f)(v):
3.0.0.0.0.20.1. Amount to be applied pursuant
to Class C Purchase Agreement $
--------
3.0.0.0.0.21. Pursuant to subsection 4.9(f)(vi):
3.0.0.0.0.21.1. Amount to be treated as Shared
Excess Principal Collections $
--------
3.0.0.0.0.22. Pursuant to subsection 4.9(f)(vii):
3.0.0.0.0.22.1. Amount to be paid to the Holder
of the Exchangeable Seller's
Certificate $
--------
Total $
========
3.0.0.0.0.23. Pursuant to subsection 4.9(g):
3.0.0.0.0.23.1. Amount to be withdrawn from
the Principal Funding Account
and deposited into the
Distribution Account $
--------
3.0.0.0.0.24. Pursuant to Section 4.14:
3.0.0.0.0.24.1. Amount of Shared Excess Finance
Charge Collections to be withdrawn
from the Collection Account to be
allocated to Series 1997-1 and
distributed as provided in
Section 4.11. $
--------
3.0.0.0.0.25. Pursuant to Section 4.17(c):
3.0.0.0.0.25.1. Principal Funding Investment
Proceeds $
--------
3.0.0.0.0.26. Pursuant to Section 4.21(b):
3.0.0.0.0.26.1. Amount of investment income
earned on Series Excess Funding Account $
--------
</TABLE>
<PAGE> 77
<TABLE>
<S> <C>
3.0.0.0.0.27. Pursuant to Section 4.21(d):
3.0.0.0.0.28. Pursuant to Section 4.21(e):
3.0.0.0.0.28.1. Amount treated as Shared
Principal Collections $
--------
3.0.0.0.0.28.2. Amount to be paid to Holder of
Exchangeable Seller Certificate $
--------
3.0.0.0.0.29. Pursuant to Section 4.21(f):
3.0.0.0.0.29.1. Amount to be distributed as
principal to holders of Investor
Certificates $
--------
(a) amount distributable to
Class A Certificateholders $
--------
(b) amount distributable to
Class B Certificateholders $
--------
(c) amount distributable to
Class C Certificateholders $
--------
(d) amount distributable to
Class D Certificateholders $
--------
3.0.0.0.0.29.2. Amount of Principal Shortfalls $
--------
3.0.0.0.0.30. Pursuant to Section 4.22(b):
3.0.0.0.0.30.1. Amount of investment income
earned on Series Excess Funding
Reserve Account in excess of
Series Excess Funding Reserve
Account Required Amount $
--------
3.0.0.0.0.31. Pursuant to Section 4.22(d):
3.0.0.0.0.31.1. Series Excess Funding
Reserve Draw Amount $
--------
3.0.0.0.0.32. Pursuant to Section 4.22(e):
3.0.0.0.0.32.1. Series Excess Funding
Reserve Account Surplus $
--------
</TABLE>
<PAGE> 78
4. INSTRUCTION TO MAKE CERTAIN PAYMENTS
Pursuant to Section 4.9 of the Pooling and Servicing Agreement, the
Servicer does hereby instruct the Trustee to pay in accordance with Section 5.1
from the Collection Account on __________ __, ____, which date is a Distribution
Date under the Pooling and Servicing Agreement:
<TABLE>
<S> <C>
4.0.1. AMOUNT TO BE DISTRIBUTED TO
Class A Certificateholders $
4.0.2. AMOUNT TO BE DISTRIBUTED TO
Class B Certificateholders $
4.0.3. AMOUNT TO BE DISTRIBUTED TO THE
Class D Certificateholders $
</TABLE>
5. APPLICATION OF EXCESS SPREAD
Pursuant to Section 4.11, the Servicer does hereby instruct the Trustee
to apply the Excess Spread with respect to the related Due Period and to make
the following distributions in the following priority:
<TABLE>
<S> <C>
A. The amount equal to the Class A
Required Amount, if any, which will
be used to fund the Class A Required
Amount and be applied in accordance
with, and in the priority set forth
in subsection 4.9(a) $
B. The amount equal to the aggregate
amount of Class A Investor
Charge-Offs which have not been
previously reimbursed (after giving
effect to the allocation on such
Distribution Date of certain other
amounts applied for that purpose)
which will be treated as a portion
of Investor Principal Collections $
C. The amount equal to the Class B
Required Amount, if any, which
</TABLE>
<PAGE> 79
<TABLE>
<S> <C>
will be used to fund the Class B
Required Amount and be applied first
in accordance with, and in the priority
set forth in, subsection 4.9(b) $
D. The amount equal to the aggregate
amount by which the Class B Investor
Interest has been reduced below the
initial Class B Series Investor
Interest for reasons other than the
payment of principal to the Class B
Certificateholders (but not in
excess of the aggregate amount of
such reductions which have not been
previously reimbursed) which will be
treated as a portion of Available
Principal Collection $
E. The amount equal to the aggregate
amount of accrued but unpaid Class C
Servicing Fee (after giving affect
to the application of Class C
Available Funds thereto pursuant to
Section 4.9) $
F. The amount equal to the Class C
Monthly Interest plus the amount of
any past due Class C Monthly
Interest which will be paid to the
Class C Holder for application in
accordance with the Class C Purchase
Agreement $
G. The amount equal to the Class C
Investor Loss Amount, if any, for
the prior Due Period which will be
treated as a portion of Available
Principal Collections $
H. The amount equal to the aggregate
amount by which the Class C Investor
Interest has been reduced
</TABLE>
<PAGE> 80
<TABLE>
<S> <C>
below the initial Class C Investor
Interest for reasons other than the
payment of principal to the Class C
Investor Holder (but not in excess
of the aggregate amount of such
reductions which have not been
previously reimbursed) which will be
treated as a portion of Available
Principal Collections $
I. The amount up to the excess, if any,
of the Series Excess Funding Account
Required Amount over the amount on
deposit in the Series Excess Funding
Reserve Account which shall be
deposited into the Series Excess
Funding Reserve Account $
J. The amount equal to the aggregate
amount of any other amounts then due
to the Class C Certificateholders
out of Excess Spread and Shared
Excess Finance Charge Collections
allocated to Series 1997-1 pursuant
to the Class C Purchase Agreement to
be distributed to the Class C
Certificateholders for application
in accordance with the Class C
Purchase Agreement $
K. The amount equal to the aggregate
amount of accrued but unpaid Class D
Servicing Fees which will be paid to
the Servicer (after giving effect to
the application of Class D Available
Funds thereto pursuant to Section
4.9) $
L. The amount equal to the Class D
Monthly Interest plus the amount of
any past due Class D Monthly
Interest which will be paid to the
Class D Certificateholders $
</TABLE>
<PAGE> 81
<TABLE>
<S> <C>
M. The amount equal to the Class D
Investor Loss Amount, if any, for
the prior Due Period which will be
treated as a portion of Available
Principal Collections $
N. The amount equal to the aggregate
amount by which the Class C Investor
Interest has been reduced below the
initial Class D Investor Interest
for reasons other than the payment
of principal to the Class D
Certificateholders (but not in
excess of the aggregate amount of
such reductions which have not been
previously reimbursed) which will be
treated as a portion of Available
Principal Collections $
O. The balance, if any, after giving
effect to the payments made pursuant
to subparagraphs (A) through (N)
above to be applied as Shared Excess
Finance Charge Collections for such
Distribution Date $
</TABLE>
6. REALLOCATED PRINCIPAL COLLECTIONS
Pursuant to Section 4.12, the Servicer does hereby instruct the Trustee
to withdraw from the Collection Account and apply Reallocated Principal
Collections pursuant to Section 4.12 with respect to the related Due Period in
the following amounts:
A. Reallocated Class D
Principal Collections $
B. Reallocated Class C Principal $
Collections
C. Reallocated Class B Principal
Collections $
<PAGE> 82
7. ACCRUED AND UNPAID AMOUNTS
After giving effect to the withdrawals and transfers to be made in
accordance with this notice, the following amounts will be accrued and unpaid
with respect to all Due Periods preceding the current calendar month
<TABLE>
<S> <C>
A. Subsections 4.9(a)(i) and (b)(i):
(1) The aggregate amount of the
Class A Deficiency Amount $
(2) The aggregate amount of
Class B Deficiency Amount $
B. Subsections 4.9(a)(ii) and (b)(ii):
(1) The aggregate amount of all
accrued and unpaid Class A
Servicing Fee $
(2) The aggregate amount of all
accrued and unpaid Class B
Servicing Fee $
C. Section 4.10:
(1) The aggregate amount of all
unreimbursed Class A Investor
Charge-Offs $
(2) The aggregate amount of all
unreimbursed Class B Investor
Charge-Offs $
(3) The aggregate amount of all
unreimbursed Class C Investor
Charge-Offs $
</TABLE>
<PAGE> 83
<TABLE>
<S> <C>
(4) The aggregate amount of all
unreimbursed Class D Investor
Charge-Offs $
</TABLE>
IN WITNESS WHEREOF, the undersigned has duly executed this
certificate this __ day of _______, ____.
SPIRIT OF AMERICA NATIONAL BANK,
Servicer
By:___________________________
Name:
Title:
<PAGE> 84
EXHIBIT C
FORM OF MONTHLY CERTIFICATEHOLDERS' STATEMENT
Series 1997-1
SPIRIT OF AMERICA NATIONAL BANK
CHARMING SHOPPES MASTER TRUST
Under Section 5.2 of the Series 1997-1 Supplement dated as of November
25, 1997 (the "Series 1997-1 Supplement", and together with the Second Amended
and Restated Pooling and Servicing Agreement dated as of November 25, 1997, the
"Pooling and Servicing Agreement") by and among Charming Shoppes Receivables
Corp., as Seller, Spirit of America National Bank ("Spirit"), as Servicer, and
First Union National Bank, as Trustee, Spirit, as Servicer, is required to
prepare certain information each month regarding current distributions to Series
1997-1 Certificateholders and the performance of the Charming Shoppes Master
Trust (the "Trust") during the previous month. The information which is required
to be prepared with respect to the Distribution Date of _______, ______ and with
respect to the performance of the Trust during the month of _________, ______ is
set forth below. Certain of the information is presented on the basis of an
original principal amount of $1,000 per Series 1997-1 Certificate (a
"Certificate"). Certain other information is presented based on the aggregate
amounts for the Trust as a whole. Capitalized terms used in this Statement have
their respective meanings set forth in the Pooling and Servicing Agreement.
A. Information Regarding the Current Monthly Distribution (Stated on the
Basis of $1,000 Original Certificate Principal Amount)
<TABLE>
<S> <C>
7.0.1. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of Class A
Monthly Principal .................. $________
7.0.2. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of Class B
Monthly Principal .................. $________
7.0.3. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of
Class C Monthly Principal .......... $________
7.0.4. THE AMOUNT OF THE CURRENT MONTHLY
</TABLE>
<PAGE> 85
<TABLE>
<S> <C>
distribution in respect of
Class D Monthly
Principal .......................... $________
7.0.5. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of Class A
Monthly Interest ................... $________
7.0.6. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of Class A
Deficiency Amounts ................. $________
7.0.7. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of Class A
Additional Interest ................ $________
7.0.8. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of Class B
Monthly Interest ................... $________
7.0.9. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of Class B
Deficiency Amounts ................. $________
7.0.10. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of Class B
Additional Interest ................ $________
7.0.11. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of
Class C Monthly Interest ........... $________
7.0.12. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of any
accrued and unpaid Class C
Deficiency Amounts ................. $________
</TABLE>
<PAGE> 86
<TABLE>
<S> <C>
7.0.13. THE AMOUNT OF THE CURRENT MONTHLY
distribution in respect of
Class D Monthly Interest ................ $________
B. Information Regarding the Performance of the Trust
7.0.14. COLLECTION OF PRINCIPAL RECEIVABLES
7.0.14.1. The aggregate amount of
Collections of Principal
Receivables processed
during the related Due
Period which were allocated
in respect of the Class A
Certificates .................. $________
7.0.14.2. The aggregate amount of
Collections of Principal
Receivables processed
during the related Due
Period which were allocated
in respect of the Class B
Certificates .................. $________
7.0.14.3. The aggregate amount of
Collections of Principal
Receivables processed
during the related Due
Period which were allocated
in respect of the Class C
Certificates .................. $________
7.0.14.4. The aggregate amount of
Collections of Principal
Receivables during the
related Due Period which
were allocated in respect
of the Class D Certificates ... $________
7.0.15. PRINCIPAL RECEIVABLES IN THE TRUST
7.0.15.1. The aggregate amount of Principal
Receivables in the Trust as of
the end of the day on the last
</TABLE>
<PAGE> 87
<TABLE>
<S> <C>
day of the preceding Due
Period ........................ $________
7.0.15.2. The Excess Funding Amount
(the aggregate amount on
deposit in the Excess Funding
Account) as of the end of the
day on the last day of the
preceding Due Period .......... $________
7.0.15.3. The Series Investor Interest
as of the last day of the
preceding Due Period .......... $________
7.0.15.4. The Floating Allocation
Percentage with respect
to the related Due
Period ........................ ______%
7.0.15.5. The Class A Floating
Allocation with respect
to the related Due
Period ........................ ______%
7.0.15.6. The Class B Floating
Allocation with respect
to the related Due
Period ........................ ______%
7.0.15.7. The Class C Floating
Allocation with respect to
the related Due
Period ........................ ______%
7.0.15.8 The Class D Floating
Allocation with respect
to the related Due Period ..... ______%
7.0.15.9. The Principal Allocation
Percentage with respect to
the related Due Period ........ ______%
7.0.15.10. The Class A Fixed Allocation
with respect to the related
Due Period .................... ______%
</TABLE>
<PAGE> 88
<TABLE>
<S> <C>
7.0.15.11. The Class B Fixed Allocation
with respect to the related
Due Period .................... ______%
7.0.15.12. The Class C Fixed
Allocation with respect
to the related Due
Period ........................ ______%
7.0.15.13. The Class D Fixed
Allocation with respect
to the related Due Period ....... ______%
</TABLE>
7.0.16. DELINQUENT BALANCES
The aggregate amount of outstanding balances in the Accounts
which were delinquent as of the day on the last day of the
preceding Due Period:
<TABLE>
<CAPTION>
Aggregate
Account
Balance
-------
<S> <C>
(a) 30-59 days .................................... $_______
(b) 60-89 days .................................... $_______
(c) 90-119 days ................................... $_______
(d) 120 or more days ............................... $_______
Total: $_______
</TABLE>
<TABLE>
<S> <C>
7.0.17. INVESTOR LOSS AMOUNT
7.0.17.1. The Investor Loss
Amount for the related
Due Period ............... $
7.0.17.2. The Class A Investor
Loss Amount for the
related Due Period ....... $
7.0.17.3. The Class B Investor
Loss Amount for the
related Due Period ....... $
</TABLE>
<PAGE> 89
<TABLE>
<S> <C>
(d) The Class C Investor Loss
Amount for the related
Due Period .................... $
(e) The Class D Investor
Loss Amount for the related
Due Period .................... $
7.0.18. INVESTOR CHARGE OFFS
7.0.18.1. The aggregate amount of
Class A Investor Charge
Offs for the related
Due Period .................... $
7.0.18.2. The aggregate amount of
Class A Investor Charge
Offs set forth in 5(a)
above per $1,000 of
original certificate
principal amount .............. $
7.0.18.3. The aggregate amount of
Class B Investor Charge
Offs for the related
Due Period .................... $
7.0.18.4. The aggregate amount of
Class B Investor Charge
Off set forth in 5(c)
above per $1,000 of original
certificate principal
amount ........................ $
7.0.18.5. The aggregate amount of
Class C Investor Charge Offs
for the related Due
Period ........................ $
7.0.18.6. The aggregate amount of
Class C Investor Charge
Offs set forth in 5(e)
above per $1,000 of original
certificate principal amount .. $
</TABLE>
<PAGE> 90
<TABLE>
<S> <C>
7.0.18.7. The aggregate amount of
Class D Investor
Charge Offs for the
related Due Period ........... $
7.0.18.8. The aggregate amount of
Class D Investor
Charge Offs set forth
in 5(e) above per $1,000
of original certificate
principal amount ............. $
7.0.18.9. The aggregate amount of
Class A Investor Charge
Offs reimbursed on this
Distribution Date ............ $
7.0.18.10. The aggregate amount of
Class A Investor Charge
Offs set forth in 5(i)
above per $1,000 original
certificate principal
amount reimbursed on this
Distribution Date ............ $
7.0.18.11. The aggregate amount of
Class B Investor Charge
Offs reimbursed on this
Distribution Date ............ $
7.0.18.12. The aggregate amount of
Class B Investor Charge Offs
set forth in 5(k) above per
$1,000 original certificate
principal amount reimbursed
on this Distribution
Date ......................... $
7.0.18.13. The aggregate amount of
Class C Investor Charge Offs
reimbursed on this
Distribution Date ............ $
</TABLE>
<PAGE> 91
<TABLE>
<S> <C>
7.0.18.14. The aggregate amount of
Class C Investor Charge Offs
set forth in 5(m) above per
$1,000 original certificate
principal amount reimbursed
on this Distribution Date .... $
7.0.18.15. The aggregate amount of
Class D Investor Charge
Offs reimbursed on
this Distribution Date ....... $
7.0.18.16. The aggregate amount of
Class D Investor Charge
Offs set forth in 5(o)
above per $1,000
original certificate
principal amount reimbursed
on this Distribution Date .... $
7.0.19. INVESTOR MONTHLY SERVICING FEE
7.0.19.1. The amount of the Class A
Servicing Fee payable by the
Trust to the Servicer for the
related Due Period ........... $
7.0.19.2. The amount of the Class B
Servicing Fee payable by the
Trust to the Servicer for the
related Due Period ........... $
7.0.19.3. The amount of the Class C
Servicing Fee payable by the
Trust to the Servicer for the
related Due Period ........... $
7.0.19.4. The amount of the Class D
Servicing Fee payable
by the Trust to the Servicer
for the related Due Period ... $
</TABLE>
<PAGE> 92
<TABLE>
<S> <C>
7.0.20. REALLOCATIONS
7.0.20.1. The amount of Reallocated
Class D Principal
Collections with respect to
this Distribution Date ........ $
7.0.20.2. The amount of Reallocated
Class C Principal
Collections with respect to
this Distribution Date ........ $
7.0.20.3. The amount of Reallocated
Class B Principal Collections
with respect to this
Distribution Date ............. $
7.0.20.4. The Class D Investor
Interest as of the close of
business on this Distribution
Date .......................... $
7.0.20.5. The Class C Investor Interest
as of the close of business on
this Distribution Date ........ $
7.0.20.6. The Class B Investor Interest
as of the close of business on
this Distribution Date ........ $
7.0.20.7. The Class A Investor Interest
as of the close of business on
this Distribution Date ........ $
7.0.21. COLLECTION OF FINANCE CHARGE RECEIVABLES
7.0.21.1. The aggregate amount of
Collections of Finance
Charge Receivables received
during the related Due
Period which were allocated
in respect of Class A
Certificates .................. $
7.0.21.2. The aggregate amount of
</TABLE>
<PAGE> 93
<TABLE>
<S> <C>
Collections of Finance
Charge Receivables received
during the related Due
Period which were allocated
in respect of the Class B
Certificates .................. $
7.0.21.3. The aggregate amount of
Collections of Finance
Charge Receivables received
during the related Due
Period which were allocated
in respect of the Class C
Certificates .................. $
7.0.21.4. The aggregate amount of
Collections of Finance
Charge Receivables received
during the related Due
Period which were allocated
in respect of the Class D
Certificates .................. $
7.0.22. PRINCIPAL FUNDING ACCOUNT
7.0.22.1. The principal amount on
deposit in the Principal
Funding Account on this
Distribution Date ............. $
7.0.22.2. The Principal Shortfall
with respect to the related
Due Period .................... $
7.0.22.3. The Principal Funding
Investment Proceeds
deposited in the Collection
Account on the related
Distribution Date ............. $
7.0.22.4. The Principal Funding
Investment Shortfall .......... $
</TABLE>
<PAGE> 94
<TABLE>
<S> <C>
7.0.23. SERIES EXCESS FUNDING ACCOUNT
7.0.23.1. The amount on deposit
in the Series Excess
Funding Account on this
Distribution Date ............. $
7.0.23.2. The investment proceeds
deposited from the Series
Excess Funding Account
to the Collection
Account on the related
Distribution Date ............. $
7.0.23.3. The Series Excess Funding
Account Surplus ............... $
7.0.24. SERIES EXCESS FUNDING RESERVE ACCOUNT
7.0.24.1. The principal amount on
deposit in the Series
Excess Funding Reserve
Account on this
Distribution Date ............. $
7.0.24.2. The investment proceeds
deposited from the Series
Excess Funding Reserve
Account to the Collection
Account on the related
Distribution Date ............. $
7.0.24.3. The Series Excess Funding
Account Investment Shortfall .. $
7.0.24.4. The Series Excess Funding
Reserve Draw Amount ........... $
7.0.24.5. The Series Excess Funding
Reserve Account Surplus ....... $
</TABLE>
<PAGE> 95
<TABLE>
<S> <C>
7.0.25. AVAILABLE FUNDS
7.0.25.1. The amount of Class A
Available Funds on deposit
in the Collection Account
on this Distribution Date........ $
7.0.25.2. The amount of Class B
Available Funds on deposit
in the Collection Account
on this Distribution Date........ $
7.0.25.3. The amount of Class C
Available Funds on deposit in
the Collection Account on
this Distribution Date........... $
7.0.25.4. The amount of Class D
Available Funds on
deposit in the Collection
Account on this Distribution
Date............................. $
7.0.26. PORTFOLIO YIELD
The Portfolio Yield for the
related Due Period......................... %
7.0.27. SHARED PRINCIPAL COLLECTIONS
(a) The Cumulative Principal
Shortfall with respect to such
Distribution Date................. $
(b) The Shared Principal
Collections allocable to
the Certificates on such
Distribution Date................. $
7.0.28. SHARED EXCESS FINANCE CHARGE COLLECTIONS
(a) The Finance Charge Shortfall
with respect to such
Distribution Date................ $
</TABLE>
<PAGE> 96
<TABLE>
<S> <C>
(b) The Shared Excess Finance
Charge Collections allocable
to the Certificates on such
Distribution Date.......................... $
C. Floating-Rate Determinations
1. LIBOR for the Interest
Period ending on this
Distribution Date.......................... %
</TABLE>
SPIRIT OF AMERICA NATIONAL
BANK, Servicer
By:
Name:
Title:
<PAGE> 97
EXHIBIT D-1
CLASS A INTEREST RATE CAP
<PAGE> 98
EXHIBIT D-2
CLASS B INTEREST RATE CAP
<PAGE> 99
CHARMING SHOPPES RECEIVABLES CORP.
Seller
SPIRIT OF AMERICA NATIONAL BANK
Servicer
and
FIRST UNION NATIONAL BANK
Trustee
on behalf of the Series 1997-1 Certificateholders
----------------------------------
SERIES 1997-1 SUPPLEMENT
Dated as of November 25, 1997
to
SECOND AMENDED AND RESTATED POOLING AND
SERVICING AGREEMENT
Dated as of November 25, 1997
----------------------------------
$83,500,000
CHARMING SHOPPES MASTER TRUST
SERIES 1997-1
<PAGE> 100
TABLE OF CONTENTS
PAGE
SECTION 1. Designation 1
SECTION 2. Definitions 1
SECTION 3. Servicing Compensation 20
SECTION 4. Reassignment and Transfer Terms 21
SECTION 5. Delivery and Payment for the Investor Certificates 21
SECTION 6. Depository; Form of Delivery of Series 1997-1 Certificates 21
SECTION 7. Article IV of Agreement 21
SECTION 8. Article V of the Agreement. 41
SECTION 9. Series 1997-1 Early Amortization Events 45
SECTION 10. Series 1997-1 Termination 47
SECTION 11. Limitations on Addition of Accounts 47
SECTION 12. Ratification of Agreement 47
SECTION 13. Counterparts 47
SECTION 14. Governing Law 47
SECTION 15. No Petition 48
SECTION 16. Tax Representation and Covenant 48
SECTION 17. Certain Tax Related Amendments 48
<PAGE> 101
EXHIBITS
EXHIBIT A-1 Form of Class A Certificate
EXHIBIT A-2 Form of Class B Certificate
EXHIBIT A-3 Form of Class C Certificate
EXHIBIT A-4 Form of Class D Certificate
EXHIBIT B Form of Monthly Payment Instructions and Notification to the Trustee
EXHIBIT C Form of Monthly Certificateholders' Statement
EXHIBIT D-1 Form of Class A Cap
EXHIBIT D-2 Form of Class B Cap
<PAGE> 1
1475 797
EXHIBIT 10.1.18
[Execution Copy]
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of November 25, 1997
Among
FIRST UNION NATIONAL BANK
solely in its capacity as the trustee for
CHARMING SHOPPES MASTER TRUST
as the Seller
CHARMING SHOPPES RECEIVABLES CORP.
as the Owner and the Subordinated Purchaser
SPIRIT OF AMERICA NATIONAL BANK
as the Servicer and the Originator
CORPORATE RECEIVABLES CORPORATION
as the Purchaser
CITIBANK, N.A.
as a Bank
and
CITICORP NORTH AMERICA, INC.
as the Agent
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I - AMOUNTS AND TERMS OF THE PURCHASES 4
SECTION 1.01. Purchase Facility 4
SECTION 1.02. Making Purchases 5
SECTION 1.03. Fees 7
SECTION 1.04. Payments and Computations, Etc. 7
SECTION 1.05. Increased Costs 8
SECTION 1.06. Additional Yield on Purchaser Receivable
Interests Bearing a Eurodollar Rate;
Breakage Fee 9
ARTICLE II - ALLOCATION AND DISTRIBUTION
OF COLLECTIONS 10
SECTION 2.01. General Allocation Procedures 10
SECTION 2.02. Allocation Among the Purchasers,
the Banks, the Subordinated Purchaser
and the Seller 10
SECTION 2.03. Allocation and Distribution of Finance
Charges 12
SECTION 2.04. Allocation and Distribution of Excess
Finance Charge Collections 14
SECTION 2.05. Required Amount; Subordinated Principal
Collections; Charge-Offs 15
SECTION 2.06. Allocation and Distribution of Allocable
Principal Collections 18
SECTION 2.07. Dilution Amounts 19
ARTICLE III - REPRESENTATIONS AND WARRANTIES; COVENANTS;
EARLY AMORTIZATION EVENTS 20
SECTION 3.01. Representations and Warranties;
Covenants 20
SECTION 3.02. Early Amortization Events 20
ARTICLE IV - INDEMNIFICATION; PURCHASE OF
INELIGIBLE RECEIVABLES 21
SECTION 4.01. Indemnities by the Owner 21
SECTION 4.02. Indemnities by the Servicer 24
SECTION 4.03. Purchase of Ineligible and Certain Other
Receivables 26
SECTION 4.04. Reassignment of Receivables and Receivable
Interests 26
<PAGE> 3
SECTION 4.05. Repurchase of Purchaser Receivable Interests 27
ARTICLE V - THE SERVICER 28
SECTION 5.01. Designation of the Servicer;
Delegation of Duties 28
SECTION 5.02. Administration and Collection of the
Pool Receivables 29
SECTION 5.03. Servicer Fee 29
ARTICLE VI - THE PURCHASER REPRESENTATIVE 29
SECTION 6.01. Designation of the Purchaser
Representative 29
SECTION 6.02. Duties of the Purchaser Representative 30
SECTION 6.03. Limitation on Purchaser Representative
Liability, Etc. 30
ARTICLE VII - MISCELLANEOUS 32
SECTION 7.01. Amendments, Waivers, Etc. 32
SECTION 7.02. Notices, Etc. 33
SECTION 7.03. Assignability 34
SECTION 7.04. Costs, Expenses and Taxes 39
SECTION 7.05. No Proceedings 40
SECTION 7.06. Confidentiality 40
SECTION 7.07. GOVERNING LAW 42
SECTION 7.08. Execution in Counterparts 42
SECTION 7.09. Survival of Termination 42
SECTION 7.10. Tax Treatment 42
SECTION 7.11. Duties of the Trustee 43
SECTION 7.12. Limitation on Seller/Trustee
Liability, Etc. 43
SECTION 7.13. Third Party Beneficiaries 44
SECTION 7.14. Limited Recourse 44
SECTION 7.15. Limitation on Rights of Purchasers
and Banks 45
SECTION 7.16. The CO Escrow Account 46
EXHIBITS
Exhibit I Definitions
Exhibit II Conditions of Purchases
Exhibit III Representations and Warranties
Exhibit IV Covenants
Exhibit V Administration and Collection of Pool Receivables
Exhibit VI Early Amortization Events
<PAGE> 4
ANNEXES
Annex A Form of Servicer Report
Annex B Form of Depositary Agreement
Annex C Form of Opinion of Counsel to the Trustee
Annex D-1 Form of Opinion of Counsel to the Owner, the
Originator, the Subordinated Purchaser, the
Servicer, Charming Shoppes and FSC
Annex D-2 Form of Opinion of Counsel to the Originator
and the Servicer
Annex D-3 Form of Opinion of General Counsel to the Owner,
the Originator, the Subordinated Purchaser and
the Servicer
Annex D-4 Form of Opinion of Counsel to the Subordinated
Purchaser, Charming Shoppes and FSC
Annex E Form of Opinion of General Counsel to Charming
Shoppes and FSC
Annex F Form of Store Payment Notice
Annex G Form of Summary of Interest Rate Agreements
Annex H Form of Assignment and Acceptance
SCHEDULES
Schedule I Material Provisions
Schedule II Depositary Banks
<PAGE> 5
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of November 25, 1997
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of
November 25, 1997 among FIRST UNION NATIONAL BANK, a national banking
association, solely in its capacity as the trustee (the "Trustee") for CHARMING
SHOPPES MASTER TRUST, a trust formed pursuant to the Pooling and Servicing
Agreement (this and other capitalized terms used herein are defined in Exhibit I
to this Agreement) (in such capacity, the "Seller"), CHARMING SHOPPES
RECEIVABLES CORP. (formerly known as Fashion SPC, Inc.), a Delaware corporation
in its capacity as the owner (prior to the sale of the Receivables to the Seller
pursuant to the Pooling and Servicing Agreement) of the Receivables (in such
capacity, the "Owner") and in its capacity as the holder of a subordinate
interest (after the sale of the Receivables by the Owner to the Seller pursuant
to the Pooling and Servicing Agreement) in the Receivables (in such capacity,
the "Subordinated Purchaser"), SPIRIT OF AMERICA NATIONAL BANK, a national
banking association ("Spirit"), in its capacity as the Servicer (in such
capacity, the "Servicer"), and in its capacity as the originator (before the
sale of the Receivables to the Owner pursuant to the Purchase Agreement) of the
Receivables (in such capacity, the "Originator"), CORPORATE RECEIVABLES
CORPORATION, a California corporation ("CRC" or the "Purchaser"), CITIBANK,
N.A., a national banking association, and CITICORP NORTH AMERICA, INC., a
Delaware corporation ("CNAI"), as agent (the "Agent") for the Purchasers and the
Banks.
PRELIMINARY STATEMENTS. 0.0.0.0.0.1. Certain terms that are
capitalized and used throughout this Agreement are defined in Exhibit I
to this Agreement. References in the Exhibits to "the Agreement" refer
to this Agreement, as amended, restated, modified or supplemented from
time to time.
0.0.0.0.0.2. The Seller, the Subordinated Purchaser, the
Originator, the Servicer, CXC Incorporated ("CXC") and CNAI as Agent,
entered into a Receivables Purchase Agreement dated as of April 4,
1996, as amended as of December 13, 1996, as of March 31, 1997, as of
June 30, 1997, as of August 31, 1997, as of September 30, 1997 and as
of October 31, 1997 (the "Original RPA"), pursuant to which a Purchaser
may, in its sole discretion, purchase Receivable Interests.
<PAGE> 6
0.0.0.0.0.3. The Seller, the Subordinated Purchaser, the
Originator, the Servicer, the Banks, and CNAI as Agent for the Banks,
are parties to a Receivables Purchase Agreement (Parallel Purchase
Commitment) dated as of April 4, 1996, as amended as of December 13,
1996, as of March 31, 1997, as of June 30, 1997, as of August 31, 1997,
as of September 30, 1997 and as of October 31, 1997 (the "Original
PPC"; together with the Original RPA, the "Original Agreements"),
pursuant to which the Banks have agreed to purchase Receivable
Interests.
0.0.0.0.0.4. Charming Shoppes and FSC are parties to two
Company Agreements each dated as of April 4, 1996 (the "Original
Company Agreements"), one in favor of the Purchasers and the Agent and
the other in favor of the Banks and the Agent, pursuant to which
Charming Shoppes and FSC agree, among other things, to cause the
performance and observance by each of the Originator, the Servicer and
the Seller and their respective successors and assigns of all of the
terms, covenants, conditions, agreements and undertakings on the part
of the Originator, the Servicer and the Seller, respectively, to be
performed or observed under the Original RPA and the Original PPC.
0.0.0.0.0.5. Pursuant to the terms of an Assignment and
Acceptance effective as of October 31, 1997, CXC sold and assigned to
CRC and CRC purchased and assumed all of CXC's rights and obligations
under the Original RPA.
0.0.0.0.0.6. Pursuant to the terms of the Purchase Agreement,
the Originator has conveyed to the Owner all its interest in all
Receivables and Related Assets (as those terms are defined in the
Purchase Agreement) (subject, in the case of Receivables in existence
on the date hereof, to the rights previously conveyed to the Seller
pursuant to the Prior PSA); and pursuant to the terms of the Pooling
and Servicing Agreement, the Owner has in turn conveyed the Receivables
to the Seller.
0.0.0.0.0.7. The Seller, the Subordinated Purchaser, the
Owner, the Originator, the Servicer, the Purchasers, the Banks, the
Agent, FSC and Charming Shoppes, as the case may be, desire to amend,
restate and combine (i) the Original Agreements to, among other things,
(a) reflect the amendments heretofore made to the Original Agreements,
(b) decrease the maximum Purchase Limit and Total Commitment (each as
defined in the Original Agreements), (c) delete all references to the
Servicer Escrow Account, and (d) reflect the amendment and restatement
of the Prior PSA on the date
<PAGE> 7
hereof, and (ii) the Original Company Agreements to include obligations
of the Owner and to reflect, among other things, the amendment and
restatement of the Prior PSA on the date hereof.
0.0.0.0.0.8. Pursuant to the Pooling and Servicing Agreement
and certain related agreements, the Seller may, among other things,
sell undivided ownership interests in the Receivables (referred to
herein as "Receivable Interests") to various purchasers and may sell
certificates of beneficial interest in the Receivables in the Trust to
various investors.
0.0.0.0.0.9. Pursuant to the Pooling and Servicing Agreement,
a portion of all Collections of the Receivable Interests and all Loss
Amounts with respect thereto will be allocated to the Receivables
Purchase Interests based on the Allocation Percentage.
0.0.0.0.0.10. Spirit has been requested and is prepared to act
as the Servicer hereunder and has been appointed and agreed to act as
servicer under the Pooling and Servicing Agreement.
0.0.0.0.0.11. This Agreement is one of the "Receivables
Purchase Agreements" referred to in the Pooling and Servicing Agreement
and creates a Receivables Purchase Series thereunder.
0.0.0.0.0.12. Notwithstanding anything to the contrary in this
Agreement, the Agent, the Purchaser, the Banks and the Subordinated
Purchaser hereby acknowledge that their rights and remedies hereunder,
and the rights and remedies of their respective assignees under this
Agreement, may be subject to the limitations set forth in the Pooling
and Servicing Agreement. To the extent that any provision in this
Agreement or in any certificate or document delivered in connection
with this Agreement is inconsistent with any provision under the
Pooling and Servicing Agreement, or in any circumstance in which it is
unclear whether this Agreement or the Pooling and Servicing Agreement
shall control, the provisions contained in the Pooling and Servicing
Agreement shall control, except that with respect to any such
inconsistency between any such provision and Section 2 of this
Agreement (including the defined terms used in such Section 2), this
Agreement shall control.
<PAGE> 8
0.0.0.0.0.13. The Subordinated Purchaser, the Purchaser and
the Banks are prepared to purchase the Receivable Interests on the
terms set forth herein.
0.0.0.0.0.14. The Purchasers and the Banks acknowledge that
the purchase of the Receivable Interests shall not include the right to
sell the Owner's or the Originator's customer lists, the right to use
the Owner's or the Originator's customer lists for any purpose other
than a purpose expressly set forth in this Agreement, or the right to
use any trademarks of the Seller, the Owner, the Originator or the
Servicer or any of their respective Affiliates.
Accordingly, the parties agree as follows:
ARTICLE 1.
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. PURCHASE FACILITY.
1.1.1. On the terms and conditions hereinafter set forth, a Purchaser
may, in its sole discretion, and the Banks shall, ratably in accordance with
their respective Bank Commitments, purchase Purchaser Receivable Interests from
the Seller from time to time during the period from the date hereof to the
Facility Termination Date (in the case of a Purchaser) and to the Commitment
Termination Date (in the case of the Banks). Under no circumstances shall any
Purchaser make any such purchase on any date, or the Banks be obligated to make
any such purchase, if after giving effect to such purchase the aggregate
outstanding Purchaser Capital would exceed the Purchase Limit on such date.
1.1.2. The Subordinated Purchaser shall, on the date of each purchase
of Purchaser Receivable Interests hereunder, be allocated Subordinated
Receivable Interests in the amount determined pursuant to paragraph 3 of Exhibit
II hereto.
1.1.3. The Seller may, upon at least 30 days' prior notice to the
Agent, terminate in whole or, from time to time, reduce in part the unused
portion of the Purchase Limit; provided that each partial reduction shall be in
the amount of at least $1,000,000 or an integral multiple thereof.
<PAGE> 9
SECTION 1.2. MAKING PURCHASES.
1.2.1. Each offer by the Seller to sell Purchaser Receivable Interests
to the Purchaser or the Banks hereunder shall be made, by written notice from
the Seller to the Agent and the Subordinated Purchaser, at least three Business
Days' prior to the date of the proposed sale. Each such notice of an offer to
sell Purchaser Receivable Interests shall specify (i) the amount requested to be
paid to the Seller (such amount, which shall not be less than $1,000,000, being
referred to herein as the initial "Purchaser Capital" of the Purchaser
Receivable Interest then being sold) and (ii) the proposed date of such purchase
(which shall be a Distribution Date). The Agent shall promptly thereafter notify
the Seller whether CRC has determined that it may make a purchase and, if so,
whether all of the terms specified by the Seller are acceptable to the
Purchaser.
1.2.2. If the Purchaser has determined not to make a proposed purchase,
the Agent shall promptly send notice of the proposed purchase to all of the
Banks concurrently by telecopier, telex or cable specifying the date of such
purchase, each Bank's Percentage multiplied by the aggregate amount of Purchaser
Capital of the Purchaser Receivable Interest being purchased, whether the Yield
for the Fixed Period for such Purchaser Receivable Interest is calculated based
on the Eurodollar Rate (which may be selected only if such notice is given at
least two Business Days prior to the purchase date) or the Alternate Base Rate,
and the duration of the Fixed Period for such Purchaser Receivable Interest
(which shall be one day if the Seller has not selected another period).
1.2.3. On the date of each purchase of a Purchaser Receivable Interest,
the Purchaser or the Banks, as the case may be, shall, upon satisfaction of the
applicable conditions set forth in Exhibit II hereto, make available to the
Seller in same day funds, by deposit to the Seller Account no later than 12:00
Noon (New York City time), an amount equal to the initial Purchaser Capital of
such Purchaser Receivable Interest.
1.2.4. Effective on the date of each purchase pursuant to this Section
1.02 and each reinvestment pursuant to Section 2.06(a) hereof, the Seller hereby
sells and assigns to the Agent, for the benefit of the parties making such
purchase or reinvestment, an undivided percentage ownership interest, to the
extent of the Purchaser Receivable Interest
<PAGE> 10
then being purchased, in each Pool Receivable then existing or thereafter
arising and in the Collections with respect thereto.
1.2.5. Notwithstanding the foregoing, a Bank shall not be obligated to
make purchases under this Section 1.02 at any time in an amount which would
exceed such Bank's Bank Commitment less (in the case of any Bank other than
Citibank) the outstanding and unpaid amount of any purchases made by such Bank
under the APA. Each Bank's obligation shall be several, such that the failure of
any Bank to make available to the Seller any funds in connection with any
purchase shall not relieve any other Bank of its obligation, if any, hereunder
to make funds available on the date of such purchase, but no Bank shall be
responsible for the failure of any other Bank to make funds available in
connection with any purchase.
1.2.6. On the date of each purchase pursuant to Section 1.02(a) above,
the Seller shall convey and allocate to the Subordinated Receivable Interest,
from the Unallocated Net Receivables Pool Balance, an amount equal to the excess
(if any) of (i) 16% of the aggregate outstanding Purchaser Capital (after giving
effect to any purchase of a Purchaser Receivable Interest on such date) over
(ii) the aggregate outstanding Subordinated Purchaser Capital (immediately prior
to the purchase of a Purchaser Receivable Interest on such date) (such amount
being referred to herein as the initial "Subordinated Purchaser Capital" of such
Subordinated Receivable Interest). Effective on the date of each such allocation
and each reinvestment on behalf of the Subordinated Purchaser pursuant to
Section 2.06(a) hereof, there is hereby conveyed to, and created in favor of,
the Subordinated Purchaser a subordinated (to the extent set forth in Section
1.02(g) and Article II hereof) undivided percentage ownership interest, to the
extent of the Subordinated Receivable Interest then being allocated, in each
Pool Receivable then existing or thereafter arising and in the Collections with
respect thereto.
1.2.7. The interest of the Purchaser and the Banks in the Pool
Receivables and the Collections with respect thereto shall be pari passu
(ratably in accordance with their respective Purchaser Capital) and shall be
deemed to have a priority senior to any interest of the Subordinated Purchaser
therein. Such priority shall be irrespective of the time, order or method of
attachment or perfection of the respective interests of the Purchasers, the
Banks and the Subordinated Purchaser, or the time or order of the filing of
financing
<PAGE> 11
statements. Until the first day after the later to occur of the
Facility Termination Date or the Commitment Termination Date on which
all amounts described in clauses (i), (ii) and (iv) of the definition
of Final Distribution Date have been paid in full, the Subordinated
Purchaser agrees that it will not commence or continue any default,
foreclosure or liquidation proceedings or remedies in respect of the
Pool Receivables or the Collections.
SECTION 1.3. FEES. The fees set forth in the separate fee
agreement of even date among the Seller, the Owner, the Servicer, the
Subordinated Purchaser and the Agent, as amended or restated from time to time
(the "Fee Letter") shall be payable to the Agent, the Purchaser and the Banks in
the amounts and on the dates set forth therein, subject to the allocation and
priority of distribution of such Collections set forth in Article II hereof.
SECTION 1.4. PAYMENTS AND COMPUTATIONS, ETC.
1.4.1. All amounts to be paid or deposited by the Seller or
the Servicer hereunder shall be paid or deposited no later than 11:00
A.M. (New York City time) on the day when due in same day funds to the
Agent's Account.
1.4.2. The Owner (with respect to payments or deposits to be
paid by the Seller) and the Servicer (with respect to payments or
deposits to be paid by the Servicer) shall, to the extent permitted by
law, pay or cause to be paid interest on any amount not paid or
deposited by the Seller or the Servicer when due hereunder (without
regard to any applicable grace period before such missed payment or
deposit gives rise to an Early Amortization Event hereunder), at an
interest rate per annum equal to 2.0% per annum above the Alternate
Base Rate, payable on demand.
1.4.3. All computations of interest under subsection (b) above
and all computations of Yield, fees, and other amounts hereunder shall
be made on the basis of a year of 360 days for the actual number of
days elapsed. Whenever any payment or deposit to be made hereunder
shall be due on a day other than a Business Day, such payment or
deposit shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of such payment
or deposit.
<PAGE> 12
SECTION 1.5. INCREASED COSTS.
1.5.1. If CNAI, any Purchaser, any Bank, any entity which enters into a
commitment to purchase Purchaser Receivable Interests or interests therein, or
any of their respective Affiliates (each an "Affected Person") determines that
compliance with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected to be
maintained by such Affected Person and such Affected Person determines that the
amount of such capital is increased by or based upon the existence of any
commitment to make purchases of or otherwise to maintain the investment in Pool
Receivables or interests therein related to this Agreement or to the funding
thereof and other commitments of the same type, then, upon demand by such
Affected Person (with a copy to the Agent), the Owner shall immediately pay, or
cause to be paid, to the Agent, for the account of such Affected Person (as a
third-party beneficiary), from time to time as specified by such Affected
Person, additional amounts sufficient to compensate such Affected Person in the
light of such circumstances, to the extent that such Affected Person reasonably
determines such increase in capital to be allocable to the existence of any of
such commitments. A certificate as to such amounts submitted to the Seller, the
Owner, the Servicer and the Agent by such Affected Person shall be conclusive
and binding for all purposes, absent manifest error.
1.5.2. If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
referred to in Section 1.06) in or in the interpretation of any law or
regulation or (ii) compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to a Purchaser or Bank of agreeing to
purchase or purchasing, or maintaining the ownership of Purchaser Receivable
Interests in respect of which Yield is computed by reference to the Eurodollar
Rate, then, upon demand by such Purchaser or Bank (with a copy to the Agent),
the Owner shall immediately pay, or cause to be paid, to the Agent, for the
account of such Purchaser or Bank (as a third-party beneficiary), from time to
time as specified by such Purchaser or Bank, additional amounts sufficient to
compensate such Purchaser or Bank for such increased costs. A certificate as to
such amounts submitted to the Seller, the Owner, the Servicer and the Agent
<PAGE> 13
by such Purchaser or Bank shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 1.6. ADDITIONAL YIELD ON PURCHASER RECEIVABLE
INTERESTS BEARING A EURODOLLAR RATE; BREAKAGE FEE.
1.6.1. The Owner shall pay, or cause to be paid, to any
Purchaser or Bank, so long as such Purchaser or Bank shall be required
under regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional Yield
on the unpaid Purchaser Capital of each Purchaser Receivable Interest
of such Purchaser or Bank during each Fixed Period in respect of which
Yield is computed by reference to the Eurodollar Rate, for such Fixed
Period, at a rate per annum equal at all times during such Fixed Period
to the remainder obtained by subtracting (i) the Eurodollar Rate for
such Fixed Period from (ii) the rate obtained by dividing such
Eurodollar Rate referred to in clause (i) above by that percentage
equal to 100% minus the Eurodollar Rate Reserve Percentage of such
Purchaser or Bank for such Fixed Period, payable on the next succeeding
date on which Yield is payable on such Purchaser Receivable Interest.
Such additional Yield shall be determined by such Purchaser or Bank and
notified to the Seller, the Owner and the Servicer through the Agent
within 30 days after any Yield payment is made with respect to which
such additional Yield is requested. A certificate as to such additional
Yield submitted to the Seller, the Owner and the Servicer and the Agent
by such Purchaser or Bank shall be conclusive and binding for all
purposes, absent manifest error.
1.6.2. If (i) any payment of Purchaser Capital with respect to
a Purchaser Receivable Interest as to which Yield is computed by
reference to the Eurodollar Rate is made by the Seller to or for the
account of any Purchaser(s) or Bank(s) other than on the last day of
the Fixed Period for such Purchaser Receivable Interest, as a result of
a payment pursuant to Section 4.03, or for any other reason, or (ii)
the Termination Date shall occur during any Fixed Period, the Owner
shall, upon demand by such Purchaser or Bank (with a copy to the
Seller, the Servicer and the Agent), immediately pay, or cause to be
paid, to the Agent for the account of such Purchaser or Bank (as a
third-party beneficiary) any amounts required to compensate such
Purchaser or Bank for any additional losses, costs or expenses which it
may reasonably incur as a result of such payment, including, without
limitation, any loss (including loss of anticipated profits), costs or
expenses incurred by reason of the liquidation or
<PAGE> 14
reemployment of deposits or other funds acquired by such Purchaser
or Bank to fund or maintain its interest in such Purchaser Receivable
Interest. A certificate as to such amounts submitted to the Seller, the
Servicer, the Owner and the Agent by such Purchaser or Bank shall be
conclusive and binding for all purposes, absent manifest error.
ARTICLE 2.
ALLOCATION AND DISTRIBUTION
OF COLLECTIONS
SECTION 2.1. GENERAL ALLOCATION PROCEDURES. Pursuant to the
Pooling and Servicing Agreement, the Servicer will allocate to the Receivables
Purchase Interest arising under this Agreement a portion of all Collections of
Pool Receivables and all Loss Amounts for each Due Period, based on the
Allocation Percentage. Collections of Pool Receivables and Loss Amounts which
have been so allocated to the Receivables Purchase Interest arising under this
Agreement shall be allocated and distributed or reallocated among the
Purchasers, the Banks, the Subordinated Purchaser and the Seller as set forth in
this Article II.
SECTION 2.2. ALLOCATION AMONG THE PURCHASERS, THE BANKS, THE
SUBORDINATED PURCHASER AND THE SELLER.
2.2.1. The Servicer shall, on each day on which Collections of
Pool Receivables are received by it which are allocated to the
Receivables Purchase Interest arising under this Agreement, hold such
Collections in trust for the Purchasers, the Banks, the Subordinated
Purchaser and the Seller, and shall allocate such amounts, during each
Due Period, as follows:
2.2.1.1. during the Revolving Period and the
Amortization Period, Allocable Finance Charge Collections will
be allocated to the Purchasers, the Banks and the Subordinated
Purchaser jointly based on the Floating Allocation Percentage
for such Due Period;
2.2.1.2. during the Revolving Period and the
Amortization Period, Allocated Loss Amounts will be allocated
to the Purchasers, the Banks and the Subordinated Purchaser
jointly based on the Floating Allocation Percentage for such
Due Period;
<PAGE> 15
2.2.1.3. during the Revolving Period, Allocable Principal
Collections will be allocated to the Purchasers, the Banks and the
Subordinated Purchaser jointly based on the Floating Allocation
Percentage for such Due Period and the Servicer shall, on behalf of the
Purchasers, the Banks and the Subordinated Purchaser which own such
Receivables Purchase Interest, have the proceeds of the Allocable
Principal Collections attributable to such Receivables Purchase
Interest automatically reinvested in additional undivided percentage
interests in the Pool Receivables pursuant to Section 2.06(a) below;
2.2.1.4. during the Amortization Period, Allocable Principal
Collections will be allocated to the Purchasers, the Banks and the
Subordinated Purchaser jointly based on the Fixed Allocation Percentage
for such Due Period; and
(v) notwithstanding the occurrence of the Final Distribution
Date or the termination of the Trust under the Pooling and Servicing
Agreement, the Purchasers and the Banks shall be entitled to receive
all amounts constituting the Allocation Percentage of Recoveries of
Pool Receivables up to the amount of the unreimbursed Purchaser
Charge-Offs on such date.
2.2.2. Amounts not allocated to the Purchasers, the Banks and the
Subordinated Purchaser jointly as described above will be allocated to the
Seller Interest and deposited into the Seller Account. Amounts allocated under
subsections (a)(iii) and (a)(iv) above for any Due Period are referred to as the
"Total Principal Collections" for such Due Period.
2.2.3. Amounts which are allocated to the Purchasers, the Banks and the
Subordinated Purchaser jointly as described above will be deposited into the
Collection Account on the date required by Section 4.3(a) of the Pooling and
Servicing Agreement. The portion of such amounts constituting Allocable Finance
Charge Collections shall remain on deposit in the Collection Account until the
next applicable Distribution Date, when such Allocable Finance Charge
Collections shall be distributed pursuant to Sections 2.03 and 2.04. The portion
of such amounts constituting Total Principal Collections shall (i) during the
Revolving Period, be distributed from the Collection Account daily pursuant to
Section 2.06(a), and (ii) during the Amortization Period, remain on deposit in
the Collection Account until the next applicable Distribution Date, when such
Total Principal
<PAGE> 16
Collections shall be distributed pursuant to Section 2.06(b).
Notwithstanding the two preceding sentences, the Servicer shall, at the
request of the Agent at any time following an Early Amortization Event,
deposit Collections allocated jointly to the Purchasers, the Banks and
the Subordinated Purchaser pursuant to this Section 2.02 into the
Collection Account within one Business Day after receipt thereof and
deposit or cause such Collections to be deposited into the Agent's
Account within one Business Day of deposit into the Collection Account.
SECTION 2.3. ALLOCATION AND DISTRIBUTION OF FINANCE CHARGES.
2.3.1. On each Distribution Date, the Servicer will allocate
all Allocable Finance Charge Collections for the immediately preceding
Due Period held by it for the Purchasers, the Banks and the
Subordinated Purchaser jointly pursuant to Section 2.02 above to the
Purchasers and the Subordinated Purchaser pro rata based on their
relative Purchaser Capital and Subordinated Purchaser Capital, as the
case may be, as of the end of the second preceding Due Period.
2.3.2. On each Distribution Date, the Servicer shall further
allocate and distribute Allocable Finance Charge Collections allocated
to the Purchasers and the Banks pursuant to Section 2.03(a) in the
following priority:
2.3.2.1. first, an amount equal to the accrued but
unpaid Yield to such Distribution Date with respect to each
Purchaser Receivable Interest plus any additional interest
with respect to Yield that was due with respect to such
Purchaser Receivable Interest but not paid on a prior
Distribution Date will be deposited into the Agent's Account
on behalf of the Purchasers and the Banks owning such
Purchaser Receivable Interest;
2.3.2.2. second, an amount equal to any accrued but
unpaid amounts, fees and expenses (including amounts payable
under the Fee Letter and (if the Agent shall notify the
Servicer at least two Business Days prior to such Distribution
Date) payments under Sections 1.05, 1.06, 4.01, 4.02, 4.03 and
7.04 of this Agreement) due and payable under this Agreement
with respect to each Purchaser Receivable Interest will be
deposited into the Agent's Account, for the Agent's own
account or on behalf of the Purchasers and the Banks owning
such Purchaser Receivable Interest, as the case may be;
<PAGE> 17
2.3.2.3. third, an amount equal to the Purchaser Loss
Amount for such Distribution Date shall be allocated and
distributed, in accordance with the provisions of Section 2.06
hereof, in the same manner as the portion of Total Principal
Collections allocated to the Purchasers and the Banks for such
Distribution Date;
2.3.2.4. fourth, if the Servicer is neither Spirit
nor an Affiliate of Spirit, an amount equal to the Purchaser
Servicer Fee for such Distribution Date will be paid to the
Servicer; and
2.3.2.5. fifth, the balance, if any, will constitute
a portion of the Excess Finance Charge Collections for such
Distribution Date and will be allocated as set forth in
Section 2.04 hereof.
2.3.3. Upon receipt of funds deposited into the Agent's
Account pursuant to subsection (b) above, the Agent will distribute
such funds to the relevant Purchasers and Banks or retain such funds
for its own account, as the case may be.
2.3.4. On each Distribution Date, the Servicer shall further
allocate and distribute Allocable Finance Charge Collections allocated
to the Subordinated Purchaser pursuant to Section 2.03(a) in the
following priority:
2.3.4.1. first, if the Servicer is neither Spirit nor
an Affiliate of Spirit, an amount equal to the Subordinated
Purchaser Servicer Fee for such Distribution Date will be
allocated and paid to the Servicer; and
2.3.4.2. second, the balance, if any, will constitute
a portion of Excess Finance Charge Collections for such
Distribution Date and will be allocated and distributed as set
forth in Section 2.04 hereof.
SECTION 2.4. ALLOCATION AND DISTRIBUTION OF EXCESS FINANCE
CHARGE COLLECTIONS. On each Distribution Date, the Servicer will allocate and
distribute all amounts, if any, specified pursuant to Section 2.03(b)(v) and
Section 2.03(d)(ii) (the "Excess Finance Charge Collections" for such
Distribution Date), in the following priority:
2.4.1. first, an amount equal to the Required Amount, if any,
with respect to such Due Period will be deposited into the Agent's
Account, and upon receipt of such funds, the Agent shall apply such
funds to the Required Amount, in the order set forth in Section 2.05(a)
hereof;
<PAGE> 18
2.4.2. second, an amount equal to the aggregate amount of Purchaser
Charge-Offs which have not been previously reimbursed will be allocated and
distributed (i) during the Revolving Period, in accordance with the provisions
of Section 2.06(a) hereof, in the same manner as the portion of Total Principal
Collections allocated to the Purchasers and the Banks for such Distribution
Date, and (ii) during the Amortization Period, in accordance with the provisions
of Section 2.06(b) hereof, in the same manner as Purchaser Principal Collections
for such Distribution Date;
2.4.3. third, an amount equal to the Subordinated Purchaser Loss Amount
for such Distribution Date will be allocated and distributed (i) during the
Revolving Period, in accordance with the provisions of Section 2.06(a) hereof,
in the same manner as the portion of Total Principal Collections allocated to
the Subordinated Purchaser for such Distribution Date, and (ii) during the
Amortization Period, in accordance with the provisions of Section 2.06(b)
hereof, in the same manner as the portion of Total Principal Collections
allocated to the Subordinated Purchaser for such Distribution Date;
2.4.4. fourth, if the Servicer is Spirit or an Affiliate of Spirit, an
amount equal to the sum of the Purchaser Servicer Fee and the Subordinated
Purchaser Servicer Fee for such Distribution Date will be allocated and paid to
the Servicer;
2.4.5. fifth, an amount equal to the aggregate amount by which the
Subordinated Purchaser Capital has been reduced pursuant to clauses (c), (d) and
(e) of the definition of "Subordinated Purchaser Capital" (but not in excess of
the aggregate amount of such reductions which have not been previously
reimbursed) will be allocated and distributed (i) during the Revolving Period,
in accordance with the provisions of Section 2.06(a) hereof, in the same manner
as the portion of Total Principal Collections allocated to the Subordinated
Purchaser for such Distribution Date, and (ii) during the Amortization Period,
in accordance with the provisions of Section 2.06(b) hereof, in the same manner
as the portion of Total Principal Collections allocated to the Subordinated
Purchaser for such Distribution Date;
2.4.6. sixth, an amount equal to the Subordinated Purchaser Yield will
be allocated and deposited into the Subordinated Purchaser Account; and
<PAGE> 19
2.4.7. seventh, the balance, if any, will be allocated to the
Seller Interest and deposited into the Seller Account.
SECTION 2.5. REQUIRED AMOUNT; SUBORDINATED PRINCIPAL
COLLECTIONS; CHARGE-OFFS.
2.5.1. On the second Business Day preceding each Distribution
Date, the Servicer will determine the amount (the "Required Amount"),
if any, by which:
2.5.1.1. the sum of:
2.5.1.1.1. The accrued but unpaid Yield to
such Distribution date,
2.5.1.1.2. any additional interest with
respect to Yield that was due but not paid on a prior
Distribution Date,
2.5.1.1.3. the amount of any accrued but
unpaid amounts, fees or expenses due and payable to
the Purchasers, the Banks or the Agent under this
Agreement (including amounts payable under the Fee
Letter and (if the Agent shall have notified the
Servicer at least two Business Days prior to such
Distribution Date) payments under Sections 1.05,
1.06, 4.01, 4.02, 4.03 and 7.04 of this Agreement)
accrued to such Distribution Date,
2.5.1.1.4. The Purchaser Loss Amount for the
related Due Period, and
2.5.1.1.5. if Spirit or an Affiliate of
Spirit is no longer the Servicer, the Purchaser
Servicer Fee accrued to such Distribution Date;
exceeds:
2.5.1.2. the product of:
2.5.1.2.1. Allocated Finance Charges, and
2.5.1.2.2. the Purchaser Percentage.
<PAGE> 20
The Servicer will give the Agent notice of the Required Amount on each such
determination date on which the Servicer determines that the Required Amount is
greater than zero.
2.5.2. If the Required Amount is greater than zero, Excess
Finance Charge Collections for the related Distribution Date will be
allocated to and used to fund the Required Amount with respect to such
Distribution Date pursuant to Section 2.04(a) hereof.
2.5.3. If Excess Finance Charge Collections with respect to
such Distribution Date are less than the Required Amount, an amount up
to the amount of the Subordinated Principal Collections for such
Distribution Date will be allocated to and used to fund the remaining
Required Amount. The Subordinated Purchaser Capital, if any, will be
reduced by the amount of Subordinated Principal Collections allocated
to fund the Required Amount. In the event that such reduction would
cause the Subordinated Purchaser Capital to be a negative number, the
Subordinated Purchaser Capital will be reduced to zero, and the
Purchaser Capital will be reduced by the amount by which the
Subordinated Purchaser Capital would have been reduced below zero (but
not by more than the Purchaser Loss Amount for such Due Period).
2.5.4. If Subordinated Principal Collections with respect to
any Due Period are insufficient to fund the remaining Required Amount
for such Due Period, then a portion of the Subordinated Purchaser
Capital, if any, equal to such insufficiency (but not in excess of the
Purchaser Loss Amount for such Due Period) will be allocated and
distributed to the Purchasers and the Banks, and the Subordinated
Purchaser Capital will be reduced by the amount so allocated and
distributed. In the event that such reduction would cause the
Subordinated Purchaser Capital to be a negative number, the
Subordinated Purchaser Capital will be reduced to zero, and the
Purchaser Capital will be reduced by the amount by which the
Subordinated Purchaser Capital would have been reduced below zero (but
not by more than the Purchaser Loss Amount for such Due Period) and
such amount will be treated as a Purchaser Charge-Off.
2.5.5. Such reductions of the Subordinated Purchaser Capital
shall thereafter be reimbursed and the Subordinated Purchaser Capital
increased (but not by an amount in excess of the aggregate reductions
of the Subordinated Purchaser Capital) on each Distribution Date by the
amount of Excess Finance Charge Collections for such Distribution Date
<PAGE> 21
allocated and available for that purpose pursuant to Section 2.04(e)
hereof.
2.5.6. Purchaser Charge-Offs shall be reimbursed and the
Purchaser Capital increased (but not by an amount in excess of the
aggregate Purchaser Charge-Offs) on any Distribution Date by the amount
of Excess Finance Charge Collections allocated and available for that
purpose pursuant to Section 2.04(b) hereof.
SECTION 2.6. ALLOCATION AND DISTRIBUTION OF ALLOCABLE
PRINCIPAL COLLECTIONS.
2.6.1. On each day during the Revolving Period on which
Collections of Pool Receivables are received by it, the Servicer will
allocate Total Principal Collections to the Purchasers, the Banks and
the Subordinated Purchaser pro rata based on their relative Purchaser
Capital or Subordinated Purchaser Capital, as the case may be, as of
the end of the immediately preceding Due Period. The Servicer shall, on
each day during the Revolving Period on which Total Principal
Collections are allocated pursuant to the preceding sentence, unless
the Servicer shall then have knowledge that any of the conditions
precedent set forth in paragraph 2 of Exhibit II hereto has not been
satisfied, reinvest with the Seller, on behalf of the Purchasers, the
Banks and the Subordinated Purchaser, respectively, in additional
undivided percentage interests in the Pool Receivables, the amount of
the Total Principal Collections so allocated to the Purchasers, the
Banks and the Subordinated Purchaser, as the case may be; provided,
however, that such reinvestment shall be effected in a manner such that
the Purchaser Capital and the Subordinated Purchaser Capital
immediately following such reinvestment are equal to the Purchaser
Capital and the Subordinated Purchaser Capital immediately prior to the
allocation of Total Principal Collections on such day pursuant to the
first sentence of this Section 2.06(a).
2.6.2. On each Distribution Date with respect to the
Amortization Period, the portion of the Total Principal Collections
received by the Servicer during the preceding Due Period not used to
fund any portion of the Required Amount pursuant to Section 2.05(c)
hereof (the "Available Principal Collections") will be allocated and
distributed by the Servicer in the following priority:
2.6.2.0.0.0.0.1. first, an amount equal to the lesser
of (x) such Available Principal Collections and (y) the
Adjusted Purchaser Capital for such Distribution Date
<PAGE> 22
will be allocated to the Purchaser Receivable Interests and deposited
into the Agent's Account, and upon receipt of such funds, the Agent
shall distribute such funds to the Purchasers and the Banks;
2.6.2.0.0.0.0.2. second, an amount equal to the lesser of the
balance of such Available Principal Collections and the Subordinated
Purchaser Capital for such Distribution Date will be allocated to the
Subordinated Purchaser Receivable Interests and deposited into the
Subordinated Purchaser Account; and
2.6.2.0.0.0.0.3. third, the balance, if any, will be allocated
to the Seller Interest and deposited into the Seller Account.
<PAGE> 23
SECTION 2.7. DILUTION AMOUNTS.
2.7.1. On the last day of each Due Period, the aggregate amount of
Principal Receivables used to calculate the Seller Interest will be reduced by
an amount equal to the sum of the Series Dilution Amount for this Series and for
all other Receivables Purchase Series (such reduction to be in addition to the
reductions required by Section 4.3(d) of the Pooling and Servicing Agreement).
If such reduction would cause the Seller Interest to be less than the Aggregate
Minimum Seller Interest (as defined in the Pooling and Servicing Agreement) (the
amount by which the Seller Interest is reduced below the Aggregate Minimum
Seller Interest is referred to herein as the "Dilution Deficit"), then the Owner
shall calculate an amount (the "Series Dilution Deficit") equal to the lesser of
the Dilution Deficit and the Series Dilution Amount for this Series, and shall
promptly, but in no event later than 10 Business Days after the last day of such
Due Period, either (i) deposit into the Agent's Account in immediately available
funds an amount equal to such Series Dilution Deficit, which deposit shall be
treated as Allocable Principal Collections with respect to such Due Period and
shall be applied in accordance with this Article II, or (ii) convey Principal
Receivables arising in Additional Accounts to the Trust in an aggregate amount
at least equal to such Series Dilution Deficit; provided, that if the Owner
shall fail to either deposit the Series Dilution Deficit into the Agent's
Account or convey Principal Receivables arising in Additional Accounts in an
aggregate amount at least equal to such Series Dilution Deficit with respect to
any Due Period within ten days after the Owner shall be required to make such a
deposit or conveyance, then if such Series Dilution Deficit exceeds the Minimum
Seller Interest,(i) the Subordinated Purchaser Capital will be reduced by an
amount equal to the lesser of such excess and the Subordinated Purchaser Capital
and (ii) the positive difference, if any, between such excess and the
Subordinated Purchaser Capital will be treated as a Purchaser Charge-Off and the
Purchaser Capital will be reduced by such amount.
2.7.2. If the Pool Receivables shall include any Discount Option
Receivables on any date when the Owner is required, pursuant to Section 2.07(a)
of this Agreement, to deposit any amount into the Agent's Account or to convey
Principal Receivables to the Trust, the Owner shall on such date make an
additional deposit into the Agent's Account or convey Principal Receivables
arising in Additional Accounts to the Trust, in each case in an amount equal to
the difference
<PAGE> 24
between (i) the amount the Owner would have been required to deposit or
convey on such date pursuant to Section 2.07(a) if none of the Pool
Receivables had been Discount Option Receivables, minus (ii) the amount
actually deposited or conveyed by the Owner on such date pursuant to
Section 2.07(a).
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EARLY AMORTIZATION EVENTS
SECTION 3.1. REPRESENTATIONS AND WARRANTIES; COVENANTS.
3.1.1. Each of the Trustee, the Subordinated Purchaser, the
Owner, the Servicer and the Originator hereby makes the representations
and warranties set forth for such party in Exhibit III hereto.
3.1.2. Each of the Trustee, the Owner, the Servicer, and the
Originator hereby agrees to perform and observe the covenants set forth
for such party in Exhibit IV hereto.
3.1.3. In addition, the Servicer hereby agrees to perform and
observe the covenants set forth in Exhibit V hereto.
SECTION 3.2. EARLY AMORTIZATION EVENTS. If any of the Early
Amortization Events set forth in Exhibit VI hereto shall occur and be
continuing, then, and in any such event, any or all of the following actions may
be taken by notice to the Owner, the Seller and the Servicer: (x) the Purchasers
or the Agent may declare the Facility Termination Date to have occurred (in
which case the Facility Termination Date shall be deemed to have occurred) and
(y) the Agent may declare the Commitment Termination Date to have occurred (in
which case the Commitment Termination Date shall be deemed to have occurred);
provided that, automatically upon the occurrence of any event (without any
requirement for the passage of time or the giving of notice) described in
paragraph (g) of Exhibit VI, the Facility Termination Date and the Commitment
Termination Date shall occur. Upon any such declaration or upon any such
automatic termination, and subject to any limitations on the Purchasers' and the
Banks' rights and remedies in respect of the Pool Receivables under the Pooling
and Servicing Agreement or pursuant to the other terms of this Agreement, the
Purchasers, the Banks and the Agent shall
<PAGE> 25
have, in addition to the rights and remedies which they may have under this
Agreement, all other rights and remedies provided under the UCC with respect to
the Receivable Interests purchased by them hereunder and under other applicable
law, which rights and remedies shall be cumulative; provided, however, that so
long as any Investor Certificates shall be outstanding, the Agent, the
Purchasers and the Banks shall not exercise such other rights and remedies under
the UCC and other applicable law unless the Agent shall have obtained and
delivered to the Trustee an Opinion of Counsel to the effect that the exercise
of such rights and remedies shall not materially and adversely affect the
interests of the holders of the Investor Certificates.
ARTICLE 4.
INDEMNIFICATION; PURCHASE OF
INELIGIBLE RECEIVABLES
SECTION 4.1. INDEMNITIES BY THE OWNER. Without limiting any
other rights that the Agent, the Purchaser Representative, the Seller, the
Trustee, any Purchaser, any Bank or any of their respective Affiliates (each, an
"Indemnified Party") may have under this Agreement or under applicable law, the
Owner hereby agrees to indemnify each Indemnified Party from and against any and
all claims, losses and liabilities (including reasonable attorneys' fees) (all
of the foregoing being collectively referred to as "Indemnified Amounts")
arising out of or resulting from this Agreement or the use of proceeds of
purchases or reinvestments or the ownership of Purchaser Receivable Interests or
in respect of any Receivable or any Cardholder Agreement, excluding, however,
(a) Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party or any of its Affiliates, (b)
recourse (except as otherwise specifically provided in this Agreement) for
uncollectible Receivables or (c) any income taxes incurred by such Indemnified
Party arising out of or as a result of this Agreement or the ownership of
Purchaser Receivable Interests or in respect of any Receivable or any Cardholder
Agreement. Without limiting or being limited by the foregoing, the Owner shall
pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from any of the following:
4.1.0.1. the creation of an undivided percentage ownership
interest in any Receivable (A) which purports to be part of
the Net Receivables Pool Balance but which is not, at the date
of the creation of such
<PAGE> 26
interest, an Eligible RPA Receivable or (B) the Obligor of
which is an Affiliate of any of the parties hereto or is a
government or a governmental subdivision or agency;
4.1.0.2. reliance on (A) any written representation or
warranty or statement made or deemed made by the Seller, the
Owner or the Originator (or any of their respective officers)
on or prior to the date of this Agreement under or in
connection with this Agreement, or any exhibit, certificate or
report delivered pursuant hereto or thereto or in connection
herewith or therewith, which shall have been incorrect in any
material respect when made, and (B) thereafter, any
representation or warranty or statement made or deemed made by
the Seller, the Owner or the Originator (or any of their
respective officers) under or in connection with this
Agreement which shall have been incorrect in any material
respect when made;
4.1.0.3. the failure by the Seller, the Owner or the
Originator to comply with any applicable law, rule or
regulation with respect to any Pool Receivable or the related
Cardholder Agreement (including, without limitation,
Regulation Z of the Board of Governors of the Federal Reserve
System, the Federal Consumer Protection Act (including,
without limitation, the Federal Truth in Lending Act), the
Fair Credit Billing Act, and all other laws, rules and
regulations relating to usury, consumer protection, truth in
lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and
privacy); or the failure of any Pool Receivable or the related
Cardholder Agreement to conform to any such applicable law,
rule or regulation;
4.1.0.4. the failure to vest in the relevant Purchaser or Bank
a perfected undivided percentage ownership interest in the
Receivables in, or purporting to be in, the Receivables Pool
and the Collections in respect thereof, free and clear of any
Adverse Claim (except for interests created therein pursuant
to the Pooling and Servicing Agreement);
4.1.0.5. the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Receivables in, or
purporting to be in, the
<PAGE> 27
Receivables Pool and the Collections in respect thereof,
whether at the time of any purchase or reinvestment or at any
subsequent time;
4.1.0.6. any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense
based on such Receivable or the related Cardholder Agreement
not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms),
or any other claim resulting from the sale of the merchandise
or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
4.1.0.7. any failure of the Seller, the Owner or the
Originator to perform its duties or obligations in accordance
with the provisions hereof or of the Pooling and Servicing
Agreement or the Purchase Agreement or to perform its duties
or obligations under the Cardholder Agreements;
4.1.0.8. any products liability or other claim arising out of
or in connection with merchandise, insurance or services which
are the subject of any Cardholder Agreement;
4.1.0.9. the commingling of Collections of Pool Receivables at
any time with other funds;
4.1.0.10. any action or omission by the Owner, the Originator
or the Seller reducing or impairing the rights of any
Purchaser or any Bank with respect to any Pool Receivable or
the value of any Pool Receivable (including, without
limitation, any cancellation, modification or netting of any
Receivable by the Owner, the Originator or the Seller); or
4.1.0.11. any investigation, litigation or proceeding related
to this Agreement or the use of proceeds of purchases or
reinvestments or the ownership of Purchaser Receivable
Interests or in respect of any Receivable or Cardholder
Agreement.
SECTION 4.2. INDEMNITIES BY THE SERVICER. Without limiting any
other rights that any Indemnified Party may have under this Agreement or under
applicable law, the Servicer hereby
<PAGE> 28
agrees to indemnify each Indemnified Party from and against, and to pay on
demand to each Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against, any and all Indemnified Amounts relating to
or resulting from any of the following:
4.2.0.1. reliance on (A) any written representation or
warranty or statement made or deemed made by the Servicer (or
any of its officers) on or prior to the date of this Agreement
under or in connection with this Agreement, or any exhibit,
certificate or report delivered pursuant hereto or in
connection herewith, which shall have been incorrect in any
material respect when made, and (B) thereafter, any
representation or warranty or statement made or deemed made by
the Servicer (or any of its officers) under or in connection
with this Agreement which shall have been incorrect in any
material respect when made;
4.2.0.2. the failure by the Servicer to comply with any
applicable law, rule or regulation with respect to any Pool
Receivable or the related Cardholder Agreement (including,
without limitation, Regulation Z of the Board of Governors of
the Federal Reserve System, the Federal Consumer Protection
Act (including, without limitation, the Federal Truth in
Lending Act), the Fair Credit Billing Act, and all other laws,
rules and regulations relating to usury, consumer protection,
truth in lending, fair credit billing, fair credit reporting,
equal credit opportunity, fair debt collection practices and
privacy);
4.2.0.3. any claim relating to collection activities with
respect to any Pool Receivable;
4.2.0.4. any failure of the Servicer or the Administrative
Servicer to perform its duties or obligations in accordance
with the provisions hereof or of the Administrative Servicer
Agreement or of the Pooling and Servicing Agreement;
4.2.0.5. any action or omission by the Servicer reducing or
impairing the rights of any Purchaser or any Bank with respect
to any Pool Receivable or the value of any Pool Receivable;
excluding, however, (a) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified Party or any of
its Affiliates, (b) recourse
<PAGE> 29
(except as otherwise specifically provided in this Agreement) for uncollectible
Receivables or (c) any income taxes incurred by such Indemnified Party arising
out of or as a result of this Agreement or the ownership of Receivable Interests
or in respect of any Receivable or any Cardholder Agreement.
SECTION 4.3. PURCHASE OF INELIGIBLE AND CERTAIN OTHER
RECEIVABLES.
4.3.1. The Owner agrees to make payment when due of all
deposits which the Owner is required to make pursuant to Sections
2.4(d)(iii) and 2.4(e) of the Pooling and Servicing Agreement. Any
amount deposited by the Owner in the Collection Account pursuant to
Section 2.4(d)(iii) or 2.4(e) of the Pooling and Servicing Agreement,
which deposit is made on account of the Receivable Interests created
under this Agreement, shall be deemed to be a Collection in respect of
the related Pool Receivable as to which such deposit is made, and the
amount of each such Collection shall be applied in accordance with
Article II hereof. If any such deposit is made after the end of a Due
Period but on or prior to the first Distribution Date following the end
of such Due Period, such deposit shall be deemed to be a Collection
received during such Due Period.
4.3.2. If the Pool Receivables shall include any Discount
Option Receivables on any date when the Owner is required, pursuant to
Section 2.4(d)(iii) or 2.4(e) of the Pooling and Servicing Agreement,
to deposit any amount into the Collection Account on account of the
Receivable Interests created under this Agreement, the Owner shall make
an additional deposit into the Collection Account on such date in an
amount equal to the difference between (i) the amount the Owner would
have been required to deposit into the Collection Account on such date
on account of such Receivable Interests pursuant to the Pooling and
Servicing Agreement if none of the Pool Receivables had been Discount
Option Receivables, minus (ii) the amount actually deposited by the
Owner into the Collection Account on such date on account of such
Receivable Interests pursuant to the Pooling and Servicing Agreement.
<PAGE> 30
SECTION 4.4. REASSIGNMENT OF RECEIVABLES AND RECEIVABLE
INTERESTS.
4.4.1. If, pursuant to Section 2.4(d) of the Pooling and
Servicing Agreement, any Receivables that are "Ineligible Receivables"
(as defined in the Pooling and Servicing Agreement) are required to be
assigned by the Seller to the Owner, each Purchaser, each Bank and the
Subordinated Purchaser hereby assigns such Receivables to the extent of
its Receivable Interest to the Seller, effective upon and
simultaneously with the assignment by the Seller of such Receivable to
the Owner in accordance with the Pooling and Servicing Agreement,
subject to the prior payment by the Owner of the amounts required under
the Pooling and Servicing Agreement.
4.4.2. If, pursuant to Section 2.4(e) of the Pooling and
Servicing Agreement, all Receivable Interests are required to be
assigned by the Seller to the Owner, each Purchaser, each Bank and the
Subordinated Purchaser hereby assigns its Receivable Interest to the
Seller, effective upon and simultaneously with the assignment by the
Seller of the Receivables to the Owner in accordance with the Pooling
and Servicing Agreement, subject to the prior payment by the Owner of
the amounts required under the Pooling and Servicing Agreement.
4.4.3. If, pursuant to Section 9.2 of the Pooling and
Servicing Agreement, all Receivables are to be sold by the Seller, each
Purchaser, each Bank and the Subordinated Purchaser hereby assigns its
Receivable Interest to the Seller, effective upon and simultaneously
with the sale by the Seller of the Receivables in accordance with the
Pooling and Servicing Agreement.
<PAGE> 31
SECTION 4.5. REPURCHASE OF PURCHASER RECEIVABLE INTERESTS. On
any Distribution Date on or after the Facility Termination Date and the
Commitment Termination Date, the Owner may, upon 30 days' prior notice to the
Agent, purchase all, but not less than all, of the Purchaser Receivable
Interests outstanding on such Distribution Date, in accordance with the terms
specified in Section 12.2(a) of the Pooling and Servicing Agreement, provided
that on such Distribution Date (a) the Subordinated Purchaser Capital has not
been reduced to zero, and (b) the sum of the Purchaser Capital plus the
Subordinated Purchaser Capital is equal to or less than 5% of the highest
Purchase Limit theretofore in effect under this Agreement. The deposit required
in connection with any such purchase shall be made to the Agent's Account, for
the account of the relevant Purchaser(s) and Bank(s), and shall be in an amount
equal to the Purchaser Capital plus all Yield accrued thereon through the date
of such purchase. The Owner shall also pay to the Agent, on the date of any such
purchase, for the account of the Agent and the relevant Purchaser(s) and
Bank(s), Indemnified Parties and Affected Persons as the case may be, all
accrued fees, costs and expenses and Indemnified Amounts payable hereunder to
the Agent, the Purchasers, the Banks, Indemnified Parties and/or Affected
Persons.
ARTICLE 5.
THE SERVICER
SECTION 5.1. DESIGNATION OF THE SERVICER; DELEGATION OF
DUTIES.
5.1.1. Each of the Seller, the Subordinated Purchaser, the
Purchasers, the Banks and the Agent hereby confirms that the Person
appointed from time to time to act as Servicer under the Pooling and
Servicing Agreement, initially Spirit, shall act as its agent and as
agent for the holders of the Investor Certificates in servicing the
Pool Receivables and the Collections. The parties hereto confirm that
it is impracticable to have more than one Servicer servicing the Pool
Receivables and, accordingly, all servicing activities described in the
Pooling and Servicing Agreement shall be the responsibility of the
Servicer and shall be performed in accordance with the Pooling and
Servicing Agreement. Spirit as the initial Servicer hereby confirms,
for the benefit of the parties hereto, that it shall perform the duties
and
<PAGE> 32
obligations of the Servicer pursuant to the terms of the Pooling and
Servicing Agreement.
5.1.2. In accordance with Section 10.2 of the Pooling and
Servicing Agreement, the Servicer may be terminated from time to time.
Any Successor Servicer shall be appointed by the Trustee in accordance
with Section 10.2 of the Pooling and Servicing Agreement and any
Successor Servicer so appointed shall act as the Servicer.
5.1.3. The Servicer may subcontract with any other Person,
with the prior consent of the Agent (which consent will not be
unreasonably withheld), for the administration and collection of the
Pool Receivables; provided, however, that such subcontract shall not
affect the Servicer's liability for performance of its duties and
obligations pursuant to the terms hereof and of the Pooling and
Servicing Agreement. The Agent hereby acknowledges and consents to the
continuation of Alliance Data Services, Inc. as the Administrative
Servicer pursuant to the terms and conditions set forth in the
Administrative Servicer Agreement.
SECTION 5.2. ADMINISTRATION AND COLLECTION OF THE POOL
RECEIVABLES. In addition to performing the duties undertaken pursuant to the
Pooling and Servicing Agreement, the Servicer shall conduct the administration
and collection of the Pool Receivables in accordance with the provisions of
Exhibit V.
SECTION 5.3. SERVICER FEE. The Servicer shall be paid a
servicing fee (the "Servicer Fee") at the per annum rate of 2.0% (the "Servicing
Fee Rate") on the average daily Purchaser Capital and Subordinated Purchaser
Capital of each Receivable Interest, from the date of purchase of such
Receivable Interest until the date on which such Purchaser Capital and
Subordinated Purchaser Capital is reduced to zero, payable on each Distribution
Date for the immediately preceding Settlement Period. The Servicer Fee shall be
payable only from Collections pursuant to, and subject to the priority of
payment set forth in, Article II of the Agreement.
<PAGE> 33
ARTICLE 6.
THE PURCHASER REPRESENTATIVE
SECTION 6.1. DESIGNATION OF THE PURCHASER REPRESENTATIVE.
6.1.1. CNAI is hereby designated as, and hereby agrees to
perform the duties and obligations of, the Purchaser Representative
pursuant to the terms hereof and (with respect to the Receivables
Purchase Series arising in connection with this Agreement) pursuant to
the Pooling and Servicing Agreement.
6.1.2. The Purchasers, the Banks, the Subordinated Purchaser
and the Agent hereby appoint the Purchaser Representative, from time to
time designated pursuant to this Section 6.01, as the representative
for themselves and for the Purchasers and the Banks to perform the
duties and obligations of the Purchaser Representative on their behalf
under the Pooling and Servicing Agreement.
6.1.3. The Agent may, by notice to the Seller, the Owner, the
Subordinated Purchaser and the Servicer, designate another Person
(including, without limitation, the Agent itself) to succeed CNAI as
the Purchaser Representative if such Person shall consent and agree to
the terms hereof and of the Pooling and Servicing Agreement.
SECTION 6.2. DUTIES OF THE PURCHASER REPRESENTATIVE.
6.2.1. The Purchaser Representative shall furnish to each
Purchaser, each Bank and to the Subordinated Purchaser a copy of each
notice, instrument or other document received by it in connection with
this Agreement or the Pooling and Servicing Agreement within a
reasonable period of time after receipt thereof.
6.2.2. The Purchaser Representative shall, on behalf of the
Purchasers, the Banks and the Subordinated Purchaser, direct the time,
method and place of exercising any right or remedy available to the
Purchasers, the Banks and/or the Subordinated Purchaser under the
Pooling and Servicing Agreement and take such other actions under the
Pooling and Servicing Agreement as could be taken by the Purchasers,
the Banks and/or the Subordinated Purchaser and as are, in the sole
discretion of the Purchaser Representative, necessary or desirable to
effectuate the purposes of this Agreement; provided, however, that the
Purchaser Representative shall not
<PAGE> 34
be required to take any action which exposes the Purchaser
Representative to personal liability or which is contrary to this
Agreement or applicable law.
SECTION 6.3. LIMITATION ON PURCHASER REPRESENTATIVE LIABILITY,
ETC.
6.3.1. Neither the Purchaser Representative nor any of its
directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Purchaser Representative:
6.3.1.1. may treat the Purchaser of or the Bank which
funded any purchase of any Purchaser Receivable Interest as
the holder thereof, and may treat the Subordinated Purchaser
as the holder of the Subordinated Receivable Interest, until
the Purchaser Representative receives written notice of the
assignment or transfer thereof signed by such Person and in
form satisfactory to the Purchaser Representative;
6.3.1.2. may consult with legal counsel (including
counsel for the Seller, the Owner, the Originator or the
Servicer), independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts;
6.3.1.3. makes no warranty or representation to any
Purchaser, any Bank or to the Subordinated Purchaser and shall
not be responsible to any Purchaser, any Bank or to the
Subordinated Purchaser for any statements, warranties or
representations made in or in connection with this Agreement,
the Pooling and Servicing Agreement or the Purchase Agreement;
6.3.1.4. shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement, the Pooling
and Servicing Agreement or the Purchase Agreement on the part
of the Seller, the Owner, the Originator or the Servicer or to
inspect the property (including the books and records) of the
Seller, the Owner or the Servicer;
<PAGE> 35
6.3.1.5. shall not be responsible to any Purchaser,
any Bank or the Subordinated Purchaser for the due execution,
legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement, the Pooling and Servicing
Agreement or the Purchase Agreement or any instrument or
document furnished pursuant hereto; and
6.3.1.6. shall incur no liability under or in respect
of this Agreement, the Pooling and Servicing Agreement, the
Purchase Agreement or any such other document or instrument by
acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram) believed by
it to be genuine and signed or sent by the proper party or
parties.
6.3.2. With respect to rights and obligations under this Agreement and
as the Purchaser or a Bank hereunder, CRC shall have the same rights and powers
under this Agreement, the Pooling and Servicing Agreement, the Purchase
Agreement or any such other document or instrument as any other Purchaser or
Bank and may exercise the same as though CNAI were not the Purchaser
Representative hereunder. CNAI and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Seller, the Owner or the Servicer, any of their respective
Affiliates and any Person or entity who may do business with or own securities
of the Seller, the Owner or the Servicer or any of its Affiliates, all as if
CNAI were not the Purchaser Representative and without any duty to account
therefor to the Purchasers, the Banks or the Subordinated Purchaser.
6.3.3. The Subordinated Purchaser acknowledges that it has,
independently and without reliance upon the Purchaser Representative and based
on such financial statements and other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. The Subordinated Purchaser also acknowledges that it will,
independently and without reliance upon the Purchaser Representative or any
other Purchaser or Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement, the Pooling and Servicing
Agreement, the Purchase Agreement and any other agreement or other document.
<PAGE> 36
ARTICLE 7.
MISCELLANEOUS
SECTION 7.1. AMENDMENTS, WAIVERS, ETC.
7.1.1. No amendment or waiver of any provision of this Agreement or
consent to any departure by the Seller, the Owner, the Servicer or the
Subordinated Purchaser therefrom shall be effective unless in a writing signed
by the Owner, the Seller, the Servicer, the Subordinated Purchaser and the
Agent, as agent for the Purchasers and the Banks, and then such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that so long as any Investor
Certificates shall be outstanding, no such amendment shall become effective
unless (i) the Owner shall have delivered an Opinion of Counsel to the Agent and
the Trustee to the effect that such amendment shall not materially and adversely
affect the interests of the holders of the Investor Certificates or (ii) S&P and
Moody's shall have notified the Owner, the Servicer and the Trustee in writing
that such action will not result in a reduction or withdrawal of their
respective ratings on any Investor Certificates. In addition, and so long as any
Investor Certificates shall be outstanding, (y) if such amendment relates to any
of the provisions of Article II hereof (and regardless of whether an Opinion of
Counsel has been delivered pursuant to clause (i) of the preceding sentence),
S&P shall have notified the Owner, the Servicer and the Trustee in writing that
such action will not result in a reduction or withdrawal of its rating on any
Investor Certificates, or (z) if such amendment relates to any other provisions
of this Agreement (other than an amendment the sole effect of which is to extend
the Facility Termination Date or the Commitment Termination Date, to reduce the
Purchase Limit or to modify the terms of an Enhancement which is for the sole
benefit of the Receivables Purchase Interest under this Agreement), S&P shall
have been given at least one Business Day's prior written notice of such
amendment and S&P shall not have advised the Owner or the Servicer at the close
of business on the Business Day following receipt of such notice that such
action would result in a reduction or withdrawal of its rating on any Investor
Certificates. Defined terms which are incorporated herein by reference from the
Pooling and Servicing Agreement shall not be altered or affected by any
subsequent amendment to the Pooling and Servicing Agreement which relates to
such terms, unless the Agent shall have consented in writing to such amendment.
<PAGE> 37
7.1.2. No failure on the part of any Purchaser, any Bank, the
Subordinated Purchaser or the Agent to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
SECTION 7.2. NOTICES, ETC.
7.2.1. All notices and other communications hereunder shall, unless
otherwise stated herein, be in writing (which shall include facsimile
communication) and faxed or delivered, to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. Notices and communications by facsimile shall be effective when sent
(and shall be followed by hard copy sent by regular mail), and notices and
communications sent by other means shall be effective when received.
7.2.2. So long as Spirit is the Servicer under this Agreement, any
notice required to be given to the Owner and the Servicer hereunder shall be
deemed to have been delivered to both the Owner and the Servicer if such notice
is delivered to Spirit at its address set forth below its name on the signature
page hereof.
<PAGE> 38
SECTION 7.3. ASSIGNABILITY.
7.3.1. This Agreement and each Purchaser's rights and obligations
herein (including ownership of each Purchaser Receivable Interest) shall be
assignable by such Purchaser and its successors and assigns; provided, that no
assignee shall be entitled to compensation pursuant to Section 1.05(a) hereof at
a rate in excess of that to which the assignor Purchaser was entitled
immediately prior to such assignment; and provided, further, that, unless the
proposed assignee is CNAI or a Bank, (i) each assignor of a Purchaser Receivable
Interest or any interest therein shall give the Agent, the Owner, the Servicer
and the Seller at least ten Business Days' notice of a proposed assignment and
shall not consummate such assignment if the Owner notifies such assignor that
the proposed assignee or any Affiliate of a proposed assignee is a competitor of
the Owner, Charming Shoppes or any of their respective Affiliates, and (ii) the
amount being assigned pursuant to each such assignment (determined as of the
date of such assignment) shall in no event be less than the lesser of (x)
$10,000,000 and (y) the assigning Purchaser's share of the Purchase Limit.
7.3.1.1. Each Bank may assign to any Eligible Assignee or to any other
Bank all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Bank Commitment and any
Purchaser Receivable Interests or interests therein owned by it); provided, that
no assignee shall be entitled to compensation pursuant to Section 1.05(a) hereof
at a rate in excess of that to which the assignor Bank was entitled immediately
prior to such assignment; and provided, further, that, unless the proposed
assignee is CNAI or a Bank, each assignor of a Purchaser Receivable Interest or
any interest therein shall give the Agent, the Owner, the Servicer and the
Seller at least ten Business Days' notice of a proposed assignment and shall not
consummate such assignment if the Owner notifies such assignor that the proposed
assignee or any Affiliate of the proposed assignee is a competitor of the Owner,
Charming Shoppes or any of their respective Affiliates; and provided, further,
that in the case of any assignment,
7.3.1.1.1. each such assignment shall be of a constant, and
not a varying, percentage of all rights and obligations under this
Agreement,
7.3.1.1.2. the amount being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment)
<PAGE> 39
shall in no event be less than the lesser of (x) $10,000,000 and (y)
the assigning Bank's Bank Commitment,
7.3.1.1.3. the parties to each such assignment shall execute
and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance, together with a processing and
recordation fee of $2,500,
7.3.1.1.4. concurrently with such assignment, if such Bank is
a Bank other than Citibank, the assignor thereunder shall assign to
such Eligible Assignee an equal percentage of its rights and
obligations under the APA, and
7.3.1.1.5. Citibank may not assign any portion of its Bank
Commitment to the extent it reduces such Bank Commitment below (x) 10%
of the Purchase Limit minus (y) the Purchaser Capital of all Purchaser
Receivable Interests owned by CNAI or any of its Affiliates.
7.3.1.2. Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Bank hereunder and (y) the
Bank assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Bank's rights and obligations under this Agreement, such
Bank shall cease to be a party hereto).
7.3.1.3. The Agent shall maintain at its address referred to in Section
7.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Banks and
the Bank Commitment of, and aggregate outstanding Purchaser Capital of Purchaser
Receivable Interests or interests therein owned by, each Bank from time to time
(the "Register"). The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Seller, the Owner, the
Servicer, the Agent and the Banks may treat each person whose name is recorded
in the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Seller, the Owner, the
Servicer, or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
<PAGE> 40
7.3.1.4. Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank and by an assignee which is an Eligible
Assignee or an existing Bank, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Annex
H hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt
notice thereof to the Seller, the Owner and the Servicer.
7.3.1.5. Notwithstanding any of the other provisions of this
Section 7.03, Citibank or any of its Affiliates may assign any of its
rights (including, without limitation, rights to payment of Purchaser
Capital and Yield) under this Agreement to any Federal Reserve Bank
without notice to or consent of the Agent, the Owner, the Servicer or
the Seller.
7.3.2. Subject to the provisions of Section 7.06(b) hereof, each
assignor of a Purchaser Receivable Interest may in connection with the
assignment or participation, disclose to the assignee or participant any
information relating to the Seller, the Servicer, the Owner or the Originator,
including the Receivables, furnished to such assignor by or on behalf of the
Seller, the Servicer, the Owner or the Originator or by the Agent.
7.3.3. This Agreement and the rights and obligations of the Agent (in
its capacity as agent hereunder) herein shall be assignable by the Agent and its
successors and assigns; provided, however, that the Agent agrees that it will
not assign of its own volition such rights and obligations to any Person other
than an Affiliate of CNAI unless:
7.3.3.1. in the reasonable judgment of the Agent consistent
with its internal policy (including, without limitation, the internal
policy of any Affiliate of the Agent, with respect to which the manner
in which conflicts of interest are to be resolved) and legal and
regulatory restrictions, the Agent determines that it would be
disadvantageous to the Agent or an Affiliate of the Agent for it to
continue as the Agent hereunder, or
7.3.3.2. the Agent's decision to assign its rights and
obligations (in its capacity as the agent hereunder) is consistent with
its determination to assign its rights and obligations as the agent in
respect of a majority of the other transactions with sellers of
receivables in which it is, at such time, the agent, which
<PAGE> 41
involve receivables having a tenor similar to the tenor of the
Receivables.
7.3.4. None of the Seller or subject to paragraph 2(m) of Exhibit IV
hereto, the Owner, or subject to Section 8.2 of the Pooling and Servicing
Agreement and paragraph 3(e) of Exhibit IV hereto, the Servicer, may assign its
rights or obligations hereunder or any interest herein without the prior written
consent of the Agent.
7.3.5. Each Purchaser may sell participations, to one or more banks or
other financial institutions, in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, any Purchaser
Receivable Interests or interests therein owned by it); provided, however, that
(i) unless the proposed participant is CNAI or a Bank, each seller of a
participation shall give the Agent, the Owner, the Servicer and the Seller at
least ten Business Days' notice of a proposed participation and shall not
consummate such participation if the Owner notifies such seller that the
proposed participant or any Affiliate of the proposed participant is a
competitor of the Owner, Charming Shoppes or any of their respective Affiliates;
(ii) such selling Purchaser's obligations under this Agreement shall remain
unchanged; (iii) such selling Purchaser shall remain solely responsible to the
other parties hereto for the performance of such obligations; and (iv) the
amount being participated pursuant to each such participation (determined as of
the date of such participation) shall in no event be less than the lesser of (x)
$10,000,000 and (y) the selling Purchaser's share of the Purchase Limit. The
parties to this Agreement shall continue to deal solely and directly with such
selling Purchaser in connection with such Purchaser's rights and obligations
under this Agreement.
7.3.6. Each Bank may sell participations, to one or more banks or other
financial institutions, in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Bank Commitment and any Purchaser Receivable Interests or interests therein
owned by it); provided, however, that (i) unless the proposed participant is
CNAI or a Bank, each seller of a participation shall give the Agent, the Owner,
the Servicer and the Seller at least ten Business Days' notice of a proposed
participation and shall not consummate such participation if the Owner notifies
such seller that the proposed participant or any Affiliate of the proposed
participant is a competitor of the Owner, Charming Shoppes or any of their
respective Affiliates; (ii) such selling Bank's
<PAGE> 42
obligations under this Agreement (including, without limitation, its Bank
Commitment hereunder) shall remain unchanged; (iii) such selling Bank shall
remain solely responsible to the other parties hereto for the performance of
such obligations; (iv) the amount being participated pursuant to each such
participation (determined as of the date of such participation) shall in no
event be less than the lesser of (x) $10,000,000 and (y) the selling Bank's Bank
Commitment; and (v) concurrently with such participation, the selling Bank (if
other than Citibank) thereunder shall sell to such participant an equal
percentage of its rights and obligations under the APA. The parties to this
Agreement shall continue to deal solely and directly with such selling Bank in
connection with such Bank's rights and obligations under this Agreement
7.3.7. No transfer (or purported transfer) of all or any part of the
Purchaser Receivable Interests (or any participation or other economic interest
therein) or the Subordinated Receivable Interests (or any participation or other
economic interest therein), whether to another Receivables Purchaser or to a
person who is not a Receivables Purchaser, shall be effective, and any such
transfer (or purported transfer) shall be void ab initio, and no Person shall
otherwise become a holder of a Purchaser Receivable Interest or a Subordinated
Receivable Interest if (i) at the time of such transfer (or purported transfer)
any Purchaser Receivable Interests or Subordinated Receivable Interests are
traded on a Market, (ii) after such transfer (or purported transfer) the Trust
would have more than 25 Private Holders of the Purchaser Receivable Interests or
the Subordinated Receivable Interests (or any participation or other economic
interests in any of the foregoing), (iii) the Purchaser Receivable Interests or
Subordinated Receivable Interests were required to be registered under the
Securities Act (or, to the extent sold or offered pursuant to Regulation S (17
CFR 230.901 through 230.904 or any successor thereto), would have been required
to be registered under the Securities Act if sold or offered within the United
States) or (iv) such transfer (or purported transfer) is to a Person other than
(x) an "accredited investor" as defined in paragraph (1), (2), (3) or (7) of
Rule 501(a) under the Securities Act, (y) a qualified institutional buyer as
defined in Rule 144A under the Securities Act or (z) an Affiliate of the Owner,
provided, however, that the Trustee shall not be responsible for monitoring
compliance with the requirements of this subsection (h) with respect to any
transfer (or purported transfer) unless it shall have received prior written
notice of the applicability thereof from the Servicer.
<PAGE> 43
SECTION 7.4. COSTS, EXPENSES AND TAXES.
7.4.1. In addition to the rights of indemnification granted under
Sections 4.01 and 4.02 hereof, the Owner agrees to pay on demand all costs and
expenses in connection with the preparation, execution, delivery and
administration of this Agreement, any asset purchase agreement or similar
agreement relating to the sale or transfer of interests in Purchaser Receivable
Interests and the other documents and agreements to be delivered hereunder,
including, without limitation, (i) the reasonable fees and out-of-pocket
expenses of counsel for the Agent, CNAI, Citicorp Securities Inc., Citibank, CRC
with respect thereto and with respect to advising the Agent, CNAI, Citicorp
Securities, Inc., Citibank and CRC as to their rights and remedies under this
Agreement, (ii) the Agent's out-of-pocket costs and expenses in connection with
annual audits under paragraph 1(b) of Exhibit V, and (iii) all costs and
expenses, if any (including reasonable counsel fees and expenses), of the Agent,
CNAI, Citicorp Securities, Inc., Citibank, the Seller, the Trustee, the
Purchasers or the Banks in connection with the enforcement of this Agreement and
the other documents and agreements to be delivered hereunder.
7.4.2. In addition, the Owner shall pay any and all stamp and other
taxes and fees payable in connection with the execution, delivery, filing and
recording of this Agreement or the other documents or agreements to be delivered
hereunder, and agrees to save each Indemnified Party harmless from and against
any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
SECTION 7.5. NO PROCEEDINGS.
7.5.1. Each of the Seller, the Agent, the Owner, the Originator, the
Servicer, the Subordinated Purchaser, each Purchaser, each Bank, each assignee
of a Purchaser Receivable Interest or any interest therein and each entity which
enters into a commitment to purchase Purchaser Receivable Interests or interests
therein hereby agrees that it will not institute against CRC any proceeding of
the type referred to in paragraph (g) of Exhibit VI so long as any senior
indebtedness issued by CRC shall be outstanding or there shall not have elapsed
one year plus one day since the last day on which any such senior indebtedness
shall have been outstanding.
7.5.2. Each of the Agent, the Owner, the Originator, the Servicer, each
Purchaser, each Bank, each assignee of a
<PAGE> 44
Purchaser Receivable Interest or any interest therein and each entity which
enters into a commitment to purchase Purchaser Receivable Interests or interests
therein hereby agrees that it will not institute against the Trust any
proceeding of the type referred to in paragraph (g) of Exhibit VI so long as any
Investor Certificate shall be outstanding or there shall not have elapsed one
year plus one day since the last day on which any Investor Certificate shall
have been outstanding.
SECTION 7.6. CONFIDENTIALITY.
7.6.1. Unless otherwise required by applicable law, each of the Seller,
the Owner, the Originator, the Servicer and the Subordinated Purchaser agrees to
maintain the confidentiality of this Agreement (and all drafts thereof) in
communications with third parties and otherwise; provided that this Agreement
may be disclosed (i) to third parties to the extent such disclosure is made
pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to the Agent, (ii) to independent financial rating
agencies in connection with the rating of any Certificate Series issued or to be
issued pursuant to the Pooling and Servicing Agreement, and (iii) to the
Seller's legal counsel and auditors, the Owner's or the Originator's legal
counsel and auditors, the Servicer's legal counsel and auditors, and the
Subordinated Purchaser's legal counsel and auditors if, in each case, they agree
(whether or not in writing) to hold it confidential; and provided, further, that
this Agreement may be filed by Charming Shoppes with the Securities and Exchange
Commission as an exhibit to an annual report on Form 10-K or a quarterly report
on Form 10-Q under the Exchange Act, in each case without any special
confidentiality requirement.
7.6.2. Each of the Agent, each Purchaser and each Bank agrees (i) to
maintain the confidentiality of this Agreement (and all drafts thereof) in
communications with third parties and otherwise, (ii) to use reasonable efforts
(e.g., procedures substantially comparable to those applied by the Agent, such
Purchaser or Bank, as the case may be, in respect of non-public information as
to its business) to maintain the confidentiality of (x) the Owner's or the
Originator's customer lists, the list of Stores delivered to the Agent pursuant
to paragraph 2(n) of Exhibit IV hereto, and any other non-public information as
to the Owner's or the Originator's business and the Servicer's business and (y)
the contents of the Administrative Servicer Agreement, in each case, to the
extent that such information is not and does not become publicly available
(other than by the filing of
<PAGE> 45
financing statements pursuant to this Agreement), and (iii) not to use
any of the information described in the preceding clauses (x) and (y)
for any purposes not specifically related to its business relationship
with the Owner, the Servicer and the Trust or its ownership of
Purchaser Receivable Interests or interests therein; provided, that
nothing in this subsection (b) shall affect the disclosure of this
Agreement or such non-public information (1) to the extent required by
law (including statute, rule, regulation or judicial process), (2) to
the Agent's, a Purchaser's or a Bank's counsel or accountants, as the
case may be, provided they agree (whether or not in writing) to hold it
confidential, and (3) to bank and insurance company examiners and
auditors, appropriate government examining authorities and independent
financial rating agencies, and provided, further, that the Agent, each
Bank, each Purchaser and each assignee of Receivable Interests may, in
connection with any assignment or participation, or proposed assignment
or participation, disclose this Agreement to the assignee or
participant or to a proposed assignee or participant and any
information relating to the Owner, the Originator or the Servicer
furnished to such entity by or on behalf of the Owner, the Originator
or the Servicer or by the Agent, if, prior to any such disclosure, such
assignee or participant or proposed assignee or participant agrees, in
a writing reasonably satisfactory to the Owner, the Originator or the
Servicer, as the case may be, to preserve the confidentiality of this
Agreement and any confidential information relating to the Owner, the
Originator or the Servicer received by it from any of the foregoing
entities and to be bound by the provisions of this Section 7.06(b). The
Agent, each Purchaser and each Bank shall, as promptly as practicable
after becoming aware of any disclosure of any confidential information
relating to the Owner, the Originator or the Servicer, use good faith
efforts to notify the Owner, the Originator and the Servicer of such
disclosure; provided, however, that the failure by the Agent, any
Purchaser or any Bank to give such notice shall not subject it to
liability.
SECTION 7.7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT
THE PERFECTION OF THE INTERESTS OF THE PURCHASERS, THE BANKS OR THE SUBORDINATED
PURCHASER IN THE RECEIVABLES OR REMEDIES HEREUNDER, IN RESPECT THEREOF, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
<PAGE> 46
SECTION 7.8. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
SECTION 7.9. Survival of Termination. The provisions of Sections 1.05,
1.06, 4.01, 4.02, 4.03, 7.04, 7.05 and 7.06 shall survive any termination of
this Agreement.
SECTION 7.10. Tax Treatment. The Owner and the Seller have structured
this Agreement and the Purchaser Receivable Interests with the intention that
the Purchaser Receivable Interests will qualify under applicable federal, state
and local tax law as indebtedness. Except as otherwise required by law, the
Seller, the Servicer, the Agent and each Purchaser agree to treat and to take no
action inconsistent with the treatment of the Purchaser Receivable Interests as
indebtedness for purposes of federal, state and local income or franchise taxes
and any other tax imposed on or measured by income.
SECTION 7.11. Duties of the Trustee. The Trustee hereby agrees to (i)
perform its duties and obligations as set forth in the Pooling and Servicing
Agreement and (ii) promptly take each action which the Agent may specify in
accordance with Section 11.14(a) or any other applicable Section of the Pooling
and Servicing Agreement to enforce the Pooling and Servicing Agreement for the
benefit of the Purchasers, the Banks, any other receivables purchasers, and any
holders of Investor Certificates, all with reasonable care and diligence and in
accordance with applicable laws, rules and regulations and the Pooling and
Servicing Agreement.
SECTION 7.12. Limitation on Seller/Trustee Liability, Etc.
7.12.1. Neither the Trustee, in its individual capacity or in
its capacity as the Seller hereunder, nor any of its directors,
officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the
Trustee:
<PAGE> 47
7.12.1.1. may consult with legal counsel (including
counsel for the Seller, the Owner, the Originator or the
Servicer), independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts;
7.12.1.2. makes no warranty or representation to any
Purchaser, any Bank or to the Subordinated Purchaser and shall
not be responsible to any Purchaser, any Bank or to the
Subordinated Purchaser for any statements, warranties or
representations made in or in connection with this Agreement,
the Pooling and Servicing Agreement or the Purchase Agreement;
7.12.1.3. shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement, the Pooling
and Servicing Agreement or the Purchase Agreement on the part
of the Seller, the Owner, the Originator or the Servicer or to
inspect the property (including the books and records) of the
Seller, the Owner, the Originator or the Servicer;
7.12.1.4. shall not be responsible to any Purchaser,
any Bank or the Subordinated Purchaser for the due execution,
legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement, the Pooling and Servicing
Agreement or the Purchase Agreement or any instrument or
document furnished pursuant hereto; and
7.12.1.5. shall incur no liability under or in
respect of this Agreement, the Pooling and Servicing
Agreement, the Purchase Agreement or any such other document
or instrument by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram)
believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.13. THIRD PARTY BENEFICIARIES.
7.13.1. Each of the Seller, the Owner, the Originator and the Trustee
hereby acknowledge that the Agent, for the benefit of the Purchasers and the
Banks, and the Purchasers and the Banks are, to the extent of the Purchasers'
and the Banks' respective rights and obligations under this Agreement, intended
to be third party beneficiaries under Section 13.14 of the Pooling and Servicing
Agreement.
<PAGE> 48
7.13.2. No "Investor Certificateholder" or "Enhancement Provider" (in
each case as defined in the Pooling and Servicing Agreement) shall be a
third-party beneficiary of this Agreement or have any benefit or any legal or
equitable right, remedy or claim under this Agreement.
SECTION 7.14. LIMITED RECOURSE.
7.14.1. In no event will any Purchaser or any Bank have any right or
interest in the Trust to the extent allocated to the holder of Investor
Certificates or attributable to the receivables purchase interest of any other
Receivables Purchaser. Notwithstanding any other provision herein or in any
other agreement or instrument, the Agent, on behalf of each Purchaser and each
Bank, confirms that it and each Purchaser and each Bank have no interest in and
will make no claim on, or otherwise interfere with, distributions of Collections
allocated to any Investor Certificates or attributable to any other Receivables
Purchasers under the Pooling and Servicing Agreement, any Supplement or any
other receivables purchase agreement.
7.14.2. Notwithstanding any claim that any Purchaser, any Bank or the
Agent may have hereunder, no such claim shall be payable from any Collections
other than those attributable to the Receivables Purchase Interest pursuant to
Section 2.01 and, as to all claims that any Purchaser, any Bank or the Agent may
have hereunder against the Trust, no such claim shall be payable other than from
Allocable Finance Charge Collections, Allocable Principal Collections and the
Allocation Percentage of Recoveries of Pool Receivables attributable to the
Receivables Purchase Interest pursuant to Section 2.01. Nothing contained in
this Section, however, shall limit or affect any claim that any Purchaser, any
Bank or the Agent may have hereunder against the Owner, the Originator or the
Servicer for any obligations under this Agreement which are direct obligations
of the Owner, the Originator or the Servicer.
7.14.3. By way of clarification of certain provisions contained in
Section 6.16(a) and 12.1(c) of the Pooling and Servicing Agreement, the parties
hereto confirm and agree that the reference in the last sentence of Section
6.16(a) to "equally and ratably" and the reference in the second sentence of
Section 12.1(c) to "pro rata" means that the applicable benefits and payments
will be allocated among the different Series in accordance with the
"Investor/Purchaser Percentages" of the relevant Series (which, in the case of
the Series
<PAGE> 49
created by this Agreement, is the Allocation Percentage) and among the
Receivables Purchasers within each Receivable Purchase Series in
accordance with the priorities set forth in the receivables purchase
agreement for such Series.
SECTION 7.15. LIMITATION ON RIGHTS OF PURCHASERS AND BANKS. It
is understood and intended, and upon the purchase of each Purchaser Receivable
Interest the Agent, each Purchaser and each Bank shall be deemed to have
expressly covenanted and agreed with every other Receivables Purchaser and
holder of an Investor Certificate and the Trustee, that the Purchaser Receivable
Interests and the Investor Certificates shall rank pari passu among one another
and amongst themselves (except for any Enhancement that may apply to only the
Purchaser Receivable Interests or one series of Investor Certificates) and
neither the Agent nor any Purchaser or Bank shall have any right hereunder or
under the Pooling and Servicing Agreement (i) to surrender, waive, impair,
disturb or prejudice the rights of any other Receivables Purchasers or the
holders of the Investor Certificates, (ii) to obtain or seek to obtain priority
over or preference to any other Receivables Purchaser or holder of an Investor
Certificate or (iii) to enforce any right under this Agreement or the Pooling
and Servicing Agreement against the Seller, except in the manner provided in the
Pooling and Servicing Agreement and for the equal, ratable and common benefit of
all Receivables Purchasers and holders of Investor Certificates and except (x)
as otherwise expressly provided in the Pooling and Servicing Agreement or (y) to
the extent this Agreement creates independent and non-duplicative rights against
the Seller. For the protection and enforcement of the provisions of this
Section, each and every Receivables Purchaser and holder of an Investor
Certificate and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
SECTION 7.16. THE CO ESCROW ACCOUNT.
7.16.1. Establishment. If at any time the Quarterly Charge-Off
Ratio shall exceed 12%, the Agent shall establish an account (the "CO
Escrow Account") in the name and under the control of the Agent with an
Eligible Institution (which may be Citibank) titled "Citicorp North
America, Inc., as Agent, pursuant to the Amended and Restated
Receivables Purchase Agreement dated as of November 25, 1997, as
amended, among Spirit of America National Bank, as Owner and Servicer,
the Agent and certain other parties (CO Escrow Account)". The CO Escrow
Account shall be a fully segregated trust account, unless the Escrow
Bank shall be (i) an Eligible Institution having short-term debt
ratings from S&P and Moody's no lower
<PAGE> 50
than A-1/P-1 or (ii) Citibank. The CO Escrow Account shall be under the sole
dominion and control of the Agent, and neither the Subordinated Purchaser, nor
any Person claiming by, through or under the Subordinated Purchaser shall have
any right, title or interest in, or any right to withdraw any amount from, the
CO Escrow Account.
7.16.2. Taxation. The taxpayer identification number associated with
the CO Escrow Account shall be that of the Subordinated Purchaser and the
Subordinated Purchaser will report for federal, state and local income tax
purposes the income, if any, earned on funds in the CO Escrow Account.
7.16.3. Investments. The Subordinated Purchaser is hereby appointed as
the investment agent, which appointment the Subordinated Purchaser hereby
accepts, to act on behalf of the Agent for determining investments of cash at
any time on deposit in the CO Escrow Account. All funds on deposit in the CO
Escrow Account shall be invested in Eligible Investments (as shall be specified
by the Subordinated Purchaser, as investment agent, in writing to the Escrow
Bank and the Agent; provided, that if the Subordinated Purchaser shall fail to
specify such Eligible Investments in a timely manner, the Agent may specify such
Eligible Investments) which shall mature not later than the Business Day
preceding the next Distribution Date and shall be held to maturity. All such
investments shall be made in the name of the Escrow Bank, as agent, and held by
the Escrow Bank, or its nominee, for the benefit of the Agent. The Escrow Bank
shall not be liable for any loss incurred in connection with any investment in
the CO Escrow Account, except for losses in respect of investments in any
investment issued or guaranteed by the Escrow Bank. Income earned on funds
deposited to the CO Escrow Account, if any, shall be considered a part of the CO
Escrow Account.
7.16.4. New CO Escrow Account. In the event the Escrow Bank ceases to
be an Eligible Institution, the Agent shall, within ten days after learning
thereof, establish a new CO Escrow Account (and transfer any balance and
investments then in the CO Escrow Account to such new CO Escrow Account) at
another Eligible Institution.
7.16.5. Statements for CO Escrow Account. On a monthly basis, the
Escrow Bank shall provide the Agent with a written statement with respect to the
preceding calendar month regarding the CO Escrow Account in a form customary for
statements provided by the Escrow Bank for other accounts held by it, which
statement shall include, at a minimum, the amount on deposit in the CO Escrow
Account, and the dates and amounts
<PAGE> 51
of all deposits, withdrawals and investment earnings with respect to the CO
Escrow Account. The Escrow Bank shall promptly deliver a copy of each such
statement to the Subordinated Purchaser and to the Servicer.
7.16.6. Payments to CO Escrow Account. On each Distribution Date,
commencing on any Distribution Date on which the Quarterly Charge-Off Ratio
shall exceed 12% and continuing until the earlier of (i) the second Distribution
Date thereafter on which the Quarterly Charge-Off Ratio shall be less than 12%
and (ii) the Termination Date, the Subordinated Purchaser shall pay into the CO
Escrow Account an amount such that, after giving effect to such payment, the
aggregate funds on deposit in the CO Escrow Account shall at least be equal to
an amount (the "Required CO Escrow Amount") equal to the product of (x) the
aggregate outstanding Purchaser Capital multiplied by (y) a percentage equal to
the excess, if any, of the higher of the Quarterly Charge-Off Ratios for the two
Due Periods preceding such Distribution Date minus 12%.
7.16.7. Payments from CO Escrow Account. On each Distribution Date
preceding the Termination Date on which the funds on deposit in the CO Escrow
Account exceed the Required CO Escrow Amount, the Agent agrees to notify the
Escrow Bank to pay such excess to the Subordinated Purchaser. On the second
Business Day preceding each Distribution Date, the Servicer will determine
whether any Purchaser Charge-Offs will arise with respect to the related Due
Period pursuant to Section 2.05(d) or Section 2.07(a) and will give the Agent
notice of the amount thereof (such amount, the "New Purchaser Charge-Offs"). By
1:00 P.M. New York City time on the Business Day prior to each Distribution Date
on which the amount of the New Purchaser Charge-Offs is greater than zero or on
which any unreimbursed Purchaser Charge-Offs exist, the Agent on behalf of the
Owners shall notify the Escrow Bank requesting payment thereof. To the extent
funds are available in the CO Escrow Account, the Escrow Bank shall pay the
amount requested to the Agent by noon New York City time on such Distribution
Date, and the Agent shall distribute such funds to the Purchasers and the Banks.
Such payment and distribution of funds from the CO Escrow Account shall not
result in any reduction of Purchaser Capital.
7.16.8. Pledge. The Subordinated Purchaser hereby pledges and assigns
to the Agent for the benefit of the Purchasers and the Banks, and hereby grants
to the Agent for the benefit of the Purchasers and the Banks, a security
interest in, all of the Subordinated Purchaser's right, title
<PAGE> 52
and interest in and to the CO Escrow Account, including, without
limitation, all funds on deposit therein, all investments arising out
of such funds, all interest and any other income arising therefrom, all
claims thereunder or in connection therewith, and all cash,
instruments, securities, rights and other property at any time and from
time to time received, receivable or otherwise distributed in respect
of such account, such funds or such investments, and all money at any
time in the possession or under the control of, or in transit to such
account, or any bailee, nominee, agent or custodian of the Escrow Bank,
and all proceeds and products of any of the foregoing. Except as
provided in the preceding sentence, the Subordinated Purchaser may not
assign, transfer or otherwise convey its rights under this Agreement to
receive any amounts from the CO Escrow Account.
7.16.9. Termination of CO Escrow Account. Unless the balance
in the CO Escrow Account has been sooner reduced to zero pursuant to
paragraph (g) of this Section 7.16, on the date occurring on or
immediately after the date on which the Adjusted Purchaser Capital is
reduced to zero, all funds then on deposit in the CO Escrow Account
shall be paid to the Subordinated Purchaser, and the CO Escrow Account
shall be closed.
If, on the Distribution Date immediately following the second
anniversary of the commencement of the Amortization Period, the CO Escrow
Account shall not have been closed in accordance with the preceding sentence,
then on such Distribution Date, all funds then on deposit in the CO Escrow
Account shall be applied as follows: first, such funds, in an amount not in
excess of the Adjusted Purchaser Capital for such Distribution Date, shall be
paid to the Agent, and upon receipt of such funds, the Agent shall distribute
such funds to the Purchasers and the Banks; and second, the balance, if any,
shall be paid to the Subordinated Purchaser. Upon the making of all payments
described in the preceding sentence, the CO Escrow Account shall be closed.
<PAGE> 53
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: FIRST UNION NATIONAL BANK,
not in its individual capacity but
solely as the Trustee for CHARMING
SHOPPES MASTER TRUST
By:
Title: Vice President
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attention: Corporate Trust Services
Facsimile Number: (215) 985-7290
with copies to:
Pepper, Hamilton & Scheetz
1201 Market Street, Suite 1402
Wilmington, Delaware 19801-1163
Attention: Richard Eckman, Esq.
Facsimile Number: (302) 656-8865
SUBORDINATED
PURCHASER/OWNER: CHARMING SHOPPES RECEIVABLES CORP.
By:
Title: Vice President
3411 Silverside Road
Wilmington, Delaware 19810
<PAGE> 54
Attention: Kirk R. Simme
Facsimile Number: (302) 479-5512
SERVICER/
ORIGINATOR: SPIRIT OF AMERICA NATIONAL BANK
By:
Title: Vice President
745 Center Street
Milford, Ohio 45150
Attention: Kirk R. Simme
Facsimile No. (513) 576-5320
with copies to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Mary Fontaine, Esq.
Facsimile Number: (312) 701-7711
Colin Stern, Esq.,
General Counsel
Charming Shoppes, Inc.
450 Winks Lane
Bensalem, Pennsylvania 19020
CRC: CORPORATE RECEIVABLES CORPORATION
By: Citicorp North America,
Inc., as Attorney-in-Fact
By:
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: U.S. Securitization
Facsimile No. (914) 899-7890
<PAGE> 55
BANK: CITIBANK, N.A.
By: Citicorp North America, Inc.,
As Attorney-in-Fact
By:
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: U.S. Securitization
Facsimile No.: (914) 899-7890
Commitment: $50,000,000
Percentage Interest: 100%
AGENT: CITICORP NORTH AMERICA, INC.,
as Agent
By:
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: U.S. Securitization
Facsimile No.: (914) 899-7890
<PAGE> 56
EXHIBIT I
DEFINITIONS
1. Certain Defined Terms. As used in the Agreement (including its
Exhibits), the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"APA" means an asset purchase agreement entered into by a bank or other
financial institution and the Agent pursuant to which such bank or other
financial institution agrees to purchase Purchaser Receivables Interests or
interests therein from CRC.
"Account" means each Spirit of America National Bank revolving credit
card account (including, without limitation, accounts which have been written
off as uncollectible) issued to an Obligor pursuant to a Cardholder Agreement
between the Originator and any Person, which account is an Eligible Account on
the initial Cut Off Date (or, in the case of Additional Accounts, as of the
applicable Addition Cut Off Date), and which is identified by account number,
Obligor name, Obligor address and Receivable balance as of the applicable Cut
Off Date (or, in the case of Additional Accounts, as of the applicable Addition
Cut Off Date) in each computer file or microfiche list delivered to the Trustee
by the Servicer pursuant to Section 2.1 or Section 2.6 of the Pooling and
Servicing Agreement. The term "Account" shall include each Renumbered Account.
The term "Account" shall be deemed to refer to an Additional Account only from
and after the Addition Date with respect thereto, and the term "Account" shall
be deemed to refer to any Removed Account only prior to the Removal Date with
respect thereto.
"Addition Cut Off Date" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Addition Date" means each date as of which Additional Accounts will be
included as Accounts for purposes of the Pooling and Servicing Agreement
pursuant to Section 2.6 thereof.
"Additional Account" means each revolving credit card account
established pursuant to a Cardholder Agreement, which account is designated
pursuant to Section 2.6 of the Pooling and Servicing Agreement to be included as
an Account under the Pooling and Servicing Agreement and is identified in a
computer file, microfiche or written list delivered to the Trustee by the
Servicer pursuant to Sections 2.1 and 2.6 thereof.
"Adjusted Purchaser Capital" means, as of any date, an amount equal to
(a) the aggregate Purchaser Capital of all
I-1
<PAGE> 57
Purchaser Receivable Interests as of such date, plus (b) the aggregate amount of
all unreimbursed Purchaser Charge-Offs as of such date, minus (c) the total
amount of payments made to the Purchasers from the CO Escrow Account prior to
such date.
"Administrative Servicer" means, initially, Alliance Data Services,
Inc. (formerly known as BSI Business Services, Inc.), a Delaware corporation,
and shall also include any other Person who succeeds to the functions performed
by the Administrative Servicer, as provided in the Administrative Servicer
Agreement, and/or such other Administrative Servicer, including Spirit, as the
Agent and the Owner shall reasonably and mutually agree upon.
"Administrative Servicer Agreement" means the Credit Processing
Agreement effective as of July 8, 1988, as amended as of July 26, 1991, between
Spirit of America National Bank and the Administrative Servicer, and any other
agreement with the same or any successor Administrative Servicer regarding the
performance of servicing functions for the Receivables, and all agreements,
instruments and documents attached thereto or delivered in connection therewith,
as any of the same may from time to time be hereafter amended, supplemented, or
otherwise modified in accordance with the terms of the Agreement.
"Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of this
definition, a Person shall be deemed to be "controlled by" another Person if
such other Person possesses, directly or indirectly, power either to (a) vote
10% or more of the securities having ordinary voting power for the election of
directors of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Agent's Account" means the special account (account number 4060-0094)
of the Agent maintained at the office of Citibank at 399 Park Avenue, New York,
New York. The Agent's Account is the "Series Account" referred to in the Pooling
and Servicing Agreement for the Receivables Purchase Series arising in
connection with the Agreement.
"Allocable Finance Charge Collections" means, for any Due Period, the
product of (a) the Allocation Percentage for such
I-2
<PAGE> 58
Due Period and (b) the amount of Collections of Finance Charge Receivables with
respect to such Due Period.
"Allocable Principal Collections" means, for any Due Period, the
product of (a) the Allocation Percentage for such Due Period and (b) the amount
of Collections of Principal Receivables with respect to such Due Period.
"Allocated Finance Charges" means amounts allocated pursuant to Section
2.02(a)(i) of the Agreement.
"Allocated Interchange" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Allocated Loss Amount" means, with respect to any Due Period, an
amount equal to the product of (a) the Allocation Percentage for such Due Period
and (b) the Loss Amount with respect to such Due Period.
"Allocation Percentage" means:
(i) for the initial Due Period, the ratio (expressed as
percentage) computed as of the date of the initial purchase under the
Agreement by dividing (A) the sum of (1) the initial Purchaser Capital,
(2) the initial Subordinated Purchaser Capital and (3) the Minimum
Seller Capital, in each case as of such date by (B) the Outstanding
Balance of all Pool Receivables on the initial Cut Off Date;
(ii) for any subsequent Due Period during the Revolving
Period, the ratio (expressed as percentage) computed as of the last day
of the immediately preceding Due Period by dividing (A) the sum of (1)
the Purchaser Capital, (2) the Subordinated Purchaser Capital and (3)
the Minimum Seller Capital, in each case as of such last day by (B) the
greater of (1) the Outstanding Balance of all Pool Receivables as of
such last day minus the total amount of Discount Option Receivables (if
any) on such last day and (2) the sum of the numerators used to
calculate the Investor/Purchaser Percentages for such subsequent Due
Period for all Certificate Series and Receivables Purchase Series
outstanding; and
(iii) for any subsequent Due Period during the Amortization
Period, the ratio (expressed as percentage) computed as of the last day
of the immediately preceding Due Period by dividing (A) the sum of (1)
the Purchaser Capital, (2) the Subordinated Purchaser Capital and (3)
the Unallocated Receivables Balance, in each case as of such last day
by (B) the greater of (i) the Outstanding Balance
I-3
<PAGE> 59
of all Pool Receivables as of such last day minus the total amount of
Discount Option Receivables (if any) on such last day and (2) the sum
of the numerators used to calculate the Investor/Purchaser Percentages
for such subsequent Due Period for all Certificate Series and
Receivables Purchase Series outstanding.
Notwithstanding the foregoing, with respect to any Due Period
in which an Addition Date or Removal Date occurs, the amount in (ii)(B)(1) and
(iii)(B)(1) above shall be (1) for the period from and including the first day
of such Due Period to but excluding the related Addition Date or Removal Date,
the Outstanding Balance of all Pool Receivables as of the last day of the
immediately preceding Due Period, minus the total amount of Discount Option
Receivables (if any) on such last day, and (2) for the period from and including
the related Addition Date or Removal Date to and including the last day of such
Due Period, the Outstanding Balance of all Pool Receivables at the end of the
day on the related Addition Date or Removal Date, minus the total amount of
Discount Option Receivables (if any) at the end of the day on such Addition Date
or Removal Date; provided further, that with respect to any Due Period in which
an Addition Date or Removal Date occurs and the Servicer need not make daily
deposits of Collections into the Collection Account, the amount in (ii)(B)(1)
and (iii)(B)(1) above shall be the Average Principal Balance for such Due
Period.
For purposes of this definition, "Investor/Purchaser Percentages" and
"Certificate Series" have the meanings attributed to them in the Pooling and
Servicing Agreement, and "Unallocated Receivables Balance" on any day means the
lesser of (1) the Outstanding Balance of the Pool Receivables not allocated to
the Purchaser Receivable Interests or the Subordinated Receivable Interests
pursuant to the Agreement and not allocated to any other Person other than the
Holder of the Exchangeable Seller Certificate pursuant to a supplement to the
Pooling and Servicing Agreement or pursuant to any other receivables purchase
agreement that is subject to the Pooling and Servicing Agreement and (2) the
Minimum Seller Capital as of such day. The Allocation Percentage may never be
greater than 100%. The Allocation Percentage is the "Investor/Purchaser
Percentage" referred to in the Pooling and Servicing Agreement for the
Receivables Purchase Series arising in connection with the Agreement, and for
purposes of clauses (ii)(B)(2) and (iii)(B)(2) above, the numerator used to
calculate the Investor/Purchaser Percentage for the Receivables Purchase Series
arising in connection with the Agreement is the amount set forth in clauses
(ii)(A) and (iii)(A), respectively.
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"Alternate Base Rate" means a fluctuating interest rate per
annum as shall be in effect from time to time, which rate shall be at all times
equal to the interest rate per annum determined using the applicable spread
specified in the Fee Letter plus the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time as
Citibank's base rate;
(b) 1/2 of one percent above the latest three-week
moving average of secondary market morning offering rates in
the United States for three-month certificates of deposit of
major United States money market banks, such three-week moving
average being determined weekly on each Monday (or, if such
day is not a Business Day, on the next succeeding Business
Day) for the three-week period ending on the previous Friday
by Citibank on the basis of such rates reported by certificate
of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received
by Citibank from three New York certificate of deposit dealers
of recognized standing selected by Citibank, in either case
adjusted to the nearest 1/4 of one percent or, if there is no
nearest 1/4 of one percent, to the next higher 1/4 of one
percent; and
(c) the Federal Funds Rate.
"Amortization Period" means the period commencing at the close
of business of the Agent on the Business Day immediately preceding the
Termination Date and ending on the Final Distribution Date.
"Assignee Rate" for any Fixed Period for any Purchaser
Receivable Interest means an interest rate per annum determined using the
applicable spread specified in the Fee Letter plus the Eurodollar Rate for such
Fixed Period; provided, however, that in the case of
(i) any Fixed Period beginning on or after the first
day of which a Purchaser or Bank shall have notified the Agent
that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or
any central bank or other governmental authority asserts that
it is unlawful, for such Purchaser or Bank to fund such
Purchaser Receivable Interest at the Assignee Rate set
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forth above (and such Purchaser or Bank shall not have subsequently
notified the Agent that such circumstances no longer exist),
(ii) any Fixed Period of one to (and including) 29 days,
(iii) any Fixed Period as to which the Agent does not receive
notice, by no later than 12:00 noon (New York City time) on the third
Business Day preceding the first day of such Fixed Period, that the
related Purchaser Receivable Interest will not be funded by issuance of
commercial paper, or
(iv) any Fixed Period for a Purchaser Receivable Interest the
Purchaser Capital of which is less than $500,000,
the "Assignee Rate" for each such Fixed Period shall be an interest rate per
annum equal to the Alternate Base Rate in effect on the first day of such Fixed
Period; provided further that the Agent and the Owner may agree in writing from
time to time upon a different "Assignee Rate".
"Assignment and Acceptance" means an assignment and acceptance
agreement entered into by a Bank, an Eligible Assignee and the Agent, pursuant
to which such Eligible Assignee may become a party to the Agreement, in
substantially the form of Annex H hereto.
"Average Principal Balance" shall mean, for a Due Period in
which an Addition Date or Removal Date occurs, the weighted average of (i) the
Outstanding Balance of all Pool Receivables at the end of the day on the last
day of the prior Due Period minus the total amount of Discount Option
Receivables (if any) on such last day and (ii) the Outstanding Balance of all
Pool Receivables at the end of the day on the related Addition Date or Removal
Date minus the total amount of Discount Option Receivables (if any) at the end
of the day on such Addition Date or Removal Date, weighted, respectively, by a
fraction, the numerator of which is the number of days from and including the
first day of such Due Period to but excluding the related Addition Date or
Removal Date, and the denominator of which is the number of days in such Due
Period, and by a fraction, the numerator of which is the number of days from and
including the related Addition Date or Removal Date to and including the last
day of such Due Period, and the denominator of which is the number of days in
such Due period.
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"Bank Commitment" of any Bank means, (a) with respect to
Citibank, $50,000,000 or such amount as reduced by any Assignment and Acceptance
entered into between Citibank and other Banks; (b) with respect to a Bank that
has entered into an Assignment and Acceptance, the amount set forth therein as
such Bank's Bank Commitment or such amount as reduced by an Assignment and
Acceptance entered into between such bank and an Eligible Assignee, in each case
as reduced (or terminated) pursuant to the next sentence. Any reduction (or
termination) of the Purchase Limit pursuant to the terms of the Agreement shall
reduce ratably (or terminate) each Bank's Bank Commitment.
"Banks" means Citibank and each Eligible Assignee that shall
become as party to the Agreement pursuant to Section 7.03(b).
"Business Day" means any day on which (i) banks are not
authorized or required to close in New York City, Philadelphia, Pennsylvania or
Milford, Ohio and (ii) if this definition of "Business Day" is utilized in
connection with the Eurodollar Rate, dealings are carried out in the London
interbank market.
"Cardholder Agreement" means the agreement (and the related
application) for any Account, as such agreement may be amended, modified or
otherwise changed from time to time in accordance with the terms thereof. The
"related Cardholder Agreement" means, when used with respect to any Receivable,
the Cardholder Agreement under which such Receivable arose.
"Cardholder Guidelines" means the Originator's policies and
procedures relating to the operation of its credit card business in effect on
the date of the Agreement, including, without limitation, the policies and
procedures for determining the creditworthiness of potential and existing credit
card customers, and relating to the maintenance of credit card accounts and
collection of credit card receivables, as such policies and procedures may be
amended from time to time in accordance with the Agreement.
"Charming Shoppes" means Charming Shoppes, Inc., a
Pennsylvania corporation.
"Citibank" means Citibank, N.A., a national banking
association.
"Collection" means any payment by or on behalf of Obligors
received by the Originator, the Seller, the Servicer or the Trustee in respect
of the Pool Receivables, in the form of cash, checks, wire transfers, electronic
transfers, ATM transfers
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or any other form of payment on any Pool Receivables, including, without
limitation, (x) all Recoveries, (y) all payments made with respect to Principal
Receivables by deposit into the Collection Account pursuant to Section 4.3(d) of
the Pooling and Servicing Agreement or Section 2.07(b) of the Agreement and (z)
payments by the Owner with respect to the reassignment of ineligible Receivables
or the reassignment of Receivables following the breach of certain
representations, made by deposit into the Collection Account pursuant to Section
2.4(d)(iii) or 2.4(e) of the Pooling and Servicing Agreement or pursuant to
Section 4.03(b) of the Agreement. The term "Collection" shall include Insurance
Proceeds generally, but shall exclude Insurance Proceeds and other amounts
constituting Recoveries of Pool Receivables to the extent the aggregate
Insurance Proceeds received in respect of the Pool Receivables during any Due
Period exceed the Loss Amount for such Due Period and any prior Due Periods. A
Collection processed on an Account in excess of the amount of Receivables in
such Account as of the date of receipt by the Originator, the Seller, the
Servicer or the Trustee of such Collection shall be deemed to be a payment in
respect of Principal Receivables to the extent of such excess. The term
"Collection" shall also include all benefits of the Owner or FSC under and all
monies due or to become due to the Owner or FSC under the Interest Rate
Agreements, and any such monies received shall be deemed a Collection of Finance
Charge Receivables and shall be considered a Collection with respect to Pool
Receivables. Notwithstanding any other provision of the Agreement to the
contrary, Collections constituting payments in respect of the Interest Rate
Agreements shall be allocated entirely to the Receivables Purchase Interest
under the Agreement, and Collections described in clauses (y) and (z) above (to
the extent allocable to the Receivables Purchase Series arising in connection
with the Agreement) shall be allocated entirely to the Receivables Purchase
Interest under the Agreement.
"Collection Account" means the segregated account established
by the Trustee pursuant to Section 4.2(a) of the Pooling and Servicing
Agreement.
"Commitment Termination Date" means the earliest of (a)
October 30, 1998, (b) the Facility Termination Date, (c) the date determined
pursuant to Section 3.02, and (d) the date the Purchase Limit
reduces to zero.
"Company" means each of FSC and Charming Shoppes.
"Company Agreement" means an agreement, dated as of the date
hereof, made by each of FSC and Charming Shoppes in favor of
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the Purchasers, the Banks and the Agent, in form and substance satisfactory to
the Agent, as the same may, from time to time, be amended, restated, modified or
supplemented.
"Congress Facility" means (i) the Amended and Restated Loan
and Security Agreement dated as of February 28, 1997 among Charming Shoppes,
certain subsidiaries of Charming Shoppes and Congress Financial Corporation, as
such agreement may be amended or modified and then in effect or (ii) if the
agreement described in clause (i) is no longer in effect, any other credit
agreement with Congress Financial Corporation executed by Charming Shoppes and
its subsidiaries in substitution for such agreement.
"CRC" means Corporate Receivables Corporation, a California
corporation, and any successor or assignee of CRC that is a receivables
investment company which in the ordinary course of its business issues
commercial paper or other securities to fund its acquisition and maintenance of
receivables.
"Credit Facility" means (i) the Congress Facility or (ii) any
other credit facility to which Charming Shoppes and/or its Affiliates are
parties.
"Cut Off Date" means the close of business of the Owner on
February 29, 1996, or, in the case of Additional Accounts, the applicable
Addition Cut Off Date.
"Cycle" means each billing cycle used by the Originator to
bill Obligors of the Receivables.
"Cycle Closing Date", in respect of any Account, means the
last day of each Cycle applicable to such Account.
"Defaulted Receivable" means a Principal Receivable:
(i) in respect of which the related Obligor has
failed to make the minimum monthly payment required under the
terms of the related Cardholder Agreement and such failure has
continued for 180 days or seven consecutive Cycles (whichever
is less) after the due date of such payment;
(ii) as to which the Obligor thereof or any other
Person obligated thereon has taken any action, or suffered any
event to occur, of the type described in paragraph (g) of
Exhibit VI; or
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(iii) which, consistent with the Cardholder
Guidelines, would be written off the Seller's books as
uncollectible.
"Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of the last day of any Due Period by dividing (i) the
average of the aggregate Outstanding Balances of all Pool Receivables that were
Delinquent Receivables on such last day and on the last day of the two
immediately preceding Due Periods by (ii) the aggregate Outstanding Balance of
all Pool Receivables on such last day.
"Delinquent Receivable" means a Receivable that is not a
Defaulted Receivable and:
(i) in respect of which the related Obligor has
failed to make the minimum monthly payment required under the
terms of the related Cardholder Agreement and such failure has
continued for 90 days or four consecutive Cycles (whichever is
less) after the due date of such payment; or
(ii) which, consistent with the Cardholder
Guidelines, would be classified as delinquent by the Servicer.
"Depositary Agreement" means an agreement, in substantially
the form of Annex B, from the Seller to any Depositary Bank.
"Depositary Bank" means any of the banks holding one or more
Initial Depositary Accounts.
"Discount Option Receivable" has the meaning set forth in the
Pooling and Servicing Agreement.
"Distribution Date" means the fifteenth day of each month, or
if such day is not a Business Day, the next succeeding Business Day.
Notwithstanding the foregoing, in the event a Total Systems Failure exists on
any Distribution Date, the date of such Distribution Date shall mean the fourth
Business Day after the date on which the Seller or the Servicer delivers a
Servicer Report; provided, that in no event shall a Distribution Date be
postponed more than 10 Business Days due to a Total Systems Failure.
"Due Period" means, initially, the period from the close of
business on the Cut-Off Date to the close of business on the Last Cycle Closing
Date for the month of March 1996, and
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thereafter, the period from the close of business on the last day of the prior
Due Period to the close of business of the next Last Cycle Closing Date.
"Early Amortization Event" has the meaning set forth in
Exhibit VI.
"Effective Date" means November 25, 1997.
"Eligible Account" has the meaning set forth in Section 1.1 of
the Pooling and Servicing Agreement.
"Eligible Assignee" means CNAI, any of its Affiliates, any
Person managed by Citibank, CNAI or any of their Affiliates, or any financial or
other institution acceptable to the Agent.
"Eligible Institution" means any depository institution (which
may not be the Originator or its successors or assigns, or any affiliate of the
Originator, or its successors or assigns), organized under the laws of the
United States or any state, having capital and surplus in excess of $50,000,000,
the deposits of which are insured to the full extent permitted by law by the
Federal Deposit Insurance Corporation and which is subject to supervision and
examination by federal or state banking authorities; provided that such
institution also must have a rating of Baa or higher with respect to long-term
deposit obligations from Moody's and BBB or higher with respect to long-term
deposit obligations from S&P. If such depository institution publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then 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.
"Eligible Investments" means any "Permitted Investments" (as
defined in the Pooling and Servicing Agreement); provided, however, that
Eligible Investments shall not include any demand or time deposit or certificate
of deposit of the Originator.
"Eligible Receivable" has the meaning set forth in Section 1.1
of the Pooling and Servicing Agreement.
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"Eligible RPA Receivable" means, at any time, an Eligible
Receivable:
(i) the Obligor of which, at the time of the initial
creation of an interest therein under the Agreement, has not
failed to make, at the time of the sale of the goods or
services giving rise to such Receivable, at least the minimum
monthly payment required in order to entitle such Obligor to
further extensions of credit under the terms of the Cardholder
Guidelines;
(ii) the Obligor of which, at the time of the initial
creation of an interest therein under the Agreement, has not
failed to make any such required payments for any period of
two consecutive Cycles (including the Cycle ending on the most
recent Cycle Closing Date under the related Cardholder
Agreement to occur 10 Business Days or more prior to the date
of such creation); provided, however, that this clause (ii)
shall not apply to determine the eligibility of a Receivable
on the date of its purchase under the Agreement;
(iii) [Intentionally omitted]
(iv) which is a "general intangible" or an "account"
within the meaning of Section 9-106 of the UCC of each
jurisdiction whose law governs the perfection of the interest
created by a Purchaser Receivable Interest;
(v) which is (A) denominated and payable only in
United States dollars in the United States, and (B) required
to be paid either by means of a check sent to the Initial
Depositary Account or, until the date on which the Store
Payment Notice is delivered to the Store managers pursuant to
paragraph 2(b)(ii) of Exhibit V to the Agreement, by means of
a Store Payment;
(vi) which:
(A) arises under a Cardholder Agreement
which, together with such Receivable, is in full
force and effect and constitutes the legal, valid and
binding obligation of the Obligor of such Receivable,
except as such enforceability may be limited by any
applicable bankruptcy, insolvency,
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reorganization, moratorium or similar law affecting creditors' rights generally
or by general principles of equity (whether considered in a proceeding in equity
or at law),
(B) arises under a Cardholder Agreement the terms of which require
minimum monthly payments such that such Receivable is scheduled to be paid in
full within 5 years from the date of its creation,
(C) arises from a Cardholder Agreement and either (x) has been billed
to the related Obligor on such Obligor's Statement in accordance with the terms
of such Cardholder Agreement, or (y) will be billed to the related Obligor on
such Obligor's Statement rendered no later than the third Cycle Closing Date
after such Receivable is incurred in accordance with the terms of such
Cardholder Agreement; provided, however, that an Eligible Receivable satisfying
the requirements of this clause (y) and all other requirements of this
definition of "Eligible RPA Receivable" (but not satisfying the preceding clause
(x)) shall be considered an Eligible RPA Receivable only to the extent that the
Outstanding Balance thereof at the time of the initial creation of an interest
therein under the Agreement, when aggregated with the Outstanding Balance of all
other Eligible Receivables satisfying the requirements of the preceding clause
(y) and all other requirements of this definition of "Eligible RPA Receivable"
(but not satisfying the preceding clause (x)), does not exceed 10% of the then
Outstanding Balance of all Eligible Receivables,
(D) is not subject to any dispute, offset, counterclaim or defense
whatsoever (except the potential discharge in bankruptcy of such Obligor),
(E) has not been purchased by the Owner pursuant to Section 2.4(d)(iii)
or 2.4(e) of the Pooling and Servicing Agreement,
(F) at the time of the initial creation of an interest therein under
the Agreement is not a Defaulted Receivable,
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(G) does not arise under an Account which the Owner
has classified on its electronic records as counterfeit,
cancelled or fraudulent, or which has been identified as an
Account with respect to which the related card has been lost
or stolen, and
(H) has not otherwise been charged off as
uncollectible pursuant to the Cardholder Guidelines;
(vii) which, together with the Cardholder Agreement related
thereto, does not contravene in any material respect any local, state
or federal laws, rules or regulations applicable thereto (including,
without limitation, Regulation Z of the Board of Governors of the
Federal Reserve System, the Federal Consumer Protection Act (including,
without limitation, the Federal Truth in Lending Act), the Fair Credit
Billing Act, and all other laws, rules and regulations relating to
usury, consumer protection, truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Cardholder Agreement related thereto is in violation of any such law,
rule or regulation in any material respect;
(viii) which satisfies all applicable requirements of the
Cardholder Guidelines;
(ix) which was not originated in or subject to the laws of a
jurisdiction whose laws would make such Receivable, the related
Cardholder Agreement or the sale of such Receivable to a Purchaser or a
Bank under the Agreement unlawful, invalid or unenforceable; and
(x) which is owned solely by the Seller free and clear of all
Adverse Claims, except for (1) the interests created therein pursuant
to the Pooling and Servicing Agreement (which interests are pari passu
with the Purchasers' and the Banks' interests therein), and (2) the
interests therein created under the Agreement.
"Escrow Bank" means the Eligible Institution then holding the CO Escrow
Account pursuant to Section 7.16 of the Agreement.
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"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"Eurodollar Rate" means, for any Fixed Period, an interest
rate per annum equal to the rate per annum at which deposits in U.S. dollars are
offered by the principal office of Citibank in London, England to prime banks in
the London interbank market at 11:00 A.M. (London time) two Business Days before
the first day of such Fixed Period in an amount substantially equal to the
Purchaser Capital associated with such Fixed Period on such first day and for a
period equal to such Fixed Period.
"Eurodollar Rate Reserve Percentage" of any Purchaser or Bank
for any Fixed Period in respect of which Yield is computed by reference to the
Eurodollar Rate means the reserve percentage applicable two Business Days before
the first day of such Fixed Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) (or if
more than one such percentage shall be applicable, the daily average of such
percentages for those days in such Fixed Period during which any such percentage
shall be so applicable) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for such Purchaser or Bank with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities (or with respect to
any other category of liabilities that includes deposits by reference to which
the interest rate on Eurocurrency Liabilities is determined) having a term equal
to such Fixed Period.
"Excess Finance Charge Collections" has the meaning set forth
in Section 2.04 of the Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Facility Termination Date" means the earliest of (i) October
30, 1998 (or such later date as the Seller, the Subordinated Purchaser, the
Owner, the Originator, the Servicer and the Agent may mutually agree in
writing), (ii) the date determined pursuant to Section 3.02 and (iii) the date
the Purchase Limit reduces to zero pursuant to Section 1.01(c).
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight
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Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three Federal funds brokers of recognized standing
selected by it.
"Fee Letter" has the meaning set forth in Section 1.03 of the
Agreement.
"Final Distribution Date" means the date on which (i) the
Purchaser Capital of all Purchaser Receivable Interests and Yield thereon have
been paid in full, (ii) all other amounts payable hereunder to the Purchasers,
the Banks or the Agent with respect thereto are paid in full, (iii) the
Subordinated Purchaser Capital of all Subordinated Receivable Interests have
been paid in full, and (iv) the aggregate amount of all unreimbursed Purchaser
Charge-Offs with respect thereto have been reimbursed; provided, that the Final
Distribution Date shall in any event occur one year after all amounts payable
pursuant to clauses (i), (ii) and (iii) above have been paid in full even if all
unreimbursed Purchaser Charge-Offs with respect thereto have not been
reimbursed; this is the "Series Termination Date" referred to in the Pooling and
Servicing Agreement.
"Finance Charge Receivables" means (i) all amounts billed to
the Obligors on any Account in the ordinary course of the Originator's business
in respect of (a) periodic rate finance charges, (b) late payment fees, (c)
annual fees, if any, with respect to the Accounts (excluding any fees payable
with respect to the "Fashion Bug Gold Club" which fees shall be deemed to be
Principal Receivables), (d) returned check charges, and (e) any other fees with
respect to the Accounts designated by the Seller by notice to the Trustee and
the Agent at any time and from time to time to be included as Finance Charge
Receivables and (ii) all amounts paid to the Originator in respect of Allocated
Interchange. Notwithstanding their treatment under the Pooling and Servicing
Agreement, Discount Option Receivables, shall, for the purposes of the
Agreement, be treated as Principal Receivables and not as Finance Charge
Receivables, except as otherwise expressly provided in the Agreement.
"Fixed Allocation Percentage" means, for each Due Period with
respect to the Amortization Period, the ratio (expressed as a percentage) (which
shall not be in excess of 100%) computed as at the close of business of the
Agent on the Business Day immediately preceding the Termination Date, by
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dividing (a) the sum of the Purchaser Capital and the Subordinated Purchaser
Capital on such Business Day by (b) the product of (i) the Allocation Percentage
for such Due Period and (ii) the total amount of Principal Receivables on the
last day of the immediately preceding Due Period minus the total amount of
Discount Option Receivables (if any) on such last day.
"Fixed Period" means, with respect to any Purchaser Receivable
Interest which is not funded through the issuance of commercial paper:
(a) initially the period commencing on the date on
which such Purchaser Receivable Interest is first funded other
than by the issuance of commercial paper and ending such
number of days as the Servicer shall select and the Agent
shall approve pursuant to the proviso below; and
(b) thereafter each period commencing on the last day
of the immediately preceding Fixed Period for such Purchaser
Receivable Interest and ending such number of days as the
Servicer shall select and the Agent shall approve pursuant to
the proviso below;
provided, that
(i) such Fixed Period shall be a period from one to
and including 29 days, or a period of one, two or three
months, as the Servicer may select and the agent shall approve
on notice received by the Agent (including notice by
telephone, confirmed in writing) not later than 11:00 A.M. on
(A) the third Business Day before the first day of such Fixed
Period (in the case of Fixed Periods of one, two or three
months) or (B) the first day of such Fixed Period (in the case
of Fixed Periods of one to 29 days);
(ii) any Fixed Period (other than of one day) which
would otherwise end on a day which is not a Business Day shall
be extended to the next succeeding Business Day (provided,
however, if Yield in respect of such Fixed Period is computed
by reference to the Eurodollar Rate, and such Fixed Period
would otherwise end on a day which is not a Business Day, and
there is no subsequent Business Day in the same calendar month
as such day, such Fixed Period shall end on the next preceding
Business Day);
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(iii) in the case of any Fixed Period of one day, (A)
if such Fixed Period is the initial Fixed Period for a
Purchaser Receivable Interest, such Fixed Period shall be the
day of purchase of such Purchaser Receivable Interest; (B) any
subsequently occurring Fixed Period which is one day shall, if
the immediately preceding Fixed Period is more than one day,
be the last day of such immediately preceding Fixed Period,
and, if the immediately preceding Fixed Period is one day, be
the day next following such immediately preceding Fixed
Period; and (C) if such Fixed Period occurs on a day
immediately preceding a day which is not a Business Day, such
Fixed Period shall be extended to the next succeeding Business
Day; and
(iv) in the case of any Fixed Period for any
Purchaser Receivable Interest which commences before the
Termination Date for such Purchaser Receivable Interest and
would otherwise end on a date occurring after such Termination
Date, such Fixed Period shall end on such Termination Date and
the duration of each Fixed Period which commences on or after
the Termination Date for such Purchaser Receivable Interest
shall be of such duration as shall be selected by the Agent.
"Floating Allocation Percentage" means, for each Due Period,
the ratio (expressed as a percentage) (which shall not be in excess of 100%)
computed as of the last day of the immediately preceding Due Period by dividing
(a) the sum of the Purchaser Capital and the Subordinated Purchaser Capital as
of such last day by (b) the product of (i) the Allocation Percentage for such
Due Period and (ii) the total amount of Principal Receivables on such last day
minus the total amount of Discount Option Receivables (if any) on such day;
provided, however, that during the initial Due Period, the Floating Allocation
Percentage will be equal to the ratio (expressed as a percentage) computed by
dividing (x) the sum of the initial Purchaser Capital and the initial
Subordinated Purchaser Capital by (y) the product of (i) the Allocation
Percentage for such initial Due Period and (ii) the total amount of Principal
Receivables on the initial Cut-Off Date.
"FSC" means Fashion Service Corp., a Delaware corporation.
"Funding Rate" for any Settlement Period means (a) the rate
per annum equivalent to the weighted average of the per annum rates paid or
payable by CRC from time to time as interest
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on, or otherwise (by means of interest rate hedges or otherwise) in respect of,
that commercial paper issued by CRC and which is allocated, in whole or in part,
by the Agent (on behalf of CRC) to fund its purchase or maintenance of such
Purchaser Receivable Interest during such Settlement Period, as determined by
the Agent (on behalf of CRC) and reported to the Owner and the Servicer, which
rates shall reflect and give effect to the commissions of placement agents and
dealers in respect of such commercial paper, to the extent such commissions are
allocated, in whole or in part, to such commercial paper by the Agent (on behalf
of CRC); provided, however, that if any component of such rate is a discount
rate, in calculating the "Funding Rate" for such Settlement Period, the Agent
shall for such component use the rate resulting from converting such discount
rate to an interest bearing equivalent rate per annum; provided further, that if
the Agent so requests and the Servicer consents thereto, the "Funding Rate" for
any Settlement Period of one day shall be the Assignee Rate for such period or
(b) such other rate as the Agent and the Servicer shall agree to in writing.
"GAAP" means generally accepted accounting principles in the
United States of America, applied on a consistent basis and applied to both
classification of items and amounts, and shall include but not be limited to the
official interpretations thereof by the Financial Accounting Standards Board,
its predecessors and successors.
"Holder of the Exchangeable Seller Certificate" shall have the
meaning ascribed to that term in the Pooling and Servicing Agreement.
"Initial Depositary Account" means the "Initial Depositary
Account" under the Pooling and Servicing Agreement.
"Insurance Proceeds" means any amounts received pursuant to
any credit life insurance policies, credit disability or unemployment insurance
policies covering any Obligor with respect to Pool Receivables under such
Obligor's Account to the extent such amounts are used to make payments on such
Account.
"Interest Rate Agreements" mean one or more interest rate cap
or interest rate swap agreements which shall (i) in the case of a cap agreement,
provide for payments to the Owner or FSC or the Seller in the event the Funding
Rate shall exceed 9.0% per annum, (ii) in the case of a swap agreement, provide
for payments to the Owner or FSC at the Funding Rate in exchange for payments by
the Owner or FSC at a fixed interest rate not in excess of 9.0% per annum, (iii)
cover in the aggregate (x) a notional balance of at least $50,000,000 through
the Facility Termination
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Date, which notional balance shall either (A) remain at least at $50,000,000
during the ten months immediately following the Facility Termination Date or (B)
amortize on a straight-line basis to zero over not less than 10 months
immediately following the Facility Termination Date and (iv) be with such
counter-parties and contain such other terms and provisions as shall be
satisfactory to the Agent. The Interest Rate Agreements, which are limited to
those agreements specified in the Owner's officer's certificate in the form of
Annex G delivered from time to time in accordance with the Agreement, are the
"Enhancement" referred to in the Pooling and Servicing Agreement for the
Receivables Purchase Series arising in connection with the Agreement.
"Investor Certificate" has the meaning set forth in Section
1.1 of the Pooling and Servicing Agreement.
"Last Cycle Closing Date" means, for any month, the
latest-occurring Cycle Closing Date for all Cardholder Agreements in such month.
"Liquidation Fee" means, for the Settlement Period or Fixed
Period during which the Termination Date occurs, the amount, if any, by which
(i) the additional Yield (calculated without taking into account any Liquidation
Fee or any shortened duration of such Settlement Period or Fixed Period due to
the occurrence of the Termination Date) which would have accrued during such
Settlement Period or Fixed Period on the reductions of Purchaser Capital of the
Purchaser Receivable Interests had such reductions remained as Purchaser
Capital, exceeds (ii) the income, if any, received by the Purchasers' investing
the proceeds of such reductions of Purchaser Capital.
"Loss Amount" for any Due Period means an amount (which shall
not be less than zero) equal to (a) the principal balance of any Account, or any
portion thereof, that has been written off or, consistent with the Cardholder
Guidelines, should have been written off the Originator's books as uncollectible
during such Due Period, minus (b) the amount of Recoveries received in such Due
Period with respect to Pool Receivables previously charged off as uncollectible.
"Majority Banks" means at any time Banks holding Purchaser
Receivable Interests having Purchaser Capital equal to more than 66- % of the
aggregate outstanding Purchaser Capital of all Purchaser Receivable Interests
owned by the Banks or, if no such Purchaser Capital is then outstanding, Banks
having more than 66- % of the Purchase Limit.
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"Market" means (i) an "established securities market" within
the meaning of Section 7704(b)(1) of the Internal Revenue Code and any proposed,
temporary or final treasury regulation thereunder, including, without
limitation, an over-the-counter market or an interdealer quotation system that
regularly disseminates firm buy or sell quotations or (ii) a "secondary market"
or "substantial equivalent thereof" within the meaning of Section 7704(b)(2) of
the Internal Revenue Code and any proposed, temporary or final treasury
regulation thereunder, including a market wherein interests in the Trust are
regularly quoted by any Person making a market in such interests and a market
wherein any Person regularly makes available bid or offer quotes with respect to
interests in the Trust and stands ready to effect buy or sell transactions at
the quoted prices for itself or on behalf of others.
"Master Trust Documents" means the Pooling and Servicing
Agreement, the Purchase Agreement, the Security Agreement and each other
agreement, instrument or other document (other than any "supplement" or
"receivables purchase agreement" (in each case, as defined therein)) delivered
in connection with the Pooling and Servicing Agreement, in each case as the same
may be amended, modified or supplemented in accordance with the terms thereof.
"Minimum Seller Capital" means, on any date of determination,
an aggregate Outstanding Balance of Principal Receivables that are Eligible
Receivables in the Receivables Pool on such date of determination equal to (i)
during the Revolving Period and during the Amortization Period (but only so long
during the Amortization Period as neither the Facility Termination Date nor the
Commitment Termination Date has occurred and the Seller has not designated the
Termination Date), the product of (a) 2.0% and (b) the amount of the Purchaser
Capital on such date of determination and (ii) during the Amortization Period
(and following the occurrence of the Facility Termination Date or the Commitment
Termination Date or the designation of the Termination Date by the Seller), an
amount equal to (a) 102% of the amount of the Purchaser Capital at the close of
business of the Agent on the Business Day (the "MSC Fix Date") immediately
preceding the earliest to occur of the Facility Termination Date, the Commitment
Termination Date and the designation of the Termination Date by the Seller,
minus (b) the sum of (1) the amount of the Purchaser Capital on such date of
determination and (2) the aggregate reductions, if any, in the amount of
Subordinated Purchaser Capital from the MSC Fix Date to such date of
determination.
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"Minimum Seller Interest" means, on any date of determination,
an aggregate Outstanding Balance of Principal Receivables that are Eligible
Receivables in the Receivables Pool on such date of determination equal to (i)
during the Revolving Period, the product of (a) 2.0% and (b) the amount of the
Purchaser Capital on such date of determination and (ii) during the Amortization
Period, an amount equal to the product of (a) 2.0% and (b) the amount of the
Purchaser Capital at the close of business of the Agent on the Business Day
immediately preceding the Termination Date.
"Monthly Charge-Off Ratio" for any Due Period means the ratio
(expressed as a percentage) computed as of the last day of such Due Period by
dividing (i) an amount equal to twelve times the remainder of (x) the aggregate
Outstanding Balance of all Pool Receivables written off the Seller's books, or
which should have been written off the Seller's books during such Due Period
minus (y) the aggregate amount of Collections of Principal Receivables in the
Receivables Pool actually received during such Due Period in respect of Pool
Receivables that had been written off the Seller's books during a prior Due
Period by (ii) the Outstanding Balance of the Receivables in the Receivables
Pool as of the first day of such Due Period.
"Moody's" means Moody's Investors Service, Inc. or any
successor thereto.
"Net Excess Spread" means, as of the last day of each Due
Period, the Portfolio Yield for such Due Period minus the sum of (A) the
weighted average Yield Rate for such Due Period, (B) the Servicer Fee Rate for
such Due Period, (C) the fees payable under the Fee Letter for such Due Period
(each expressed as a percentage rate per annum) and (D) the Monthly Charge-Off
Ratio for such Due Period.
"Net Receivables Pool Balance" means, at any time, the
Outstanding Balance of all Eligible Receivables then in the Receivables Pool.
For the purpose of this definition, if any Receivable in any Account shall
constitute a Defaulted Receivable, the Outstanding Balance of all Receivables in
the same Account shall be deemed to be zero.
"Obligor" means, with respect to any Account, the Person or
Persons obligated to make payments with respect to such Account pursuant to a
Cardholder Agreement, including any guarantor thereof.
"Opinion of Counsel" has the meaning set forth in Section 1.1
of the Pooling and Servicing Agreement.
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"Original Agreements" has the meaning set forth in the third
Preliminary Statement to the Agreement.
"Original PPC" has the meaning set forth in the third
Preliminary Statement to the Agreement.
"Original RPA" has the meaning set forth in the second
Preliminary Statement to the Agreement.
"Originator" means Spirit of America National Bank in its
capacity as the originator of the Receivables prior to the sale thereof to the
Owner pursuant to the Purchase Agreement.
"Outstanding Balance" of any Receivable at any time means the
then outstanding principal balance thereof.
"Owner" means Charming Shoppes Receivables Corp. in its
capacity as the seller of Receivables to the Seller pursuant to the Pooling and
Servicing Agreement.
"Payment Ratio" means the ratio (expressed as a percentage)
computed as of the last day of any Due Period by dividing (i) the aggregate
Collections received during such Due Period (excluding Collections constituting
payments in respect of the Interest Rate Agreements) by (ii) the aggregate
Outstanding Balance of all Pool Receivables at the close of business of the Due
Period immediately preceding such Due Period.
"Percentage" of any Bank means, (a) with respect to Citibank,
the percentage set forth on the signature page to the Agreement, or such amount
as reduced by any Assignment and Acceptance entered into with an Eligible
Assignee, or (b) with respect to a Bank that has entered into an Assignment and
Acceptance, the amount set forth therein as such Bank's Percentage, or such
amount as reduced by an Assignment and Acceptance entered into between such Bank
and an Eligible Assignee.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, limited liability company or other entity, or a
government or any political subdivision or agency thereof.
"Pool Index File" means the file on the Originator's computer
system that identifies revolving credit card accounts of the Originator, which
file is designated by the Originator as its "Pool Index File".
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"Pool Receivables" means all Receivables existing on the
initial Cut-Off Date and all Receivables arising in the Accounts from time to
time after the applicable Cut Off Date until the Final Distribution Date.
"Pooling and Servicing Agreement" means the Second Amended and
Restated Pooling and Servicing Agreement dated as of November 25, 1997 among the
Owner, as the seller, Spirit, as the Servicer, and First Union National Bank, as
the Trustee, as the same may from time to time be amended, restated, modified or
supplemented.
"Portfolio Yield" means, with respect to any Due Period, the
annualized percentage equivalent to the amount computed as of the last day of
such Due Period by dividing (i) the amount of Collections of Finance Charge
Receivables during such Due Period calculated on a cash basis by (ii) the total
amount of the Principal Receivables in the Receivables Pool as of the first day
of such Due Period.
"Principal Receivables" means (a) all amounts (other than
amounts which represent Finance Charge Receivables) billed to the Obligor on any
Account, including, without limitation, amounts billed in the ordinary course of
the Originator's business in respect of purchases of merchandise or services or
credit insurance premiums and (b) all other fees (other than Finance Charge
Receivables) billed to Obligors on the Accounts. Notwithstanding their treatment
under the Pooling and Servicing Agreement, Discount Option Receivables, shall,
for the purposes of the Agreement, be treated as Principal Receivables and not
as Finance Charge Receivables, except as otherwise expressly provided in the
Agreement.
"Prior PSA" means the Amended and Restated Pooling and
Servicing Agreement dated as of December 24, 1992 as amended and restated as of
May 4, 1994, and as amended by Amendment No. 1 dated as of December 22, 1995 and
Amendment No. 2 dated as of March 22, 1996, among Spirit, as the seller and the
Servicer and First Union National Bank, as the Trustee.
"Private Holder" means each holder of a right to receive
interest or principal in respect of any direct or indirect interest in the
Trust, including any financial instrument or contract the value of which is
determined in whole or part by reference to the Trust (including the Trust's
assets, income of the Trust or distributions made by the Trust), excluding any
interest in the Trust represented by any Series, Class of Certificates,
Receivables Purchase Interest (as defined
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in the Pooling and Servicing Agreement) or any other interests as to which the
Trustee has received an Opinion of Counsel to the effect that such Series,
Class, Receivables Purchase Interest or other interest will be treated as debt
or otherwise not as an equity interest in either the Trust or the Receivables
for federal income tax purposes (unless such interest is convertible or
exchangeable into an interest in the Trust or the Trust's income or such
interest provides for payment of equivalent value). Notwithstanding the
immediately preceding sentence, "Private Holder" shall also include any other
Person that the Seller determines is a "partner" within the meaning of Section
1.7704-1(h)(1)(ii) of the U.S. Treasury Regulations (including by reason of
Section 1.7704-1(h)(3) or any successor provision of law. Any Person holding
more than one interest in the Trust, each of which separately would cause such
Person to be a Private Holder, shall be treated as a single Private Holder. Each
holder of an interest in a Private Holder which is a partnership, S corporation
or a grantor trust under the Internal Revenue Code shall be treated as a Private
Holder unless excepted with the consent of the Seller (which consent shall be
based on an Opinion of Counsel generally to the effect that the action taken
pursuant to the consent will not cause the Trust to become a publicly traded
partnership treated as a corporation). Notwithstanding anything to the contrary
herein, each Person designated as a "Private Holder" in any Supplement or
Receivables Purchase Agreement as defined in the Pooling and Servicing Agreement
shall be considered to be a Private Holder.
"Purchase Agreement" means that certain Purchase and Sale
Agreement, dated as of November 25, 1997, between Spirit of America National
Bank, as seller and Charming Shoppes Receivables Corp., as purchaser, as the
same may, from time to time, be amended, restated, modified or supplemented.
"Purchase Limit" means $50,000,000, as such amount may be
reduced pursuant to Section 1.01(c) of the Agreement.
"Purchaser" means CRC and all other owners by assignment or
otherwise (other than the Banks) of a Purchaser Receivable Interest and, to the
extent of the undivided interests so purchased, shall include any participants.
"Purchaser Capital" for any date means an amount equal to (a)
the aggregate initial Purchaser Capital of all Purchaser Receivable Interests
purchased by the Purchasers or the Banks under the Agreement prior to such date
(including pursuant to reinvestments under Section 2.06(a) of the Agreement)
minus (b) the amount of distributions on account of Purchaser Capital made to
the Purchasers and the Banks prior to such date and minus
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(c) the excess, if any, of the aggregate amount of Purchaser Charge-Offs for all
Distribution Dates preceding such date over the aggregate amount of Purchaser
Charge-Offs reimbursed prior to such date; provided, however, that if Purchaser
Capital shall have been reduced by any distribution and thereafter all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason, such Purchaser Capital shall be increased by the amount of such
rescinded or returned distribution, as though it had not been made.
"Purchaser Charge-Off" means any amount designated as such in
Section 2.05(d) or 2.07(a) of the Agreement.
"Purchaser Loss Amount" means, with respect to any
Distribution Date, the product of (a) the Floating Allocation Percentage of the
Allocated Loss Amount for the preceding Due Period and (b) the Purchaser
Percentage.
"Purchaser Percentage" means, with respect to any Distribution
Date, a fraction, the numerator of which is equal to the Purchaser Capital as of
the close of business on the last day of the second preceding Due Period and the
denominator of which is equal to the sum of the Purchaser Capital and the
Subordinated Purchaser Capital as of the close of business on such day.
"Purchaser Principal Collections" has the meaning set forth in
Section 2.06(b) of the Agreement.
"Purchaser Receivable Interest" means, at any time, the
undivided percentage ownership interests purchased by CRC, the Banks or their
respective successors and assigns, under the Agreement, which shall represent an
undivided percentage ownership interest in all outstanding Pool Receivables then
existing or thereafter arising and all Collections with respect to, and other
proceeds of, such Pool Receivables (including, without limitation, Insurance
Proceeds and other amounts constituting Recoveries of Pool Receivables and
payments in respect of the Interest Rate Agreements).
"Purchaser Representative" means, initially, CNAI, as the
Purchaser Representative pursuant to Section 6.01 of the Agreement, and each
other Person who shall succeed to the functions of CNAI as the Purchaser
Representative pursuant to Section 6.01(c) of the Agreement.
"Purchaser Servicer Fee", with respect to any Distribution
Date, means an amount equal to one-twelfth of the product of (a) the Servicing
Fee Rate and (b) the Purchaser
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Capital as of the last day of the Due Period second preceding such Distribution
Date.
"Quarterly Charge-Off Ratio" as of the last day of any Due
Period means the ratio (expressed as a percentage) computed by averaging the
Monthly Charge-Off Ratio for such Due Period with the two immediately preceding
Monthly Charge-Off Ratios.
"Receivable" means Principal Receivables and Finance Charge
Receivables.
"Receivable Interest" has the meaning set forth in the eighth
Preliminary Statement to the Agreement.
"Receivables Pool" means at any time the aggregation of each
then outstanding Pool Receivable.
"Receivables Purchase Interest" and "Receivables Purchase
Series Interest" mean, collectively, the Purchaser Receivable Interests and the
Subordinated Receivable Interests.
"Receivables Purchase Series" has the meaning attributed
thereto in the Pooling and Servicing Agreement.
"Receivables Purchaser" has the meaning attributed thereto in
the Pooling and Servicing Agreement.
"Records" means correspondence, memoranda, computer programs,
tapes, discs, papers, books or other documents or transcribed information of any
type whether expressed in ordinary or machine readable language.
"Recoveries" means all amounts received (net of out-of-pocket
costs of collection) with respect to Pool Receivables which were previously
charged off as uncollectible and all Insurance Proceeds.
"Register" has the meaning set forth in Section 7.03(b)(iii).
"Removal Date" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Removed Accounts" means Accounts designated by the Owner for
deletion and removal from the Trust for purposes of the Pooling and Servicing
Agreement pursuant to Section 2.7 thereof.
"Renumbered Account" means an Account with respect to which a
new credit account number has been issued by the Servicer
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or the Originator under circumstances resulting from a lost or stolen credit
card, from the transfer from one group to another group, from the transfer from
one Obligor to another Obligor or from the addition of any Obligor and not
requiring standard application and credit evaluation procedures under the
Cardholder Guidelines; and which in any case can be traced or identified by
reference to or by way of the computer files or microfiche or written lists
delivered to the Trustee pursuant to Section 2.1, 2.6(d)(ii) or 2.7(b)(ii)(B) of
the Pooling and Servicing Agreement as an Account which has been renumbered.
"Required Amount" has the meaning set forth in Section 2.05(a)
of the Agreement.
"Requirements of Law" means any law, treaty, rule or
regulation, or determination of an arbitrator or of the United States of
America, any state or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, whether federal, state or local
(including any usury law, the Federal Truth-in-Lending Act and Regulation Z of
the Board of Governors of the Federal Reserve System), and, when used with
respect to any Person, the certificate of incorporation and by-laws or other
charter or other governing documents of such Person.
"Responsible Officer" of the Seller, the Owner, the
Originator, the Servicer, FSC or Charming Shoppes, as the case may be, means the
chief executive officer, chief financial officer or controller thereof, and in
addition, with respect to FSC, any Vice President.
"Revolving Period" means the period beginning on the date of
the Agreement and ending at the close of business of the Agent on the Business
Day immediately preceding the Termination Date.
"S&P" means Standard & Poor's Corporation or any successor
thereto.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means that certain Security Agreement,
dated as of November 25, 1997, between Spirit of America National Bank and First
Union National Bank, as trustee, as the same may, from time to time, be amended,
restated, modified or supplemented.
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"Seller Account" means, initially, the account (account number
033009128001) of the Seller maintained at the office of the Trustee located at
123 South Broad Street, Philadelphia, Pennsylvania, or, upon 10 Business Days'
written notice from the Seller to the Agent, any other account established by
the Seller with a financial institution in New York, New York or Philadelphia,
Pennsylvania for the purpose of receiving amounts allocated and distributed by
the Servicer in respect of the Seller Interest.
"Seller Interest" has the meaning set forth in Section 1.1 of
the Pooling and Servicing Agreement.
"Series" has the meaning set forth in Section 1.1 of the
Pooling and Servicing Agreement.
"Servicer" means at any time the Person then authorized
pursuant to the Agreement and the Pooling and Servicing Agreement to administer
and collect Pool Receivables.
"Servicer Fee" has the meaning set forth in Section 5.03 of
the Agreement; this is the "Receivables Purchaser Monthly Servicing Fee"
referred to in the Pooling and Servicing Agreement.
"Servicer Report" means a report, in substantially the form of
Annex A hereto, furnished by the Servicer to the Agent pursuant to paragraph
1(f) of Exhibit V.
"Servicing Fee Rate" has the meaning set forth in Section 5.03
of the Agreement; this is the "Series Servicing Fee Percentage" referred to in
the Pooling and Servicing Agreement.
"Settlement Period" means (a) initially, the period from and
including the date of the Agreement to but excluding the next following
Distribution Date and (b) thereafter, the period from and including a
Distribution Date to but excluding the next following Distribution Date.
"Statement" means, in respect of any Cardholder Agreement, the
periodic written notice to the related Obligor setting forth the previous
balance, payments and credits, finance charge, charges (including sales and
other charges), new balance, and minimum payment.
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"Store" means:
(i) each retail location of the Originator or any
Affiliate of the Originator that is part of the "Fashion Bug"
or "Fashion Bug Plus" chain of women's retail apparel stores,
(ii) each other retail location of a chain of women's
retail apparel stores established de novo by the Originator or
any Affiliate of the Originator the primary business of which
is the retail sale of moderately priced women's apparel, and
(iii) any other retail location the primary business
of which is the retail sale of moderately priced women's
apparel that is consented to by the Agent.
"Store Account" means each account established by a Store for
the purpose of collecting Store Payments.
"Store Payment" means any payment by an Obligor of a Pool
Receivable made by means of cash or a check delivered in person by or on behalf
of such Obligor at any Store.
"Store Payment Notice" has the meaning set forth in paragraph
1(b)(xxi) of Exhibit II to the Agreement.
"Subject Instrument" means any Certificate or Receivables
Purchase Interest (as defined in the Pooling and Servicing Agreement) issued by
the Trust with respect to which the Seller shall not have received an Opinion of
Counsel to the effect that such Certificate or Receivables Purchase Interest
will be treated as debt for Federal income tax purposes.
"Subordinated Principal Collections" means, with respect to
each Distribution Date, (a) the product of (1) the Floating Allocation
Percentage, with respect to the Revolving Period, or the Fixed Allocation
Percentage, with respect to the Amortization Period, of Allocable Principal
Collections for the related Due Period (or any partial Due Period which occurs
as the first Due Period during the Amortization Period) and (2) the Subordinated
Purchaser Percentage for such Distribution Date, minus (b) the aggregate amount
(if any) of Total Principal Collections reinvested with the Seller on behalf of
the Subordinated Purchaser during such Due Period pursuant to Section 2.06(a) of
the Agreement; provided, that in no event shall Subordinated Principal
Collections be less than zero.
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"Subordinated Purchaser Account" means the special account
(account number 033009128002) of the Subordinated Purchaser maintained at First
Union National Bank, or, upon 10 Business Days' written notice from the
Subordinated Purchaser to the Agent, any other account established by the
Subordinated Purchaser with a financial institution in New York, New York or
Philadelphia, Pennsylvania for the purpose of receiving amounts allocated and
distributed by the Servicer in respect of the Subordinated Receivable Interest.
"Subordinated Purchaser Capital" for any date means an amount
equal to (a) the aggregate initial Subordinated Purchaser Capital of all
Subordinated Receivable Interests conveyed and allocated to the Subordinated
Purchaser under the Agreement prior to such date (including pursuant to
reinvestments under Section 2.06(a) of the Agreement), minus (b) the amount of
Total Principal Collections allocated to the Subordinated Purchaser on account
of Subordinated Purchaser Capital which are, prior to such date, distributed to
the Subordinated Purchaser pursuant to Section 2.06(a) of the Agreement, minus
(c) an amount equal to the aggregate amount by which the Subordinated Purchaser
Capital has been reduced as a result of Subordinated Principal Collections for
prior Distribution Dates having been used to fund the Required Amount with
respect to such Distribution Dates pursuant to Section 2.05(c) of the Agreement,
minus (d) an amount equal to the aggregate amount by which the Subordinated
Purchaser Capital has been reduced to fund the Purchaser Loss Amount on all
prior Distribution Dates pursuant to Section 2.05(d) of the Agreement, minus (e)
an amount equal to the aggregate amount by which Subordinated Purchaser Capital
has been reduced on all prior Distribution Dates pursuant to Section 2.07(a) of
the Agreement, and plus (f) the aggregate amount of Excess Finance Charge
Collections applied on all prior Distribution Dates for the purposes of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e).
"Subordinated Purchaser Loss Amount" means, with respect to
any Distribution Date, the product of (a) the Floating Allocation Percentage of
the Allocated Loss Amount for the preceding Due Period and (b) the Subordinated
Purchaser Percentage as of such Distribution Date.
"Subordinated Purchaser Percentage" means, with respect to any
Distribution Date, a fraction, the numerator of which is equal to the
Subordinated Purchaser Capital as of the close of business on the last day of
the second preceding Due Period and the denominator of which is equal to the sum
of the Purchaser Capital and the Subordinated Purchaser Capital at the close of
business on such day.
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"Subordinated Purchaser Rate" means, for any period, a per
annum rate equal to the Yield Rate for such period plus 0.25%.
"Subordinated Purchaser Servicer Fee", with respect to any
Distribution Date, means an amount equal to one-twelfth of the product of (a)
the Servicing Fee Rate and (b) the Subordinated Purchaser Capital as of the last
day of the Due Period second preceding such Distribution Date.
"Subordinated Purchaser Yield" means, for each Subordinated
Receivable Interest for any Settlement Period,
SPR x SPC x ED
---
360
where:
SPR = the Subordinated Purchaser Rate for such
Subordinated Receivable Interest for such
Settlement Period
SPC = the Subordinated Purchaser Capital of the
Subordinated Receivable Interests during
such Settlement Period
ED = the actual number of days elapsed during
such Settlement Period;
provided that no provision of the Agreement shall require the payment or permit
the collection of Subordinated Purchaser Yield in excess of the maximum
permitted by applicable law; and provided, further that Subordinated Purchaser
Yield for any Subordinated Receivable Interest shall not be considered paid by
any distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
"Subordinated Receivable Interest" means, at any time, the
undivided percentage ownership interests conveyed and allocated to the
Subordinated Purchaser under the Agreement, which shall represent an undivided
percentage ownership interest, subordinated (to the extent set forth in Article
II of the Agreement) to the Purchaser Receivable Interests, in all outstanding
Pool Receivables then existing or thereafter arising and all Collections with
respect to, and other proceeds of, such Pool Receivables (including, without
limitation, Insurance Proceeds and other amounts constituting Recoveries of Pool
Receivables and payments in respect of the Interest Rate Agreements).
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"Termination Date" means (i) in the case of a Purchaser
Receivable Interest owned by the Purchaser, the earlier of (a) the Business Day
which the Seller or the Agent so designates by notice to the other (with a copy
to the Servicer) at least one Business Day in advance (including any date on
which the Agent terminates the reinvestment of Collections pursuant to paragraph
2(b)(iii) of Exhibit II to the Agreement) and (b) the Facility Termination Date,
and (ii) in the case of a Purchaser Receivable Interest owned by a Bank, the
earlier of (a) the Business Day which the Seller so designates by notice to the
Agent (with a copy to the Servicer) at least one Business Day in advance and (b)
the Commitment Termination Date.
"Total Principal Collections" has the meaning set forth in
Section 2.02(b) of the Agreement.
"Total Systems Failure" means, in respect of any Distribution
Date, a total failure of the computer system (including but not limited to
off-site backup systems) of the Servicer or the Administrative Servicer which
contain Records relating to the Pool Receivables, the effect of which would make
it impossible or impracticable for the Servicer or the Administrative Servicer
to perform the acts required to be performed hereunder on or in anticipation of
such Distribution Date.
"Trust" means the trust created by the Pooling and Servicing
Agreement.
"Trustee" means, initially, First Union National Bank
(formerly known as First Fidelity Bank, National Association, and prior to that
known as First Fidelity Bank, N.A., Pennsylvania, and prior to that known as
Fidelity Bank, National Association), a national banking association, as the
trustee under the Pooling and Servicing Agreement, and each other Person who
shall succeed to the functions of First Union National Bank pursuant to the
terms of the Pooling and Servicing Agreement.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"Unallocated Net Receivables Pool Balance" means, at any time,
the Outstanding Balance of Principal Receivables that are Eligible Receivables
in the Receivables Pool that is not allocated to the Purchaser Receivable
Interests or the Subordinated Receivable Interests pursuant to the Agreement and
not allocated to any other Person other than the Holder of the Exchangeable
Seller Certificate pursuant to a supplement to the
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Pooling and Servicing Agreement or pursuant to any other receivables purchase
agreement that is subject to the Pooling and Servicing Agreement.
"Yield" means:
(i) for each Purchaser Receivable Interest for any
Settlement Period to the extent the Purchaser will be funding
such Purchaser Receivable Interest on the first day of such
Settlement Period through the issuance of commercial paper,
FR x C x ED + LF
---
360
(ii) for each Purchaser Receivable Interest for any
Fixed Period to the extent (x) the Purchaser will not be
funding such Purchaser Receivable Interest on the first day of
such Fixed Period through the issuance of commercial paper or
(y) the Banks will be funding such Purchaser Receivable
Interest,
AR x C x ED
---
360
where:
AR = the Assignee Rate for such
Purchaser Receivable Interest for
the applicable Fixed Period
C = the Purchaser Capital of the
Purchaser Receivable Interests
during the applicable Settlement
Period or Fixed Period
FR = the Funding Rate for the
applicable Settlement Period
ED = the actual number of days elapsed
during the applicable Settlement
Period or Fixed Period
LF = the Liquidation Fee, if any, for
such Settlement Period;
provided that no provision of the Agreement shall require the payment or permit
the collection of Yield in excess of the maximum permitted by applicable law;
and provided, further that
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Yield for any Purchaser Receivable Interest shall not be considered paid by any
distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
"Yield Rate" means, at any time, the Assignee Rate or the
Funding Rate with regard to which Yield is calculated at such time.
- - - - - -
2. Defined Terms from the Pooling and Servicing Agreement. For
purposes of the Pooling and Servicing Agreement:
"Enhancement" means the Interest Rate Agreements and any
additional interest rate caps purchased pursuant to Section 5.04(h).
"interest" at any time means the sum of the Yield and the
Subordinated Purchaser Yield at such time.
"Investor/Purchaser Percentage" means the Allocation
Percentage.
"principal" at any time means the sum of the Purchaser Capital
and the Subordinated Purchaser Capital at such time.
"Receivables Purchaser Monthly Servicing Fee" means the
Servicer Fee.
"Series Servicing Fee Percentage" means the Servicing Fee
Rate.
"Series Termination Date" means the Final Distribution Date.
3. Other Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. All terms used in Article 9
of the UCC in the State of New York, and not specifically defined herein, are
used herein as defined in such Article 9.
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EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to the Effectiveness of the Amendment and
Restatement. The effectiveness of the amendment and restatement of the Original
Agreements on the terms set forth in the Agreement is subject to the conditions
precedent that:
7.16.10. on or before the date of such effectiveness, the
Owner shall have (i) indicated in the Pool Index File maintained in its
computer files that interests in the Receivables created in connection
with the Accounts have been sold by the Seller to the Purchasers
pursuant to the Agreement and (ii) delivered to the Trustee, pursuant
to Section 2.1 of the Pooling and Servicing Agreement, a computer file
or microfiche or written list containing a true and complete list of
all Accounts, identified by account number, Obligor name and Obligor
address and setting forth the Receivable balance as of the applicable
Cut Off Date; and
7.16.11. the Agent shall have received on or before the date
of such effectiveness the following, each (unless otherwise indicated)
dated such date, in form and substance satisfactory to the Agent:
7.16.11.1. Certified copies of any necessary
corporate action of the Trustee approving the Agreement and
certified copies of all documents evidencing other necessary
governmental approvals, if any, with respect to the Agreement.
7.16.11.2. A copy of (A) the Subordinated Purchaser's
Certificate of Incorporation, certified (as of a date
reasonably near the date of the effectiveness hereof) by the
Secretary of State of the State of Delaware as being a true
and correct copy thereof, (B) the Subordinated Purchaser's
By-Laws as in effect on the date of such effectiveness,
certified by the Subordinated Purchaser's President or a Vice
President and the Secretary or any Assistant Secretary of the
Subordinated Purchaser as being a true and correct copy
thereof, (C) the resolutions adopted by the Board of Directors
of the Subordinated Purchaser authorizing the Subordinated
Purchaser's officers to enter into, and to perform all
necessary actions in connection with, transactions of the type
contemplated by the Agreement, certified by the Subordinated
Purchaser's Secretary or Assistant Secretary and (D) a
certificate of the Secretary or Assistant Secretary of the
Subordinated Purchaser certifying the names and true
signatures of the
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officers of the Subordinated Purchaser authorized to sign the
Agreement on behalf of the Subordinated Purchaser and the
other documents to be delivered by the Subordinated Purchaser
thereunder.
7.16.11.3. Certified copies of the resolutions of the
Board of Directors of the Servicer and the Originator
approving the Agreement and certified copies of all documents
evidencing other necessary corporate action and governmental
approvals, if any, with respect to the Agreement.
7.16.11.4. Certified copies of the resolutions of the
Board of Directors of each of FSC and Charming Shoppes
approving the Company Agreement and certified copies of all
documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Company
Agreement.
7.16.11.5. A certificate of the Secretary or
Assistant Secretary of the Trustee certifying the names and
true signatures of the officers of the Trustee authorized to
sign the Agreement on behalf of the Seller and the other
documents to be delivered by the Seller thereunder.
7.16.11.6. A certificate of the Secretary or
Assistant Secretary of the Servicer, the Originator and the
Owner, certifying the names and true signatures of the
officers of the Servicer, the Originator or the Owner, as the
case may be, authorized to sign the Agreement and the other
documents to be delivered by it thereunder.
7.16.11.7. A certificate of the Secretary or
Assistant Secretary of each of FSC and Charming Shoppes
certifying the names and true signatures of the officers
thereof authorized to sign the Company Agreement and the other
documents to be delivered by it thereunder.
7.16.11.8. Executed copies of proper financing
statements or amendments thereto, duly filed on or before the
date of such initial purchase under the UCC of all
jurisdictions that the Agent may deem necessary or desirable
in order to perfect the ownership interests contemplated by
the Agreement.
7.16.11.9. Executed copies of proper financing
statements, if any, necessary to release all security
interests and other rights of any Person in the Receivables or
Cardholder Agreements previously granted by the
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Originator, the Owner or the Seller (other than Adverse Claims
expressly permitted under the Agreement).
7.16.11.10. Completed requests for information, dated
as of a date reasonably near the date of such effectiveness
listing all effective financing statements (other than the
financing statements referred to in subsection (viii) above)
filed in the jurisdictions referred to in subsection (viii)
above (other than Philadelphia County, Pennsylvania) that name
the Seller as debtor, together with copies of such other
financing statements (none of which shall cover any
Receivables or Cardholder Agreements).
7.16.11.11. A copy of each Depositary Agreement with
each Depositary Bank, duly executed by the Servicer and duly
acknowledged by such Depositary Bank, and a notice to each
Depositary Bank instructing such Depositary Bank to make all
payments to the Collection Account and informing them of the
intermediate sale of Receivables to the Owner.
7.16.11.12. An instruction letter or letters to the
Administrative Servicer, duly executed and delivered by the
Owner and duly acknowledged by the Administrative Servicer,
directing the Administrative Servicer to process Collections
in accordance with the Trustee's instructions and informing
them of the intermediate sale of Receivables to the Owner.
7.16.11.13. The Company Agreement, duly executed and
delivered by each of FSC and Charming Shoppes.
7.16.11.14. The Fee Letter, duly executed and
delivered by the Seller.
7.16.11.15. Certified copies or executed originals of
(A) the Pooling and Servicing Agreement and the Purchase
Agreement, duly executed and delivered by each party thereto,
and evidence satisfactory to the Agent that each of the
conditions to the effectiveness thereof shall have been
satisfied (including, without limitation, the filing of all
appropriate UCC financing statements) and that the conveyances
contemplated therein have occurred and (B) the Security
Agreement and each other agreement, document and opinion
delivered pursuant to the Pooling and Servicing Agreement.
7.16.11.16. A copy of the Cardholder Guidelines,
certified by a Responsible Officer of the Originator as being
complete and accurate in all material respects.
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7.16.11.17. A favorable opinion of Pepper, Hamilton & Scheetz,
counsel for the Trustee, substantially in the form of Annex C hereto
and as to such other matters as the Agent may reasonably request.
7.16.11.18. A favorable opinion of:
(1) Mayer, Brown & Platt, counsel for each of the
Servicer, the Originator, the Owner, the Subordinated
Purchaser, Charming Shoppes and FSC, as to certain corporate
and security interest matters substantially in the form of
Annex D-1 hereto,
(2) Mayer, Brown & Platt, counsel for the Originator
and the Servicer, as to certain bank regulatory matters
substantially in the form of Annex D-2 hereto,
(3) Colin Stern, Esq., General Counsel for each of
the Servicer, the Originator, the Owner and the Subordinated
Purchaser, substantially in the form of Annex D-3, and
(4) Mayer, Brown & Platt, counsel for each of the
Subordinated Purchaser, Charming Shoppes and FSC, as to
certain Federal Bankruptcy Code matters substantially in the
form of Annex D-4 hereto.
7.16.11.19. A favorable opinion of Colin Stern, Esq., General
Counsel for each of FSC and Charming Shoppes, substantially in the form
of Annex E hereto.
7.16.11.20. A favorable opinion of Kaye, Scholer, Fierman,
Hays & Handler, LLP, counsel for the Agent, as the Agent may reasonably
request.
7.16.11.21. An undated notice (the "Store Payment Notice"),
duly executed by each of the Owner and the Originator, to the manager
of each Store, in substantially the form of Annex F hereto.
7.16.11.22. Assignments to the Seller of the benefits under
each of the Interest Rate Agreements in effect on the Effective Date,
together with any necessary consents by the counterparties to such
Interest Rate Agreements.
7.16.11.23. Copies of each of the Interest Rate Agreements in
effect on the Effective Date, together with a
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summary thereof in the form of Annex G hereto, in each case certified
by a Responsible Officer of the Owner as being complete and correct.
7.16.11.24. [Intentionally omitted].
7.16.11.25. Copies of each of the Credit Facilities as in
effect on the Effective Date, certified by an officer of Charming
Shoppes as being complete and correct, accompanied by a certificate of
an officer of Charming Shoppes that (x) Charming Shoppes has duly
executed and delivered each of the Credit Facilities, (y) all
conditions precedent to the obligations of the lenders under the Credit
Facilities have been satisfied and the Credit Facilities are in full
force and effect as of the date of the initial purchase and (z) no
event or condition of the type described in paragraph (l) of Exhibit VI
has occurred and is continuing.
7.16.11.26. Copies of the Consumer Credit Plan Agreement
between Charming Shoppes of Delaware, Inc. and FSC, the Consumer Credit
Plan Operations Agreement between FSC and Spirit and the Cardholder
Agreement, each as in effect on the Effective Date, certified by a
Responsible Officer of FSC or the Owner as being complete and correct.
7.16.11.27. A copy of the Administrative Servicing Agreement
or a summary prepared by the Servicer of the provisions of the
Administrative Servicing Agreement relating to the termination thereof
by either party and the assignability thereof by the Administrative
Servicer.
7.16.11.28. [Intentionally omitted]
(xxix) A letter agreement between Charming Shoppes of
Delaware, Inc. and the Trustee, in form and substance satisfactory to
the Agent, duly executed and delivered by Charming Shoppes of Delaware,
Inc. and the Trustee, setting forth certain instructions with respect
to the flow of funds arising out of Store Payments and the agreement of
Charming Shoppes of Delaware, Inc. not to assert setoffs against such
funds.
(xxx) Copies of good standing certificates for Spirit from the
Office of the Comptroller of the Currency and the Federal Deposit
Insurance Corporation.
2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase (including the initial purchase) of
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Purchaser Receivable Interests by the Purchaser or the Banks, as the case may
be, under the Agreement and each reinvestment pursuant to Section 2.06(a) of the
Agreement shall be subject to the further conditions precedent that:
(a) in the case of each purchase, the Servicer shall have delivered (i)
to the Trustee, on or prior to such purchase, the then most recent computer file
or microfiche or written list of Accounts required pursuant to Section 2.1 or
2.6(d)(ii) of the Pooling and Servicing Agreement, and (ii) to the Agent, on or
prior to such purchase, in form and substance satisfactory to the Agent, a
completed Servicer Report dated within 31 days prior to the date of such
purchase together with such additional information as may reasonably be
requested by the Agent,
(b) on the date of such purchase or reinvestment the following
statements shall be true, except that the statement in clause (iii) below is
required to be true only if such purchase or reinvestment is by the Purchaser
(and acceptance of the proceeds of such purchase or reinvestment shall be deemed
a representation and warranty by the Seller that such statements are then true):
(i) The representations and warranties contained in
Exhibit III are correct on and as of the date of such purchase
or reinvestment as though made on and as of such date, and
(ii) No event has occurred and is continuing, or
would result from such purchase or reinvestment, that
constitutes an Early Amortization Event or that would
constitute an Early Amortization Event but for the requirement
that notice be given or time elapse or both, and
(iii) The Agent shall not have given the Seller and
the Servicer at least one Business Day's notice that the
Purchaser has terminated the reinvestment of Collections in
Purchaser Receivable Interests, and
7.16.12. the Agent shall have received such other approvals,
opinions or documents as it may reasonably request.
3. Additional Conditions Precedent to Each Purchase by the Purchaser
and the Banks. Each purchase (including the initial purchase) of a Purchaser
Receivable Interest by the Purchaser and the Banks under the Agreement is
subject to the additional conditions precedent that, after giving effect to such
purchase and any concurrent allocation of a Subordinated Receivable Interest
pursuant to Section 1.02(f) of the Agreement:
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7.16.13. the representation and warranty contained in paragraph 2(n) of
Exhibit III shall be correct; and
7.16.14. the Unallocated Net Receivables Pool Balance shall be equal to
or exceed the Minimum Seller Capital.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Trustee. The Trustee, not in
its individual capacity but solely as the trustee for the Charming Shoppes
Master Trust, represents and warrants as follows:
7.16.15. The Trustee is a national banking association duly
organized, validly existing and in good standing under the federal law
of the United States of America with full corporate trust power and
authority to enter into and perform its obligations under the
Agreement, the Pooling and Servicing Agreement and each other Master
Trust Document to which the Trustee will be a party.
7.16.16. The execution and delivery by the Trustee of, and the
performance by the Trustee of the transactions contemplated by, the
Agreement, the Pooling and Servicing Agreement and each other Master
Trust Document to which the Trustee is a party, including the Trustee's
use of the proceeds of purchases and reinvestments, are within the
Trustee's corporate trust powers, have been duly authorized by all
necessary corporate action of the Trustee, and (a) do not contravene
(i) the Trustee's charter or by-laws or (ii) any existing federal or
applicable state law governing the trust powers of the Trustee.
7.16.17. Each of the Agreement, the Pooling and Servicing
Agreement and each other Master Trust Document to which the Trustee is
a party has been duly executed and delivered by the Trustee, as the
trustee for Charming Shoppes Master Trust pursuant to the Pooling and
Servicing Agreement, and constitutes a legal, valid and binding
obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, subject to bankruptcy, insolvency or other
similar laws affecting creditors' rights generally and to general
principles of equity (whether considered in a proceeding in equity or
at law).
7.16.18. No authorization or approval or other action by and
no notice to or filing with, any governmental authority or regulatory
body under any existing federal or Pennsylvania law governing the trust
powers of the Trustee, except such as have been obtained, made or
taken, is required for the due execution and delivery by the Trustee
of, and the consummation of any of the transactions by the Trustee
contemplated by, the Agreement, the Pooling and Servicing Agreement or
each other Master Trust Document to which the Trustee is a party or for
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the perfection of or the exercise by the Agent or the Purchasers of
their respective rights and remedies under the Agreement.
7.16.19. There are no actions or proceedings pending or, to
the best knowledge of the Trustee, threatened against the Trustee
before any court, regulatory body, administrative agency or other
tribunal, governmental instrumentality or arbitrator seeking to prevent
the consummation of any of the transactions contemplated by the
Agreement, the Pooling and Servicing Agreement or any other Master
Trust Document, or seeking and determination or ruling that, would
materially and adversely affect the performance by the Trustee of its
obligations under the Agreement, the Pooling and Servicing Agreement or
any other Master Trust Document to which the Trustee is a party, or
seeking any determination or ruling that would materially and adversely
affect the legality, validity or enforceability of the Agreement, the
Pooling and Servicing Agreement or any other Master Trust Document.
7.16.20. The principal place of business and chief executive
office of the Trustee and the office where the Trustee keeps its
records concerning the Pool Receivables are located at 123 South Broad
Street, Philadelphia, Pennsylvania 19109; the address of the Trustee
where notices and demands to or upon the Trustee in respect of the Pool
Receivables, the Agreement or the Pooling and Servicing Agreement may
be served is First Union National Bank, 123 S. Broad Street, 12th
Floor, Philadelphia, Pennsylvania 19109, Attention: Corporate Trust
Services.
7.16.21. All representations and warranties of the Trustee set
forth in the Pooling and Servicing Agreement and each other Master
Trust Document to which the Trustee is a party are true and correct in
all material respects (unless any such representation or warranty
speaks as of a particular date, in which case it is true and correct in
all materials respects as of each such date).
2. Representations and Warranties of the Owner. The Owner represents
and warrants as follows:
7.16.22. The Owner is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Delaware,
and is duly qualified to do business, and is in good standing, in every
jurisdiction where the nature of its business requires it to be so
qualified.
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7.16.23. The execution, delivery and performance by the Owner of the
Agreement and each Master Trust Document to which it is or will be a party, (i)
are within the Owner's corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) do not contravene (1) the Owner's charter or
by-laws, (2) any Requirement of Law applicable to the Owner, (3) any indenture,
contract, agreement, mortgage, deed of trust or other instrument to which the
Owner is a party or by which it is bound (including, without limitation, the
Pooling and Servicing Agreement and any other Master Trust Document to which the
Owner is or will be a party), or (4) any order, writ, judgment, award,
injunction or decree binding on or affecting the Owner or its property, and do
not result in or require the creation of any lien, security interest or other
charge or encumbrance upon or with respect to any of its properties (other than
the interests created by the Pooling and Servicing Agreement and the Agreement).
Each of the Agreement, and each Master Trust Document to which the Owner is or
will be a party has been or will be duly executed and delivered by the Owner.
7.16.24. No authorization or approval or other action by, and, except
for the filing of financing statements to be filed pursuant to the Pooling and
Servicing Agreement and pursuant to the Agreement, no notice to or filing with,
any governmental authority or regulatory body is required for the due execution,
delivery and performance by the Owner of the Agreement or any Master Trust
Document to which the Owner is or will be a party.
7.16.25. Each of the Agreement and each Master Trust Document to which
the Owner is or will be a party constitutes, or upon due execution and delivery
by the Owner will constitute, the legal, valid and binding obligation of the
Owner enforceable against the Owner in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally
or by general principles of equity (whether considered in a proceeding in equity
or at law).
7.16.26. There are no actions or proceedings pending or, to the best
knowledge of the Owner, threatened against the Owner before any court,
regulatory body, administrative agency or other tribunal, governmental
instrumentality or arbitrator seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any Master Trust Document, or
seeking any determination or ruling that, in the reasonable judgment of the
Owner, would materially and adversely affect
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the performance by the Owner of its obligations under this Agreement or any
Master Trust Document to which it is or will be a party, or seeking any
determination or ruling that would materially and adversely affect the legality,
validity or enforceability of this Agreement or any Master Trust Document.
7.16.27. Since February 1, 1997, (i) there has been no material adverse
change in the business, operations, property or financial or other condition of
the Owner which may materially adversely affect the Owner's ability to collect
Pool Receivables pursuant to the Agreement or the Pooling and Servicing
Agreement or otherwise perform its obligations under the Agreement or the Master
Trust Documents to which it is or will be a party and (ii) there has not
occurred any event which may materially adversely affect the collectibility or
value of the Receivables Pool.
7.16.28. (i) Immediately prior to the purchase by the Seller
of an interest therein under the Pooling and Servicing Agreement, the
Owner is the legal and beneficial owner of each Pool Receivable free
and clear of any Adverse Claims except for the interests therein
created pursuant to the Security Agreement;
(ii) upon each purchase by the Trustee under the Pooling and
Servicing Agreement, the Trustee will acquire a valid and perfected
first priority ownership interest in the Pool Receivables and
Collections with respect thereto;
(iii) immediately prior to the purchase by each Purchaser or
Bank of an interest therein under the Agreement, the Trustee will be
the legal and beneficial owner of each Pool Receivable free and clear
of any Adverse Claims, except for the interests created therein
pursuant to the Pooling and Servicing Agreement (which interests will
be pari passu with the Purchasers' or Banks' interests therein);
(iv) upon each purchase by a Purchaser or a Bank and each
reinvestment on behalf of a Purchaser or a Bank under the Agreement,
such Purchaser or Bank, as the case may be, will acquire a valid and
perfected first priority undivided percentage ownership interest to the
extent of the pertinent Purchaser Receivable Interest in the Pool
Receivables and in the Collections with respect thereto, subject to the
interests therein referred to clause (iii) above;
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(v) no effective financing statement or other instrument
similar in effect covering any Cardholder Agreement or any Pool
Receivable or Collections with respect thereto is on file in any
recording office, except those filed pursuant to the Pooling and
Servicing Agreement and those filed pursuant to the Agreement; and
(vi) except for any credit life insurance policies, credit
disability or unemployment insurance policies covering an Obligor with
respect to Pool Receivables under such Obligor's Account, there are no
guaranties, insurance, or other agreements, and no security interests
or liens, supporting or securing or purporting to support or secure
payment of any Receivable.
7.16.29. The principal place of business and chief executive office of
the Owner and the office where the Owner keeps its records concerning the Pool
Receivables are located at the address or addresses referred to in paragraph
2(b) of Exhibit IV.
7.16.30. The names and addresses of all the Depositary Banks, together
with the account numbers of the Initial Depositary Accounts of the Seller at
such Depositary Banks, are specified in Schedule II hereto (or at such other
Depositary Banks and/or with such other Initial Depositary Accounts as have been
notified to the Agent in accordance with the Agreement).
7.16.31. The facts and assumptions contained in paragraph (p) on page
10 of the opinion of Mayer, Brown & Platt delivered pursuant to paragraph
1(b(xviii)(4) of Exhibit II to the Agreement are true and correct as of the time
specified therein.
7.16.32. All representations and warranties of the Owner set forth in
the Pooling and Servicing Agreement and each other Master Trust Document to
which the Owner is a party are true and correct in all material respects (unless
any such representation or warranty speaks as of a particular date, in which
case it is true and correct in all material respects as of each such date).
7.16.33. The Trust is not an "investment company" required to be
registered under the Investment Company Act of 1940, as amended.
7.16.34. As of the applicable Cut Off Date, Schedule 1 to the Pooling
and Servicing Agreement and the related
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computer file or microfiche or written list referred to in paragraph 1(a) of
Exhibit II to the Agreement is an accurate and complete listing in all material
respects of all the Accounts, 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 such Cut Off Date.
7.16.35. On the date of each purchase of Purchaser Receivable Interests
by the Purchaser or a Bank under the Agreement, after giving effect to the
purchase to be made by the Purchaser or Bank on such date and any allocation of
a Subordinated Receivable Interest to the Subordinated Purchaser on such date,
the Net Receivables Pool Balance minus the sum of (A) the aggregate "Investor
Interests" (as defined in the Pooling and Servicing Agreement) for all
Certificate Series issued pursuant to one or more supplements to the Pooling and
Servicing Agreement, (B) the aggregate "Receivables Purchase Interests" (as
defined in the Pooling and Servicing Agreement) for all Receivables Purchase
Series issued pursuant to any receivables purchase agreement that is subject to
the Pooling and Servicing Agreement (other than the Agreement), (C) the
Subordinated Purchaser Capital, (D) the Minimum Seller Capital, and (E) the
total amount of Discount Option Receivables, if any, will be equal to or exceed
the sum of the aggregate outstanding Purchaser Capital of all Purchaser
Receivable Interests under the Agreement; and the Floating Allocation Percentage
as of such day shall be less than or equal to 98.305%.
7.16.36. No proceeds of any purchase or reinvestment will be used by
the Owner or the Seller to acquire any equity security of a class which is
registered pursuant to Section 12 of the Exchange Act.
7.16.37. After giving effect to the Pooling and Servicing Agreement and
each purchase of Receivables from the Owner by the Trustee under the Pooling and
Servicing Agreement and the use of proceeds of each Purchase by the Owner, (i)
the Owner will have sufficient presently saleable assets, and sufficient cash
flow, to enable it to meet its debts as they mature (in each case as such
concepts are defined in applicable bankruptcy and related laws), and (ii) the
Owner does not have unreasonably small capital.
7.16.38. The Owner is not entering into, and has not caused any other
Person to enter into, any of the transactions contemplated by the Pooling and
Servicing Agreement or the
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Agreement with the intent to hinder, delay or defraud the creditors of
the Owner.
7.16.39. Each computer file or microfiche list which has been
delivered to the Trustee by the Owner pursuant to Section 2.1 or
Section 2.6 of the Pooling and Servicing Agreement contains a complete
and accurate list of Accounts identified by account number, Obligor
name, Obligor address and Receivable balance as of the applicable Cut
Off Date.
7.16.40. The Trustee is not an insider or Affiliate of the
Owner.
3. Representations and Warranties of the Servicer. The Servicer
represents and warrants as follows:
7.16.41. The Servicer is a national banking association, duly
organized, validly existing and in good standing under the laws of the
United States of America, and is duly qualified to do business, and is
in good standing, in every jurisdiction where the nature of its
business requires it to be so qualified.
7.16.42. The execution, delivery and performance by the
Servicer of the Agreement and each Master Trust Document to which it is
or will be a party and the other documents to be delivered by it
thereunder, (i) are within the Servicer's corporate powers, (ii) have
been duly authorized by all necessary corporate action, (iii) do not
contravene (1) the Servicer's charter or by-laws, (2) any Requirement
of Law applicable to the Servicer, (3) any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which the
Servicer is a party or by which it is bound (including, without
limitation, the Pooling and Servicing Agreement and any other Master
Trust Document to which the Servicer is or will be a party), or (4) any
order, writ, judgment, award, injunction or decree binding on or
affecting the Servicer or its property, and do not result in or require
the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of its properties (other than
the interests created by the Master Trust Documents and the Agreement).
Each of the Agreement and each Master Trust Document to which the
Servicer is or will be a party has been or will be duly executed and
delivered by the Servicer.
7.16.43. No authorization or approval or other action by, and
no notice to or filing with, any governmental
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authority or regulatory body is required for the due execution,
delivery and performance by the Servicer of the Agreement or any Master
Trust Document to which the Servicer is or will be party or any other
document to be delivered thereunder.
7.16.44. Each of the Agreement and each Master Trust Document
to which the Servicer is or will be party constitutes, or upon due
execution and delivery by the Servicer will constitute, the legal,
valid and binding obligation of the Servicer enforceable against the
Servicer in accordance with its terms, except as such enforceability
may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights
generally or by general principles of equity (whether considered in a
proceeding in equity or at law).
7.16.45. There are no actions or proceedings pending or, to
the best knowledge of the Servicer, threatened against the Servicer
before any court, regulatory body, administrative agency or other
tribunal, governmental instrumentality or arbitrator seeking to prevent
the consummation of any of the transactions contemplated by the
Agreement or any Master Trust Document, 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 the Agreement or any Master Trust Document to which
it is or will be a party, or seeking any determination or ruling that
would materially and adversely affect the legality, validity or
enforceability of the Agreement or any Master Trust Document.
7.16.46. The principal place of business and chief executive
office of the Servicer and the office where the Servicer keeps its
records concerning the Pool Receivables are located at the address or
addresses referred to in paragraph 3(b) of Exhibit IV.
7.16.47. All representations and warranties of the Servicer
set forth in the Pooling and Servicing Agreement and each other Master
Trust Document to which the Servicer is a party are true and correct in
all material respects (unless any such representation or warranty
speaks as of a particular date, in which case it is true and correct in
all materials respects as of each such date).
4. Representations and Warranties of the Originator. The Originator
represents and warrants as follows:
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7.16.48. The Originator is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America, and is duly qualified to do business, and is in good
standing, in every jurisdiction where the nature of its business requires it to
be so qualified.
7.16.49. The execution, delivery and performance by the Originator of
the Agreement and each Master Trust Document to which the Originator is a party
and the other documents to be delivered by it thereunder, (i) are within the
Originator's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) do not contravene (1) the Originator's charter or
by-laws, (2) any Requirement of Law applicable to the Originator, (3) any
indenture, contract, agreement, mortgage, deed of trust or other instrument to
which the Originator is a party or by which it is bound or (4) any order, writ,
judgment, award, injunction or decree binding on or affecting the Originator or
its property, and do not result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties. The Agreement and each Master Trust Document to which the Originator
is a party has been duly executed and delivered by the Originator.
7.16.50. No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Originator of the Agreement,
any Master Trust Document to which the Originator is a party or any other
document to be delivered thereunder.
7.16.51. The Agreement and each Master Trust Document to which the
Originator is a party constitutes the legal, valid and binding obligation of the
Originator enforceable against the Originator in accordance with its terms,
except as such enforceability may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors'
rights generally or by general principles of equity (whether considered in a
proceeding in equity or at law).
7.16.52. There are no actions or proceedings pending or, to the best
knowledge of the Originator, threatened against the Originator before any court,
regulatory body, administrative agency or other tribunal, governmental
instrumentality or arbitrator seeking to prevent the consummation of any of the
transactions contemplated by the Agreement or any Master Trust Document, or
seeking any
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determination or ruling that, in the reasonable judgment of the Originator,
would materially and adversely affect the performance by the Originator of its
obligations under the Agreement or any Master Trust Document to which it is or
will be a party, or seeking any determination or ruling that would materially
and adversely affect the legality, validity or enforceability of the Agreement
or any Master Trust Document.
7.16.53. The Originator is in compliance with its regulatory capital
requirements under applicable rules and regulations of the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System or other appropriate
governmental authorities.
7.16.54. The Originator did not (i) execute the Purchase Agreement, the
Agreement or any other Master Trust Document, (ii) convey the assets described
in Section 1.1 of the Agreement or in the Security Agreement, (iii) cause,
permit, or suffer the perfection or attachment of an interest in such assets, or
(iv) otherwise effectuate or consummate any transfer pursuant to the Purchase
Agreement or the Agreement, in each case:
7.16.54.0.1. in contemplation of insolvency;
7.16.54.0.2. with a view to preferring one creditor over
another or to preventing the application of its assets in the manner
required by applicable law or regulations;
7.16.54.0.3. after committing an act of insolvency; or
7.16.54.0.4. with any intent to hinder, delay, or defraud
itself or its creditors.
7.16.55. All representations and warranties of the Originator set forth
in the Purchase Agreement and each other Master Trust Document to which the
Originator is a party are true and correct in all material respects (unless any
such representation or warranty speaks as of a particular date, in which case it
is true and correct in all materials respects as of each such date).
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EXHIBIT IV
COVENANTS
1. Covenants of the Trustee. The Trustee, not in its individual
capacity but solely as the trustee for the Charming Shoppes Master Trust, agrees
that, until the latest of (x) the Facility Termination Date, (y) the Commitment
Termination Date or (z) the Final Distribution Date:
7.16.56. Compliance with Laws, Etc. The Trustee will comply in
all material respects with all applicable laws, rules, regulations and
orders and preserve and maintain its existence, rights, franchises,
qualifications, and privileges except to the extent that the failure so
to comply with such laws, rules and regulations or the failure so to
preserve and maintain such existence, rights, franchises,
qualifications, and privileges would not materially adversely affect
the collectibility of the Receivables Pool or the ability of the
Trustee to perform its obligations under the Agreement or the Master
Trust Documents.
7.16.57. Offices, Records and Books of Account. The Trustee
will keep its principal place of business and chief executive office
and the office where it keeps its records concerning the Pool
Receivables at 123 Broad Street, Philadelphia, Pennsylvania 19109 or,
upon 30 days' prior written notice to the Agent, at any other locations
in jurisdictions where all actions reasonably requested by the Agent to
protect and perfect the interest in the Pool Receivables have been
taken and completed. The Trustee shall maintain in the City of Newark,
New Jersey, an office or offices where notices and demands to or upon
the Trustee in respect of the Pool Receivables, the Agreement or the
Pooling and Servicing Agreement may be served.
7.16.58. Further Assurances. The Trustee shall, from time to
time, at the Servicer's expense, promptly execute and deliver all
further instruments and documents, and take all further actions, that
may be necessary or desirable, or that the Agent may reasonably
request, to perfect, protect or more fully evidence the Receivable
Interests purchased under the Agreement, or to enable the Purchasers,
the Banks or the Agent to exercise and enforce their respective rights
and remedies under the Agreement. Without limiting the foregoing, the
Trustee:
7.16.58.1. will upon the request of the Agent (x)
execute and file such financing or continuation statements, or
amendments thereto, and such other
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instruments and documents, that may be necessary or desirable,
or that the Agent may reasonably request, to perfect, protect
or evidence such Receivable Interests; (y) ensure that all
Records evidencing Pool Receivables and related Cardholder
Agreements in its possession are marked conspicuously with a
legend, acceptable to the Agent, evidencing that Receivable
Interests therein have been sold in accordance with the
Agreement; and (z) ensure that any data processing records
evidencing such Pool Receivables and related Cardholder
Agreements in its possession are marked with such a legend;
and
7.16.58.2. authorizes the Agent to file financing or
continuation statements, and amendments thereto, relating to
such Receivable Interests without the signature of the Trustee
where permitted by law and agrees that a photocopy or other
reproduction of the Agreement shall be sufficient as a
financing statement where permitted by law.
Notwithstanding the foregoing, so long as any Investor Certificates shall be
outstanding, the Trustee and the Agent shall not file any financing statements
pursuant to this Section (other than continuation statements, amendments
reflecting name changes or changes of office location or financing statements
relating solely to an Enhancement for the benefit of the Receivables Purchase
Series arising in connection with the Agreement) unless the Agent shall have
obtained and delivered to the Trustee an Opinion of Counsel to the effect that
such filing shall not materially and adversely affect the interests of the
holders of the Investor Certificates.
7.16.59. Interest Rate Agreements. The Trustee shall not
consent to any modification or amendment of the Interest Rate
Agreements without the prior written consent of the Agent in each
instance, which consent shall not be unreasonably withheld by the
Agent.
7.16.60. Store Payment Notice. If the Trustee shall be
notified by any Person (other than the Agent) to deliver the Store
Payment Notice, the Trustee shall promptly notify the Agent thereof.
7.16.61. Books and Records. The Trustee will mark its books
and records to indicate that interests in the Pool Receivables have
been conveyed to the Purchasers, the Banks and the Subordinated
Purchaser and to evidence the interest of the Purchasers, the Banks and
the Subordinated Purchaser in the Pool Receivables.
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7.16.62. Store Payment Agreements. The Trustee shall not
consent to any modification, amendment or termination of the letter
agreements delivered pursuant to clause (xxix) of Section 1(b) of
Exhibit II of the Agreement without the prior written consent of the
Agent in each instance.
2. Covenants of the Owner. Until the latest of (x) the Facility
Termination Date, (y) the Commitment Termination Date or (z) the Final
Distribution Date:
7.16.63. Compliance with Laws, Etc. The Owner will comply in
all material respects with all applicable laws, rules, regulations and
orders and preserve and maintain its corporate existence, rights,
franchises, qualifications, and privileges except to the extent that
the failure so to comply with such laws, rules and regulations or the
failure so to preserve and maintain such existence, rights, franchises,
qualifications, and privileges would not materially adversely affect
the collectibility of the Receivables Pool or its ability to perform
its obligations under the Agreement or the Master Trust Documents.
7.16.64. Offices, Records and Books of Account. The Owner will
keep its principal place of business and chief executive office or the
office where it keeps its records concerning the Pool Receivables at
745 Center Street, Milford, Ohio 45150, 3411 Silverside Road, 186
Weldin Bldg., Wilmington, Delaware 19810 and 450 Winks Lane, Bensalem,
Pennsylvania 19020, or, upon 30 days' prior written notice to the
Agent, at any other locations in jurisdictions where all actions
reasonably requested by the Agent to protect and perfect the interest
in the Pool Receivables have been taken and completed. The Owner also
will maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records
evidencing Pool Receivables and related Cardholder Agreements in the
event of the destruction of the originals thereof), and keep and
maintain all documents, books, records and other information reasonably
necessary or advisable for the collection of all Pool Receivables
(including, without limitation, records adequate to permit the daily
identification of each Pool Receivable and all Collections of and
adjustments to each existing Pool Receivable).
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7.16.65. [Intentionally omitted].
7.16.66. Sales, Liens, Etc. The Owner will not, prior to the
Final Distribution Date, (i) suffer to exist any Adverse Claim upon or
with respect to any portion of the Minimum Seller Capital, except for
the interests therein created pursuant to the Security Agreement, or
(ii) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with
respect to, any of the Accounts or (iii) assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to any account to which any
Collections of any Pool Receivable are sent, or assign any right to
receive income in respect thereof, other than pursuant to the Pooling
and Servicing Agreement.
7.16.67. Interest Rate Hedging. The Owner shall maintain, or
cause to be maintained, the Interest Rate Agreements in full force and
effect and shall obtain, or cause to be obtained, extensions to or
replacements for the Interest Rate Agreements from time to time so that
the then effective Interest Rate Agreements are at all times in
compliance with the first sentence of the definition of "Interest Rate
Agreements." Whenever the Owner shall obtain, or cause to be obtained,
an extension to or replacement for any Interest Rate Agreement, the
Owner shall immediately furnish the Agent with an updated Annex G
incorporating such extension or replacement and a copy of such
extension or replacement, in each case certified by a Responsible
Officer of the Owner as being complete and correct. With respect to
each Interest Rate Agreement to which the Seller is not a party, the
Owner shall cause all monies due or to become due to the Owner (or, if
applicable, FSC) under such Interest Rate Agreement to be assigned to
the Seller.
7.16.68. [Intentionally omitted]
7.16.69. Information. The Owner shall provide to (i) the
Servicer (if other than Spirit) on a timely basis all information
needed for the administration of the Pool Receivables, including notice
of the commencement of the Amortization Period and (ii) to the Agent,
as soon as possible and in any event within two Business Days after
receipt thereof, copies of all notices, reports, information,
documents, instruments and records delivered to the Trustee which
relate to the Pool Receivables or the Pooling and Servicing Agreement.
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7.16.70. Further Assurances. The Owner shall, from time to
time, at its expense, promptly execute and deliver all further
instruments and documents, and take all further actions, that may be
necessary or desirable, or that the Agent may reasonably request, to
perfect, protect or more fully evidence the Receivable Interests
purchased under the Agreement, or to enable the Purchasers, the Banks
or the Agent to exercise and enforce their respective rights and
remedies under the Agreement. Without limiting the foregoing, the
Owner:
7.16.70.1. will upon the request of the Agent (x)
execute and file such financing or continuation statements, or
amendments thereto, and such other instruments and documents,
that may be necessary or desirable, or that the Agent may
reasonably request, to perfect, protect or evidence such
Receivable Interests; (y) mark conspicuously the Records
evidencing each Pool Receivable and the related Cardholder
Agreement with a legend, acceptable to the Agent, evidencing
that Receivable Interests therein have been sold in accordance
with the Agreement; and (z) mark its master data processing
records evidencing such Pool Receivables and related
Cardholder Agreements with such a legend; and
7.16.70.2. authorizes the Agent to file financing or
continuation statements (solely with respect to the
Agreement), and amendments thereto, relating to such
Receivable Interests without the signature of the Owner where
permitted by law and agrees that a photocopy or other
reproduction of the Agreement shall be sufficient as a
financing statement where permitted by law.
Notwithstanding the foregoing, so long as any Investor Certificates shall be
outstanding, the Owner and the Agent shall not file any financing statements
pursuant to this Section (other than continuation statements, amendments
reflecting name changes or changes of office location or financing statements
relating solely to an Enhancement for the benefit of the Receivables Purchase
Series arising in connection with the Agreement) unless the Agent shall have
obtained and delivered to the Trustee an Opinion of Counsel to the effect that
such filing shall not materially and adversely affect the interests of the
holders of the Investor Certificates.
7.16.71. Annual Compliance Certificate. The Owner will provide
to the Agent, as soon as possible and in any event within 30 days after
the close of each fiscal year of the Owner, a certificate signed by the
President or a Vice
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President of the Owner, stating that a review of the activities of the Owner and
its subsidiaries during the fiscal year in respect of which such statement was
delivered has been made under his or her supervision and that no Early
Amortization Event or condition or event which, with notice or lapse of time or
both, would constitute an Early Amortization Event has occurred, or, if such has
occurred, specifying the nature and status thereof.
7.16.72. No Alteration of File Designation. The Owner shall not alter
the file designation referenced in clause (i) of paragraph 1(a) of Exhibit II to
the Agreement during the term of this Agreement for any Account unless and until
such Account becomes a Removed Account.
7.16.73. Pool Receivables Not to Be Evidenced by Instruments, Etc. The
Owner will not take any action to cause any Pool Receivable to be evidenced by
any instrument (as defined in the UCC as in effect in each of the States of New
York, Ohio, Pennsylvania and Delaware). Each Pool Receivable shall be payable
pursuant to a contract which does not create a lien on any goods purchased
thereunder. The Owner will not take any action to cause any Pool Receivable to
be anything other than an "account", or a "general intangible" or the "proceeds"
of either for purposes of the UCC as in effect in each of the States of New
York, Ohio, Pennsylvania and Delaware.
7.16.74. Addition of Accounts or Accounts from Additional Programs. (i)
The Owner will not, without the prior written consent of the Agent, add to the
Trust pursuant to Section 2.6 of the Pooling and Servicing Agreement Eligible
Accounts which have been acquired by the Owner from third parties (as
distinguished from Accounts originated by the Owner or an Affiliate of the
Owner) ("Third-Party Accounts") to the extent that:
(A) the number of such Third-Party Accounts plus the total
number of all Third- Party Accounts theretofore added to the Trust in
the same calendar year shall exceed 5% of the total number of Accounts
in the Trust as of the end of the prior calendar year; or
(B) the sum of the Outstanding Balance of the Receivables in
such Third-Party Accounts as of the Addition Date plus the Outstanding
Balance of the Receivables in all other Third-Party Accounts
theretofore added to the Trust in the same calendar year shall exceed
5% of the Outstanding Balance of all
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Receivables in the Receivables Pool as of the end of
the prior calendar year.
(ii) The Owner will not, without the prior written consent of the
Agent, add to the Trust Accounts arising from programs other than the Private
Label Program (as defined in the Pooling and Servicing Agreement).
7.16.75. Merger, Consolidation, Etc. The Owner will not
consolidate with or merge into any other Person or convey or transfer
its properties and assets substantially as an entirety to any Person,
unless:
(i) the Person formed by such consolidation or into
which the Owner is merged or which acquires by conveyance or
transfer the properties of the Owner substantially as an
entirety shall be a special purpose bankruptcy-remote entity
(and its certificate of incorporation shall have provisions
similar to those of the Owner) and, if the Owner is not the
surviving entity, shall expressly assume, by an agreement
executed and delivered to the Agent and in form and substance
satisfactory to the Agent, the performance of every covenant
and obligation of the Owner hereunder;
(ii) the Owner shall have delivered to the Agent (A)
an officer's certificate of a Responsible Officer of the Owner
certifying that such consolidation, merger, conveyance or
transfer and such agreement comply with this paragraph (m) and
that all conditions precedent herein provided for relating to
such transaction have been complied with and (B) an opinion of
counsel, from counsel reasonably acceptable to the Agent and
addressed to the Agent, that such agreement is legal, valid
and binding with respect to the Owner and the surviving entity
and that the surviving entity would not be substantively
consolidated, in connection with any bankruptcy proceeding,
with any shareholder or other equity owner of such surviving
entity;
(iii) the Owner shall have given at least 10 Business
Days' prior notice to the Agent of such consolidation, merger,
conveyance or transfer; and
(iv) the Agent shall have consented to such
consolidation, merger, conveyance or transfer in writing (such
consent not to be unreasonably withheld).
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7.16.76. List of Stores. On or prior to May 31 of each year,
the Owner shall furnish to the Agent a complete and accurate list of
the names and addresses of all of the Stores.
7.16.77. [Intentionally omitted]
7.16.78. Limit on Certain Holders. The Owner shall not allow
(i) to be outstanding over 100 Private Holders of Subject Instruments,
or (ii) any Subject Instruments to be traded on a Market, registered
under the Securities Act or offered or sold pursuant to Regulation S
(17 CFR 230.901 through 230.904 or any successor thereto) if such
offering or sale would have been required to be registered under the
Securities Act if the interests so offered or sold had been offered and
sold within the United States.
3. Covenants of the Servicer. In addition to the duties of the Servicer
set forth in Exhibit V hereto, until the latest of (x) the Facility Termination
Date, (y) the Commitment Termination Date or (z) the Final Distribution Date:
7.16.79. Compliance with Laws, Etc. The Servicer will comply
in all material respects with all applicable laws, rules, regulations
and orders and preserve and maintain its corporate existence, rights,
franchises, qualifications, and privileges except to the extent that
the failure so to comply with such laws, rules and regulations or the
failure so to preserve and maintain such existence, rights, franchises,
qualifications, and privileges would not materially adversely affect
the collectibility of the Receivables Pool or the ability of the
Servicer to perform its obligations under the Agreement, the Pooling
and Servicing Agreement or the other Master Trust Documents.
7.16.80. Offices, Records and Books of Account. The Servicer
will keep its principal place of business and chief executive office
and the office where it keeps its records concerning the Pool
Receivables at 745 Center Street, Milford, Ohio 45150 or, upon 30 days'
prior written notice to the Agent, at any other locations in
jurisdictions where all actions reasonably requested by the Agent to
protect and perfect the interest in the Pool Receivables have been
taken and completed. The Servicer also will maintain and implement
administrative and operating procedures (including, without limitation,
an ability to recreate records evidencing Pool Receivables and related
Cardholder Agreements in the event of the destruction of the originals
thereof), and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
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Pool Receivables (including, without limitation, records adequate to permit the
daily identification of each Pool Receivable and all Collections of and
adjustments to each existing Pool Receivable).
7.16.81. Further Assurances. The Servicer shall, from time to time, at
its expense, promptly execute and deliver all further instruments and documents,
and take all further actions, that may be necessary or desirable, or that the
Agent may reasonably request, to perfect, protect or more fully evidence the
Receivable Interests purchased under the Agreement, or to enable the Purchasers,
the Banks or the Agent to exercise and enforce their respective rights and
remedies under the Agreement. Without limiting the foregoing, the Servicer will
upon the request of the Agent (x) execute such instruments and documents that
may be necessary or desirable, or that the Agent may reasonably request, to
perfect, protect or evidence the Receivable Interests purchased under the
Agreement; (y) mark conspicuously the Records evidencing each Pool Receivable
and the related Cardholder Agreement with a legend, acceptable to the Agent,
evidencing that Receivable Interests therein have been sold in accordance with
the Agreement; and (z) mark its master data processing records evidencing such
Pool Receivables and related Cardholder Agreements with such a legend.
Notwithstanding the foregoing, so long as any Investor Certificates shall be
outstanding, the Servicer and the Agent shall not file any financing statements
pursuant to this Section (other than continuation statements, amendments
reflecting name changes or changes of office location or financing statements
relating solely to an Enhancement for the benefit of the Receivables Purchase
Series arising in connection with the Agreement) unless the Agent shall have
obtained and delivered to the Trustee an Opinion of Counsel to the effect that
such filing shall not materially and adversely affect the interests of the
holders of the Investor Certificates.
7.16.82. Servicer Will Not Resign. The Servicer shall not resign from
the obligations and duties imposed by it under the Agreement except as permitted
pursuant to Section 8.5 of the Pooling and Servicing Agreement.
7.16.83. Merger, Consolidation, Etc. The Servicer will not consolidate
with or merge into any other Person or convey or transfer its properties and
assets substantially as an entirety to any Person, unless:
(i) the Person formed by such consolidation or into which the
Servicer is merged or which acquires by
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conveyance or transfer the properties of the Servicer
substantially as an entirety shall be a state or national
banking or savings association or other entity which is not
subject to the bankruptcy laws of the United States of America
and, if the Servicer is not the surviving entity, shall
expressly assume, by an agreement executed and delivered to
the Agent and in form and substance satisfactory to the Agent,
the performance of every covenant and obligation of the
Servicer hereunder;
(ii) the Servicer shall have delivered to the Agent
(A) an officer's certificate of a Responsible Officer of the
Servicer certifying that such consolidation, merger,
conveyance or transfer and such agreement comply with this
paragraph (e) and that all conditions precedent herein
provided for relating to such transaction have been complied
with and (B) an opinion of counsel, from counsel reasonably
acceptable to the Agent and addressed to the Agent, that such
agreement is legal, valid and binding with respect to the
Servicer and the surviving entity;
(iii) the Servicer shall have given at least 10
Business Days' prior notice to the Agent of such
consolidation, merger, conveyance or transfer; and
(iv) the Agent shall have consented to such
consolidation, merger, conveyance or transfer in writing (such
consent not to be unreasonably withheld).
4. Covenants of the Subordinated Purchaser. Until the latest of (x) the
Facility Termination Date, (y) the Commitment Termination Date or (z) the Final
Distribution Date:
7.16.84. Sale, Liens, Etc. The Subordinated Purchaser shall
not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with
respect to, any Subordinated Receivable Interest, or assign any right
to receive income in respect thereof, without the prior written consent
of the Agent.
7.16.85. Observance of Corporate Procedures, Etc. The
Subordinated Purchaser (i) shall observe the corporate procedures
required by its certificate of incorporation, its by-laws and the
corporate law of the State of Delaware, including, without limitation,
holding separate director and shareholder meetings from those of any
other Person and otherwise ensure at all times that it is maintained as
a separate corporate entity from any other Person and (ii) shall not
amend or modify any provision of its Certificate of
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Incorporation or by-laws without the prior written consent of the Agent (such
consent not to be unreasonably withheld).
7.16.86. Board of Directors' Authorization, Etc. The Subordinated
Purchaser shall (i) ensure that its Board of Directors duly authorizes all of
its corporate actions, and (ii) keep correct and complete books and records of
account separate from those of any other Person, and correct and complete
minutes of the meetings and other proceedings of its stockholders and Board of
Directors, and (iii) where necessary, obtain proper authorization from its
directors or stockholders, as appropriate, for corporate action.
7.16.87. Operating Expenses; Separate Accounts. The Subordinated
Purchaser shall provide for its operating expenses and liabilities from its own
funds and maintain deposit accounts and other bank accounts separate from those
of the Servicer or the Seller, or any of their respective Affiliates.
7.16.88. Corporate Action. The Subordinated Purchaser shall act solely
in its corporate name and through its duly authorized officers or agents in the
conduct of its business and ensure that neither the Originator nor the Servicer
nor any of their respective Affiliates controls any corporate decisions made by
it.
7.16.89. Arm's-Length Transactions. To the extent it obtains any
services from the Originator or the Servicer or any of their respective
Affiliates, the Subordinated Purchaser shall ensure that the terms of such
arrangements are comparable to those that would be obtained in an arm's-length
transaction.
7.16.90. No Commingling. The Subordinated Purchaser shall ensure that
its assets are not commingled with those of the Originator, the Servicer, the
Seller or any other Person.
7.16.91. Separate Records. The Subordinated Purchaser shall maintain
separate corporate records and books of account from those of the Originator,
the Servicer or any other Person.
7.16.92. Conduct of Business. The Subordinated Purchaser shall not
conduct any business or engage in any activities other than (i) the ownership of
the Subordinated Receivable Interest, (ii) the performance of its obligations
under the Agreement and the Master Trust Document to which it is a party, (iii)
the ownership of the "Seller Interest" under
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the Pooling and Servicing Agreement, and (iv) the ownership of a
"subordinated receivable interest" and the performance of its
obligations under any receivables purchase agreement that is subject to
the Pooling and Servicing Agreement.
7.16.93. Separate Existence, Etc. The Subordinated Purchaser
(i) shall not hold itself out, or permit itself to be held out, as
having agreed to pay, or as being liable for, the debts of the
Originator, the Servicer, or any other Person; (ii) shall maintain an
arm's-length relationship with the Originator and the Servicer and
their respective Affiliates with respect to any transactions between
itself and such other Person; and (iii) shall comply with (and cause to
be true and correct) each of the facts and assumptions contained in
paragraphs (a) through (k),(m) and (o) on pages 8 to 10 of the opinion
of Mayer, Brown & Platt delivered pursuant to paragraph 1(b)(xviii)(4)
of Exhibit II to the Agreement.
7.16.94. Independent Director. The Subordinated Purchaser
shall select and at all times maintain as its Independent Director a
Person who meets the following qualifications (which qualifications are
in addition to those set forth in the Subordinated Purchaser's
certificate of incorporation): the Independent Director shall have (i)
prior experience as an independent director for a corporation whose
charter documents require the unanimous written consent of all
independent directors thereof before such corporation could consent to
the institution of bankruptcy or insolvency proceedings against it or
could file a petition seeking relief under any applicable federal or
state law relating to bankruptcy, and (ii) at least three years of
employment experience with one or more entities that provide, in the
ordinary course of their respective businesses, advisory, management or
placement services to issuers of securitization or structured finance
instruments, agreements or securities.
5. Covenants of the Originator. In addition to the duties of the
Servicer set forth in Exhibit V hereto, until the latest of (x) the Facility
Termination Date, (y) the Commitment Termination Date or (z) the Final
Distribution Date:
7.16.95. Compliance with Laws, Etc. The Originator will comply
in all material respects with all applicable laws, rules, regulations
and orders and preserve and maintain its corporate existence, rights,
franchises, qualifications, and privileges except to the extent that
the failure so to comply with such laws, rules and regulations or the
failure so to preserve and maintain such existence, rights, franchises,
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qualifications, and privileges would not materially adversely affect
the collectibility of the Receivables Pool or its ability to perform
its obligations under the Agreement or the Master Trust Documents.
7.16.96. Change in Cardholder Guidelines, Etc.
7.16.96.1. Except (x) as otherwise required by any
Requirements of Law or (y) as is deemed by the Originator to
be necessary in order for it to maintain its 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 and only if the change giving rise to
such reduction is made applicable to the comparable segment of
revolving credit card accounts owned or serviced by it which
have characteristics similar to the Accounts which are the
subject of such change, the Originator shall not at any time
permit the Portfolio Yield to be less than the Funding Rate;
and
7.16.96.2. unless the Agent consents in writing, the
Originator shall not otherwise alter the Cardholder Guidelines
in any manner which the Originator reasonably believes might
have a material adverse effect on the collectibility or value
of Pool Receivables and shall apply its Cardholder Guidelines
to each of the Pool Receivables; provided, however, that if
any such alteration made without the Agent's consent is later
determined by the Agent or the Originator to have had an
adverse effect on the collectibility or value of Pool
Receivables, then the Originator shall promptly revise the
Cardholder Guidelines in order to prevent any such adverse
effect from occurring thereafter and any loss suffered by the
Purchasers or the Banks as a result of such alteration shall
be subject to Section 4.01 of the Agreement;
provided, however, that the Originator shall, within 10 Business Days following
any material change to the Cardholder Guidelines, give the Agent written notice
of such change; and provided, further, that the Originator (x) shall not make
any material adverse change in the minimum monthly payment required to be made
by an Obligor in respect of any Pool Receivable without the prior written
consent of the Agent (which consent will not be unreasonably withheld), (y)
shall not make any change in the duration of the Cycles used to bill Obligors of
the Receivables such that any such Cycle is more than 32 days and (z) shall
ensure that the entire principal balance of any Account any portion of which
remains unpaid for 180 days or more is written off the Seller's books as
uncollectible.
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7.16.97. Administrative Servicer.
7.16.97.1. Unless the Agent consents in writing, the
Originator will not amend, modify or supplement the Administrative
Servicer Agreement in any manner which the Originator reasonably
believes might have a material adverse effect on the collectibility or
value of Pool Receivables; provided, however, that if any amendment,
modification or amendment made without the Agent's consent is later
determined by the Agent or the Originator to have had an adverse effect
on the collectibility or value of Pool Receivables, then the Originator
shall use its best efforts to promptly amend, modify or supplement the
Administrative Servicer Agreement in order to prevent any such adverse
effect from occurring thereafter and any loss suffered by the
Purchasers or the Banks as a result of such amendment, modification or
supplement shall be subject to Section 4.01 of the Agreement; and
provided, however, that the Originator shall, within 10 Business Days
following any amendment, modification or supplement to the
Administrative Servicer Agreement, give the Agent written notice
thereof such change.
7.16.97.2. The Originator will not replace the Administrative
Servicer without the prior written consent of the Agent, which consent
will not be unreasonably withheld.
7.16.97.3. The Originator will provide to the Agent, as
promptly as possible, and in any event within two Business Days, after
receiving any notice from the Administrative Servicer of the
Administrative Servicer's intention to terminate the Administrative
Servicer Agreement for any reason, a statement setting forth the
details of such termination (including the reasons given by the
Administrative Servicer for taking such action) and the action that the
Originator proposes to take with respect thereto.
7.16.98. Information. The Originator shall provide to (i) the Servicer
(if other than Spirit) on a timely basis all information needed for the
administration of the Pool Receivables, including notice of the commencement of
the Amortization Period and (ii) to the Agent, as soon as possible and in any
event within two Business Days after receipt thereof, copies of all notices,
reports, information, documents, instruments and records delivered to the
Trustee
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which relate to the Pool Receivables or the Pooling and Servicing Agreement.
7.16.99. Annual Compliance Certificate. The Originator will provide to
the Agent, as soon as possible and in any event within 30 days after the close
of each fiscal year of the Originator, a certificate signed by the President or
a Vice President of the Originator, stating that the Originator is in compliance
with its regulatory capital requirements under applicable rules and regulations
of the Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System or other
appropriate governmental authorities.
7.16.100. No Alteration of File Designation. The Originator shall not
alter the file designation referenced in clause (i) of paragraph 1(a) of Exhibit
II to the Agreement during the term of this Agreement for any Account unless and
until such Account becomes a Removed Account.
7.16.101. Pool Receivables Not to Be Evidenced by Instruments, Etc. The
Originator will not take any action to cause any Pool Receivable to be evidenced
by any instrument (as defined in the UCC as in effect in each of the States of
New York, Ohio, Pennsylvania and Delaware). Each Pool Receivable shall be
payable pursuant to a contract which does not create a lien on any goods
purchased thereunder. The Originator will not take any action to cause any Pool
Receivable to be anything other than an "account", or a "general intangible" or
the "proceeds" of either for purposes of the UCC as in effect in each of the
States of New York, Ohio, Pennsylvania and Delaware.
7.16.102. Approval; Official Record. Each Master Trust Document to
which the Originator is a party and the Agreement (i) was approved by the board
of directors of the Originator and such approval has been, and will be,
reflected continuously in the minutes of the Originator's board of directors,
and (ii) has been, and will be, an official record of the Originator
continuously from the time of its execution.
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EXHIBIT V
ADMINISTRATION AND COLLECTION
OF POOL RECEIVABLES
1. Duties of the Servicer. Until the latest of (x) the Facility
Termination Date, (y) the Commitment Termination Date or (z) the Final
Distribution Date:
7.16.103. In General. The Servicer shall take or cause to be
taken all such actions as may be necessary or advisable to service and
administer the Pool Receivables and collect all payments due under the
Pool Receivables from time to time in accordance with its customary and
usual servicing procedures for servicing credit card receivables
comparable to the Pool Receivables and in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in
accordance with the Cardholder Guidelines, the Agreement and the
Pooling and Servicing Agreement. The Servicer shall not be obligated to
use separate servicing procedures, offices, employees or accounts for
servicing the Pool Receivables from the procedures, offices, employees
and accounts used by the Servicer in connection with servicing other
credit card receivables.
7.16.104. Audits. At any reasonable time and from time to time
at the Agent's reasonable request upon reasonable notice to the
Servicer and, if applicable, the Administrative Servicer, the Servicer
shall permit the Agent or its agents or representatives, to visit the
offices and properties of the Servicer for the purpose of examining
Records relating to the Servicer's credit card-related operations
and/or the Pool Receivables, internal controls and procedures
maintained by the Administrative Servicer (including, without
limitation, all Files, File Extracts and Masterfiles, as such terms are
defined in the Administrative Servicing Agreement in effect from time
to time) and to take copies and extracts therefrom, and to discuss the
Servicer's affairs with its officers, employees and independent
accountants.
7.16.105. Change in Payment Instructions to Obligors. The
Servicer will not add or terminate any bank as a Depositary Bank from
those listed in Schedule II to the Agreement, or, except
as requested by the Trustee pursuant to the Pooling and Servicing Agreement,
make any change in its instructions to Obligors
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regarding the method by which payments are to be made in respect of Pool
Receivables, unless the Agent shall have received notice of such addition,
termination or change and the Trustee shall have received copies of Depositary
Agreements with each new Depositary Bank, duly executed by the Seller and duly
acknowledged by such Depositary Bank, or such other notice or acknowledgments as
the Trustee may reasonably request.
7.16.106. Reporting Requirements. The Servicer will provide to
the Agent (in multiple copies, if requested by the Agent) the
following:
7.16.106.1. as soon as possible and in any event
within five days after the occurrence of each Early
Amortization Event or event which, with the giving of notice
or lapse of time, or both, would constitute an Early
Amortization Event, a statement of the chief financial officer
of the Servicer setting forth details of such Early
Amortization Event or event and the action that the Servicer
has taken and proposes to take with respect thereto;
7.16.106.2. within 30 days after the end of each
calendar year, a certificate of a Responsible Officer of the
Servicer to the effect that no Early Amortization Event
(including, without limitation, an Early Amortization Event
described in paragraph (m) of Exhibit VI), or event which,
with the giving of notice or lapse of time, or both, would
constitute an Early Amortization Event, has occurred and is
continuing;
7.16.106.3. at least 10 Business Days prior to any
change in the Seller's name or the Servicer's name, a notice
setting forth the new name and the effective date thereof; and
7.16.106.4. such other information respecting the
Pool Receivables or the condition or operations, financial or
otherwise, of the Seller, the Servicer or any of their
respective Affiliates required to be delivered to the
"Receivables Purchasers" under the Pooling and Servicing
Agreement or as the Agent may from time to time reasonably
request.
7.16.107. Calculation of Allocated Amounts. The Servicer
shall, from time to time at the reasonable request of the Agent,
furnish to the Agent (promptly after any such request) a calculation of
the amounts set aside for the
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Purchasers and the Banks pursuant to Article II of the Agreement.
7.16.108. Delivery of Servicer Reports. The Servicer shall prepare and
forward to the Agent, at least 2 Business Days prior to each Distribution Date,
a Servicer Report relating to the Purchaser Receivable Interests outstanding on
the last day of the immediately preceding Due Period, together with an analysis
of the aging of the Pool Receivables outstanding on such last day, and each such
Servicer Report will be accurate in all material respects as of its date.
7.16.109. Total Systems Failure. The Servicer shall promptly notify the
Agent of any Total Systems Failure and shall advise the Agent of the estimated
time required in order to remedy such Total Systems Failure and of the estimated
date on which a Servicer Report can be delivered. Until a Total Systems Failure
is remedied, the Servicer will (i) furnish to the Agent such periodic status
reports and other information relating to such Total Systems Failure as the
Agent may reasonably request and (ii) promptly notify the Agent if the Servicer
believes that such Total Systems Failure cannot be remedied by the estimated
date, which notice shall include a description of the circumstances which gave
rise to such delay, and the action proposed to be taken in response thereto, and
a revised estimate of the date on which a Servicer Report can be delivered. The
Servicer shall promptly notify the Agent when a Total Systems Failure has been
remedied.
7.16.110. Servicer Remains Liable. The exercise by the Agent and by any
Purchaser or any Bank of their rights under the Agreement shall not release the
Servicer, the Originator or the Owner from any of their duties or obligations
with respect to any Pool Receivables or under the related Cardholder Agreements.
Neither the Agent nor any Purchaser nor any Bank shall have any obligation or
liability with respect to any Pool Receivables or related Cardholder Agreements,
nor shall any of them be obligated to perform the obligations of any party
thereunder.
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2. Certain Rights of the Agent.
7.16.111. Notification of Obligors. The Agent may at any time following
the termination or transfer of the rights and obligations of both the Servicer
under the Pooling and Servicing Agreement and the Administrative Servicer under
the Administrative Servicer Agreement, upon ten days prior written notice to the
Owner and the Servicer, instruct the Trustee to, and upon such instruction the
Trustee shall, direct the Servicer to notify the Obligors of Pool Receivables,
at the Servicer's expense (if the Servicer is then Spirit, the Seller or a
designee of either of them), of the Agent's security interest in the Pool
Receivables pursuant to the Agreement, such notification to be made (i) by means
of statement to the foregoing effect contained in or enclosed with the monthly
billing statement sent by the Servicer to the Obligors of Pool Receivables and
(ii) within the next 32 days. If the Servicer fails to notify Obligors as
required pursuant to the foregoing sentence, then the Agent itself may, by any
means reasonably determined by the Agent to be consistent with market practice
and otherwise desirable to accomplish the purpose of this subsection and at the
Servicer's expense (if the Servicer is then Spirit, the Seller or a designee of
either of them), so notify such Obligors.
7.16.112. Store Payment Notice, Etc.
(i) At any time following the institution of insolvency
proceedings by or against any Store or Charming Shoppes or Charming
Shoppes of Delaware, Inc., the Agent is authorized to instruct the
Trustee to, and upon such instruction the Trustee shall, at the
Servicer's expense, date and deliver the Store Payment Notice to the
manager of each Store by or against which such a proceeding has been
instituted, or in the case of such a proceeding by or against Charming
Shoppes or Charming Shoppes of Delaware, Inc., to the managers of all
Stores.
(ii) Each of the Trustee, the Seller, the Servicer, the Owner,
the Originator, CNAI, the Purchasers and the Banks hereby authorizes
the Agent, if appointed Successor Servicer under the Pooling and
Servicing Agreement, to take any and all steps in the Trustee's name
and on behalf of the Trustee, the Purchasers and the Banks that are
necessary or desirable, in the determination of the Agent, to collect
amounts due under the Pool Receivables,
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including, without limitation, indorsing the name of the Originator, the Owner
or the Seller, as appropriate, on checks and other instruments representing
Collections of Pool Receivables and enforcing the Pool Receivables and the
related Cardholder Agreements.
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EXHIBIT VI
EARLY AMORTIZATION EVENTS
Each of the following (whether occurring before or after the
commencement of the Amortization Period) shall be an "Early Amortization Event":
7.16.113. (i) The Servicer shall fail to perform or observe
any term, covenant or agreement on its part to be performed or observed
under the Agreement (other than as referred to in clause (ii) below)
and such failure shall remain unremedied for 10 Business Days after
written notice thereof shall have been given to the Servicer by the
Agent; or (ii) the Servicer shall fail to make when due any payment or
deposit to be made by it under the Agreement and such failure shall
remain unremedied for 1 Business Day after written notice thereof shall
have been given to the Servicer by the Agent; or
7.16.114. (i) The Owner shall fail to make any deposit into
the Collection Account or the Agent's Account pursuant to Section
2.4(d) or 2.4(e) of the Pooling and Servicing Agreement or pursuant to
Section 2.07 or 4.03(b) of the Agreement, or (ii) the Seller shall fail
to make any other payment required under the Agreement; and, in the
case of either clause (i) or clause (ii) of this subsection (b), such
failure shall remain unremedied for one Business Day after written
notice thereof shall have been given to the Owner or the Seller, as the
case may be, by the Agent; or
7.16.115. Any representation or warranty made or deemed made
by the Seller, the Owner, the Originator, the Servicer, FSC or Charming
Shoppes (or any of their respective officers) under or in connection
with the Agreement, any Master Trust Document or the Company Agreement
or any information or report (other than any Servicer Report) delivered
by the Seller, the Owner, the Originator, the Servicer, FSC or Charming
Shoppes pursuant to the Agreement, any Master Trust Document or the
Company Agreement shall prove to have been incorrect or untrue in any
material respect when made or deemed made or delivered; or
7.16.116. The Seller, the Owner, the Originator, FSC or
Charming Shoppes shall fail to perform or observe any other term,
covenant or agreement contained in the Agreement, any Master Trust
Document or the Company Agreement on its part to be performed or
observed and any such failure shall remain
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unremedied for 10 continuous Business Days after written notice thereof shall
have been given to the Seller, the Owner, the Originator, FSC or Charming
Shoppes, as the case may be, by the Agent; or
7.16.117. (i) Spirit, in its capacity as the Servicer under the Pooling
and Servicing Agreement or Spirit or any Affiliate of Spirit, in any capacity
under any other Master Trust Document, shall fail to perform or observe any
term, covenant or agreement contained in the Pooling and Servicing Agreement or
such other Master Trust Document, on its part to be performed or observed and
(A) any such failure shall continue for 10 Business Days after written notice
thereof shall have been given to the Servicer by the Trustee or any Purchaser
Representative (as defined in the Pooling and Servicing Agreement) or (B) any
such failure under the Pooling and Servicing Agreement or other Master Trust
Document shall constitute an "early amortization event" or similar event under
any Certificate Series or Receivables Purchase Series (as defined in the Pooling
and Servicing Agreement), or
(ii) any "Servicer Default" shall occur under the Pooling and
Servicing Agreement, or
(iii) any other event shall occur or condition shall exist
under the Pooling and Servicing Agreement or other Master Trust
Document that constitutes an "Amortization Event" or a "Trust Early
Amortization Event" thereunder or would constitute an "Amortization
Event" or a "Trust Early Amortization Event" thereunder but for the
requirement that notice be given or time elapse or both; or
7.16.118. Any purchase or any reinvestment pursuant to the Agreement
shall for any reason (other than pursuant to the terms hereof) cease to create,
or any Purchaser Receivable Interest shall for any reason cease to be, a valid
and perfected first priority undivided percentage ownership interest to the
extent of the pertinent Purchaser Receivable Interest in each applicable Pool
Receivable and the Collections with respect thereto; or
7.16.119. The Seller, the Owner, the Originator, FSC or Charming
Shoppes shall generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Seller, the Owner, the
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Originator, FSC or Charming Shoppes seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, conservatorship or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors (including any law relating to the conservatorship or
liquidation of national banking associations), or seeking the entry of an order
for relief or the appointment of a receiver, trustee, custodian, conservator,
sequestrator or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian, conservator, sequestrator or
other similar official for, it or for any substantial part of its property)
shall occur; or the Seller, the Owner, the Originator, FSC or Charming Shoppes
shall take any corporate action to authorize any of the actions set forth above
in this paragraph (g); or
7.16.120. As of the last day of any Due Period, either the Delinquency
Ratio shall exceed 10% or the Quarterly Charge-Off Ratio shall exceed 15%; or
7.16.121. The Net Receivables Pool Balance minus the sum of (A) the
aggregate "Investor Interests" (as defined in the Pooling and Servicing
Agreement) for all Certificate Series issued pursuant to any supplement to the
Pooling and Servicing Agreement, (B) the aggregate "Receivables Purchase
Interests" (as defined in the Pooling and Servicing Agreement) for all
Receivables Purchase Series issued pursuant to any receivables purchase
agreement that is subject to the Pooling and Servicing Agreement (other than the
Agreement), (C) the Subordinated Purchaser Capital, (D) the Minimum Seller
Capital, and (E) the total amount of Discount Option Receivables, if any, shall,
as of the last day of any Due Period, be less than the sum of the aggregate
outstanding Purchaser Capital of all Purchaser Receivable Interests under the
Agreement; or the Floating Allocation Percentage as of the last day of any Due
Period shall be greater than 98.305%; and, in either case, such condition shall
continue until the first Distribution Date immediately following such day; or
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7.16.122. Charming Shoppes shall cease to own, directly or indirectly,
all shares of each class of the issued and outstanding shares of capital stock
of FSC; or FSC shall cease to own, directly or indirectly, all shares of each
class of the issued and outstanding shares of capital stock of Spirit; or
7.16.123. The Net Excess Spread (averaged over any three consecutive
Due Periods) shall be less than 2.5%; or
7.16.124. (i) Charming Shoppes or any of its subsidiaries shall fail to
pay any principal of or premium or interest on any indebtedness arising under
any Credit Facility when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such indebtedness (regardless of whether
such failure shall have been waived by the other parties to such Credit
Facility); or (ii) any event or condition listed in Schedule I as a "material
provision" shall occur or exist under any Credit Facility and shall continue
after the applicable grace period, if any, specified therein (regardless of
whether such event or condition shall have been waived by the other parties to
such Credit Facility); or (iii) any other event shall occur or condition shall
exist (which is not referred to in clause (i) or (ii) of this paragraph) under
any Credit Facility or any agreement or instrument relating to any such
indebtedness and shall (A) continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such indebtedness and (B) continue without waiver by the other parties to such
Credit Facility after the earliest to occur of (x) acceleration of the maturity
of such indebtedness, (y) in the case of the Congress Facility, the refusal of
the lenders thereunder to make further revolving loans or letter of credit
accommodations to Charming Shoppes and its Affiliates after a request therefor
and (z) the passage of ten Business Days following the last day of the
applicable grace period, if any; or (iv) any such indebtedness shall be declared
to be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), redeemed, purchased or defeased, or an offer to
repay, redeem, purchase or defease such indebtedness shall be required to be
made, in each case prior to the stated maturity thereof; or
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7.16.125. Spirit shall not be in compliance with its regulatory capital
requirements under applicable rules and regulations of the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System or other appropriate
governmental authorities; or
7.16.126. The Company Agreement shall cease to be in full force and
effect.
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Schedule I
Material Provision
1. Material Provision: adjusted net worth covenant.
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Schedule II
Depositary Banks
NationsBank:
ABA # 11 000 025
Account # 375-0504484
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ANNEX G
Summary of Interest Rate Agreements as of [Date]
<TABLE>
<CAPTION>
Reference Date
No. or Type Fixed Amortization
Date of (Swap Notional Rate or Effective of Notional Termination
Counterparty Confirmation or Cap) Amount Cap Rate Date Amount Begins Date
- ------------ ------------ ------- -------- -------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
The [Owner/FSC] is a party to each of the above Agreements.
The Index for floating rate payments for each of the above Agreements is
["USD-CP-H.15"] for one month maturities.
II-
<PAGE> 1
EXHIBIT 10.2.22
CHARMING SHOPPES, INC.
1998 RESTRICTED AWARD PROGRAM
1. Purpose and Overview. This 1998 Restricted Award Program (the
"Program") of Charming Shoppes, Inc. (the "Company") is intended to provide an
additional incentive to selected associates to promote the success of the
Company through long-term service. Under the Program, associates of the Company
and its subsidiaries selected to participate will be granted an award which
represents a conditional right to receive bonus compensation on June 30, 2000,
subject to complete or partial forfeiture of the award in the event of
termination of employment before that date as more fully set forth in the
Program (a "Restricted Award"). During the 30-day period following the grant to
an associate of a Restricted Award, the associate (a "Participant") may elect to
have the Restricted Award denominated as a cash amount or as an equivalent
number of shares of Company Common Stock. At the end of the restricted period,
cash will be payable in settlement of a cash-denominated Restricted Award and
shares will be issuable in settlement of a share-denominated Restricted Award. A
Restricted Award constitutes a conditional bonus, and does not replace or reduce
a Participant's salary or other compensation.
2. Administration.
(a) Authority. The Program shall be administered by the Chief Executive
Officer of the Company (the "CEO") or a committee of officers designated by the
CEO (the CEO or such committee being the "Administrator"). The Administrator may
delegate authority with respect to actions and determinations under the Program.
(b) Manner of Exercise of Authority. Any action of the Administrator or
its delegatee with respect to the Program shall be final, conclusive, and
binding on all persons, including the Company, subsidiaries, a Participant, and
any person claiming any rights under the Program from or through any
Participant, except that the Administrator may take action within a reasonable
time after any such action superseding or overruling a prior action.
(c) Limitation of Liability. Each person acting for the Administrator or a
delegatee shall be entitled to, in good faith, rely or act upon any report or
other information furnished to him by any officer or other employee of the
Company or any subsidiary or any agent or professional assisting in the
administration of the Program, such person shall not be personally liable for
any action, determination, or interpretation taken or made in good faith with
respect to the Program, and such person shall, to the extent permitted by law,
be fully indemnified and protected by the Company with respect to any such
action, determination, or interpretation.
3. Restricted Award Limits; Stock Subject to Program. An aggregate of
$500,000 is available for grants of Restricted Awards under the Program, which
limitation shall apply to all grants regardless of Participant elections as to
denomination of the Restricted Awards. Subject to adjustment as provided in
Section 8(b) of the Program, a total of 140,000 shares of Common Stock are
reserved and available for issuance in settlement of share-denominated
Restricted Awards under the Program. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares, and will not be
deemed to be drawn from the reserves under any other Company plan or program. If
a Restricted Award is forfeited, the cash amount thereof and shares subject
thereto will again be available for Restricted Awards under the Program.
4. Eligibility. Associates of the Company and its subsidiaries who are not
officers of the Company and are not serving on the Board of Directors of the
Company are eligible for selection to be granted Restricted Awards under the
Program.
<PAGE> 2
5. Grants of Restricted Awards. Each associate selected by the
Administrator to participate in the Program shall be granted a Restricted Award.
The Administrator shall specify the amount of such Restricted Award initially as
a cash amount. Such Restricted Award shall be subject to the terms and
conditions set forth in the Program and in the Restricted Award Agreement and
Election executed by the Company and the Participant, including the following:
(a) Consideration for Restricted Award. A Restricted Award shall be
granted for the general purposes set forth in Section 1 of the Program and to
help secure the benefits of the Participant's continued service to the Company
during the period the Award is outstanding. A Participant shall not be required
to pay any cash consideration or other tangible or definable consideration for
the Restricted Award, nor may a Participant choose to receive the Restricted
Award in lieu of other compensation or other compensation in lieu of the
Restricted Award. No negotiation shall take place between the Company and any
Participant as to the amount, timing, or other terms of a Restricted Award or
the cash or shares deliverable in settlement of a Restricted Award (except a
Participant may elect the form of settlement of the Restricted Award, cash or
shares, as specified below).
(b) Risk of Forfeiture. A Restricted Award shall be subject to a risk of
forfeiture, as follows: In the event that the Participant is not continuously
employed as an associate of the Company or a subsidiary of the Company from the
date of grant of his or her Restricted Award until June 30, 2000, the
Participant's Restricted Award shall be forfeited; provided, however, that (i)
this risk of forfeiture shall automatically lapse in the event the associate's
employment as an associate of the Company or a subsidiary terminates due to
death or a permanent disability (as determined by the Administrator); (ii) in
the event the Participant is continuously employed by the Company or a
subsidiary from the date of grant of his or her Restricted Award through
December 31, 1999 and is thereafter terminated for any reason other than for
"cause" between January 1, 2000 and June 30, 2000, this risk of forfeiture will
lapse as to seventy-five (75%) percent of the Restricted Award on the date of
such termination (i.e. 75% of the cash amount determined as the Restricted Award
or 75% of the number of shares of Restricted Stock denominated as the Restricted
Award as initially elected by the Participant); and (iii) the Administrator may
otherwise accelerate the date or dates as of which this risk of forfeiture shall
lapse or, at the time of grant of a Restricted Award, specify a later date as of
which such risk of forfeiture will lapse, with respect to all or part of a
Restricted Award.
For purposes hereof, "cause" shall mean the Participant's chronic neglect,
refusal or failure to fulfill his or her employment duties and responsibilities,
other than for reasons of sickness, accident or other similar causes beyond the
Participant's control. Such neglect, refusal or failure shall be determined in
the sole and reasonable judgment of the Administrator.
(c) Nontransferability. A Restricted Award, rights to cash or shares in
settlement of the Restricted Award, and other rights relating thereto shall not
be transferable or assignable by a Participant, other than by will or the laws
of descent and distribution, and shall not be pledged, hypothecated, or
otherwise encumbered in any way or subject to execution, attachment, lien, or
similar process.
6. Participant Election of Denomination of Restricted Award in Cash or
Shares of Common Stock. During the 30-day period following the grant of the
Restricted Award, a Participant may file an election with the Administrator to
have his or her Restricted Award denominated as a cash amount or as an
equivalent number of shares of Company Common Stock. The form of such election
shall be specified by the Administrator. The election of a Participant is
irrevocable; no Participant may make any further election as to the denomination
of his or her Restricted Award.
(a) Cash-Denominated Restricted Award. If a Participant elects to have his
or her Restricted Award denominated as a cash amount, or if the Participant
fails to file a valid election as to the denomination of the Restricted Award by
the filing deadline set forth in this Section 6, the Participant's Restricted
Award will be denominated as a cash amount equal to the amount of the Restricted
Award initially specified by the Administrator. For so long as such Restricted
Award remains outstanding, the amount of the Restricted Award shall not be
changed or adjusted, and no interest will be credited on the amount of such
Restricted Award. As promptly as practicable after lapse of the risk of
forfeiture relating to such Restricted Award under Section 5(b), the Company
shall pay to
2
<PAGE> 3
the Participant cash in the amount of the Restricted Award (to the extent not
forfeited) in full settlement of the Restricted Award, subject to withholding
under Section 7.
(b) Share-Denominated Restricted Award. If a Participant elects to have
his or her Restricted Award denominated as shares of Company Common Stock by
filing a valid election prior to the filing deadline set forth in this Section
6, the Participant's Restricted Award will be converted into a number of share
units ("Restricted Stock") determined by dividing the cash amount of the
Restricted Award initially specified by the Administrator by the Fair Market
Value (as defined below) per share of Company Common Stock at the date of grant.
Such Restricted Stock shall be subject to the terms set forth in Section 6(b)
through 6(g), including the crediting of additional Restricted Stock as a result
of dividends and changes in the number of shares of Restricted Stock credited to
the Participant due to adjustments. As promptly as practicable after lapse of
the risk of forfeiture relating to such Restricted Award under Section 5(b), the
Company shall settle such Restricted Award (to the extent not forfeited) by
issuance and delivery of a number of shares of Common Stock equal to the number
of shares of Restricted Stock then credited to the Participant in full
settlement of the Restricted Award, subject to withholding under Section 7.
(c) Dividend Equivalents. A Participant shall be entitled to receive
dividends equivalents in respect of Restricted Stock, as follows:
(i) Dividends Other Than Stock Dividends. If the Company declares and pays any
dividend or distribution on Common Stock in the form of cash or any other
property other than Common Stock, the record date of which is prior to the
date on which the Participant's Restricted Stock is settled, the Company
shall credit to the Participant, as of the payment date of such dividend
or distribution, a number of additional shares of Restricted Stock
determined by multiplying (A) the amount of cash actually paid plus the
fair market value at such payment date of any such property actually paid
as a dividend or distribution per share of Common Stock times (B) the
number of shares of such Restricted Stock credited to the Participant at
the record date and dividing the product by (C) the Fair Market Value per
share of Common Stock on the dividend or distribution payment date.
(ii) Stock Dividends and Stock Splits. If the Company declares and pays a
dividend or distribution in the form of Common Stock payable on Common
Stock, or their occurs a forward stock split of the Common Stock, the
record date of which is prior to the date on which the Participant's
Restricted Stock is settled, the Company shall credit to the Participant a
number of shares of additional Restricted Stock equal to the number of
shares of Common Stock paid as a dividend or distribution per share of
Common Stock or distributed as a result of the stock split per share of
Common Stock multiplied by the number of shares of Restricted Stock
credited to the Participant on the record date.
(iii) Other Terms Applicable to Restricted Stock Resulting from Dividends or
Splits. Additional shares of Restricted Stock credited under this Section
6(c) will be subject to the same terms, including the risk of forfeiture,
as other Restricted Stock. No such additional Restricted Stock will be
credited to a Participant in respect of Restricted Stock forfeited under
Section 5(b) on or before the payment date for the dividend or
distribution.
A Participant shall not be entitled to receive actual dividends in respect of
Restricted Stock prior to the issuance of Common Stock in settlement thereof.
(d) Delivery of Shares in Settlement of Restricted Stock. The
Administrator may make delivery of shares hereunder in settlement of Restricted
Stock by either delivering one or more certificates representing such shares to
the Participant, registered in the name of the Participant (and any joint name,
if so directed by the Participant), or by depositing such shares into an account
maintained for the Participant (or of which the Participant is a joint owner,
with the consent of the Participant) established in connection with the
Company's Employee Stock Purchase Program or another plan or arrangement
providing for investment in Common Stock and under which the Participant's
rights are similar in nature to those under a stock brokerage account. If the
Administrator determines to settle Restricted Stock by making a deposit of
shares into such an account, the Company may settle any fractional share of
Restricted Stock by means of such deposit. In other circumstances or if so
determined by the Administrator, the Company shall instead pay cash in lieu of
fractional shares, on such basis as the Administrator may determine. In no event
will the Company in fact issue fractional shares.
3
<PAGE> 4
(e) Definition of "Fair Market Value." "Fair Market Value" as of a given
date means the closing sale price of Common Stock reported in the table entitled
"Nasdaq National Market Issues" or any successor table in the Wall Street
Journal (or, if Common Stock is then principally traded on a national securities
exchange, in the table reporting composite transactions for such exchange) for
such date or, if no shares of Common Stock were traded on that date, on the next
preceding day on which there was such a trade.
(f) Crediting of Fractional Shares of Restricted Stock. If any transaction
or event under the Program results in the Participant being credited with
fractional shares of Restricted Stock, such fractional shares will be credited
to not less than three decimal places.
(g) Form of Restricted Award Agreement and Election. The general form of
the Restricted Award Agreement and Election is attached hereto as Exhibit A. The
Administrator may make changes to the form of Restricted Award Agreement and
Election or amend outstanding Restricted Award Agreements.
7. Tax Withholding. The Company and any subsidiary may deduct from any
payment to be made to a Participant, including but not limited to settlement of
a cash-denominated Restricted Award, any amount that federal, state, local, or
foreign tax law requires to be withheld with respect to the settlement of the
Restricted Award. At the election of the Administrator, the Company may withhold
from the shares of Common Stock to be distributed in settlement of Restricted
Stock that number of shares having a Fair Market Value, at the date of
settlement of the Restricted Stock, equal to the amount of such withholding
taxes.
8. General Provisions.
(a) Compliance With Legal and Other Requirements. The grant and settlement
of Restricted Awards and other obligations of the Company under the Program will
be subject to all applicable federal and state laws, rules, and regulations, and
to such approvals by any regulatory or governmental agency as may be required.
The Company may, in its discretion, postpone the issuance or delivery of Common
Stock in settlement of Restricted Stock under the Program until completion of
any required action under any federal or state law, rule, or regulation, listing
or other required action with respect to any automated quotation system or stock
exchange upon which the Common Stock or other Company securities are designated
or listed, or compliance with any other contractual obligation of the Company,
as the Company may consider appropriate, and the Company may require any
Participant to make such representations and furnish such information as the
Company may consider appropriate in connection with the issuance or delivery of
Common Stock in compliance with applicable laws, rules, and regulations,
designation or listing requirements, or other contractual obligations.
(b) Adjustments. In the event that the Administrator shall determine that
any recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, extraordinary dividend or
distribution, or share exchange, or other similar corporate transaction or
event, affects the Common Stock such that an adjustment is appropriate to carry
out the purposes of the Program and to prevent dilution or enlargement of the
rights of Participants to whom Restricted Stock has been credited under the
Program (after taking into account any Restricted Stock credited under Section
6(c) to Participants as a result of such transaction or event), then the
Administrator shall, in such manner as it may deem equitable, adjust any or all
of (i) the number and kind of shares of Common Stock which may thereafter be
issued under Section 3 in connection with Restricted Stock, and (ii) the number
and kind of shares of Common Stock issuable in settlement of then-outstanding
Restricted Stock. For purposes of the Program, the term "Common Stock" shall
include any security that may be substituted or resubstituted for Common Stock
pursuant to this Section 8(b).
(c) No Right to Continued Employment. Neither the Program nor any action
taken hereunder, including the grant of any Restricted Award, will be construed
as giving any associate the right to be retained in the employ of the Company or
any of its subsidiaries, nor will it interfere in any way with the right of the
Company or any of its subsidiaries to terminate any associate's employment at
any time.
4
<PAGE> 5
(d) No Rights to Participate; No Shareholder Rights. No Participant or
employee will have any claim to participate in the Program, and the Company will
have no obligation to continue the Program. A crediting of Restricted Stock
under a Restricted Award will confer on the Participant none of the rights of a
shareholder of the Company (including no rights to vote or receive dividends or
distributions) until settlement by delivery of Common Stock, and then only to
the extent that such Restricted Stock has not otherwise been forfeited by the
Participant.
(e) Changes to the Program. The Administrator may amend, alter, suspend,
discontinue, or terminate the Program without the consent of Participants;
provided, however, that, without the consent of an affected Participant, no such
action shall materially and adversely affect the rights of such Participant with
respect to an outstanding Restricted Award; and provided further, that any
increase in the aggregate cash limit on Restricted Awards or the number of
shares issuable under Section 3 shall be subject to the approval by the Board of
Directors.
(f) Effect of Settlement. Upon settlement of a Restricted Award, all
obligations of the Company in respect of such Restricted Award shall be
terminated. Any shares delivered in settlement of Restricted Stock shall no
longer be deemed Restricted Stock for purposes of the Program.
(g) Governing Law. The validity, construction, and effect of the Program
and any rules and regulations relating to the Program will be determined in
accordance with the Pennsylvania Business Corporation Law, to the extent
applicable, other laws (including those governing contracts) of the Commonwealth
of Pennsylvania, without giving effect to principles of conflicts of laws, and
applicable federal law.
9. Effective Date and Termination of Program. The Program shall become
effective on March 5, 1998. Unless earlier terminated under Section 8(e), the
Program shall terminate at such time after 1998 that no Restricted Award
previously granted under the Program remains outstanding.
Approved and Ratified by the Board of Directors: March 5, 1998
5
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
The following are the Company's subsidiaries, each of which is directly and
wholly owned by its immediate parent, Charming Shoppes, Inc. All subsidiaries
are included in the consolidated financial statements of Charming Shoppes, Inc.,
and subsidiaries, except as noted.
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
CHARM-FIN STORES,INC. (2) DE
CHARMING SHOPPES OF COLONIAL PARK,INC. PA
CHARMING SHOPPES OF CUMBERLAND,INC. PA
CHARMING SHOPPES OF DELAWARE,INC. (2) PA
CHARMING SHOPPES OF ECHELON,INC. NJ
CHARMING SHOPPES OF NORRISTOWN,INC. (2) PA
CHARMING SHOPPES OF NORRISTOWN,INC. (2) PA
CHARMING SHOPPES OF TRENTON,INC. NJ
CHARMING SHOPPES OF WOODBURY,INC NJ
CHARMING SHOPPES,INC. (2) PA
COLUMBIA #2589 DEVOLPMENT CO,INC. TN
CS INSURANCE LTD. (2) BERMUDA
CSBC, INC. (2) DE
CSI CHARITIES (2) PA
CSI INDUSTRIES,INC. (2) DE
CSI-DR,INC. (2) DOM. REPUB.
C.S.A.C.,INC. (2) DE
C.S.F.CORP. (2) DE
C.S.I.C.,INC. (2) DE
DIVERSIFIED FASHIONS,INC. (2) PA
ERICOOL CO LTD. (2) HONG KONG
EVATONE TRADING LTD. (2) HONG KONG
EXECUTIVE FLIGHTS,INC. (2) DE
FASHION BUG ACQUISITION CORP DE
FASHION BUG OF 640 PLAZA,INC. TN
FASHION BUG OF ALLENTOWN,INC. PA
FASHION BUG OF ALLIANCE,INC. PA
FASHION BUG OF ALPENA,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 2
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF ALTOONA,INC. PA
FASHION BUG OF AMHERST,INC. NY
FASHION BUG OF ANDORRA,INC. PA
FASHION BUG OF APPLE VALLEY SQUARE,INC. PA
FASHION BUG OF ASBURY PARK,INC. PA
FASHION BUG OF AUDUBON,INC. NJ
FASHION BUG OF AURORA,INC. PA
FASHION BUG OF BARBERTON,INC. PA
FASHION BUG OF BEAVER FALLS,INC. (2) PA
FASHION BUG OF BECKLEY,INC. PA
FASHION BUG OF BELLEVILLE,INC. PA
FASHION BUG OF BELMONT,INC. PA
FASHION BUG OF BELVEDERE PLAZA,INC. (2) GA
FASHION BUG OF BETHLEHEM,INC. PA
FASHION BUG OF BIRMINGHAM,INC. AL
FASHION BUG OF BLOOMSBURG,INC. PA
FASHION BUG OF BLUE ASH,INC. (2) PA
FASHION BUG OF BLUEFIELD,INC. PA
FASHION BUG OF BOLINGBROOK,INC. IL
FASHION BUG OF BOND,INC. PA
FASHION BUG OF BORDENTOWN,INC. PA
FASHION BUG OF BRADFORD,INC. PA
FASHION BUG OF BRICKTOWN PLAZA,INC. PA
FASHION BUG OF BRIDGEVIEW,INC. PA
FASHION BUG OF BRISTOL, CT,INC. CT
FASHION BUG OF BRISTOL,INC. PA
FASHION BUG OF BRUNSWICK,INC. PA
FASHION BUG OF BUCYRUS,INC. PA
FASHION BUG OF CALIFORNIA, INC. (1) (2) CA
FASHION BUG OF CAMBRIDGE,INC. MD
FASHION BUG OF CAPE MAY,INC. PA
FASHION BUG OF CARLISLE,INC. PA
FASHION BUG OF CASSELBERRY,INC. FL
FASHION BUG OF CASTOR AVENUE,INC. PA
FASHION BUG OF CENTURY III MALL PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 3
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF CHARLOTTESVILLE,INC. VA
FASHION BUG OF CHESTERTOWN,INC. PA
FASHION BUG OF CHILLICOTHE,INC. PA
FASHION BUG OF CLARION,INC. PA
FASHION BUG OF CLARKSBURG,INC. PA
FASHION BUG OF CLEARFIELD,INC. PA
FASHION BUG OF CLEARVIEW MALL,INC. PA
FASHION BUG OF CLEVELAND,INC. OH
FASHION BUG OF COCKEYSVILLE,INC. PA
FASHION BUG OF COLLEGE SQUARE,INC. PA
FASHION BUG OF CORBIN,INC. (2) PA
FASHION BUG OF COTTMAN,INC. PA
FASHION BUG OF COUNTRYSIDE,INC. PA
FASHION BUG OF CRANBERRY,INC. PA
FASHION BUG OF CREST HILL,INC. (2) PA
FASHION BUG OF CROMWELL FIELD,INC. MD
FASHION BUG OF CRYSTAL LAKE,INC. (2) PA
FASHION BUG OF CULPEPPER,INC. VA
FASHION BUG OF CUMBERLAND MALL,INC. (2) GA
FASHION BUG OF CUYAHOGA FALLS,INC. PA
FASHION BUG OF DANBURY,INC. PA
FASHION BUG OF DANVILLE,INC. PA
FASHION BUG OF DEARBORN,INC. PA
FASHION BUG OF DEKALB,INC. IL
FASHION BUG OF DES PLAINES,INC. PA
FASHION BUG OF DEVON,INC. PA
FASHION BUG OF DOVER PLAZA,INC. PA
FASHION BUG OF DUBOIS,INC. PA
FASHION BUG OF DUNBAR,INC. PA
FASHION BUG OF EAST HARTFORD,INC. CT
FASHION BUG OF EAST MANSFIELD,INC. PA
FASHION BUG OF EAST PARK,INC. PA
FASHION BUG OF EAST WINDSOR,INC. PA
FASHION BUG OF EASTSIDE PLAZA,INC. PA
FASHION BUG OF EASTWOOD MALL,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 4
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF EDGEWOOD,INC. PA
FASHION BUG OF EDWARDSVILLE,INC. PA
FASHION BUG OF ELDERSBURG,INC. PA
FASHION BUG OF ELKTON,INC. PA
FASHION BUG OF ELWOOD CITY,INC. PA
FASHION BUG OF EUSTIS,INC. (1) (2) FL
FASHION BUG OF EVANSVILLE,INC. IN
FASHION BUG OF FAIRFIELD,INC. PA
FASHION BUG OF FAIRMONT,INC. PA
FASHION BUG OF FALL RIVER,INC. PA
FASHION BUG OF FALLS CHURCH,INC. (2) VA
FASHION BUG OF FLEMINGTON,INC. (2) PA
FASHION BUG OF FLINT,INC. PA
FASHION BUG OF FOREST PARK MALL,INC. (2) PA
FASHION BUG OF FOREST PLAZA,INC. IL
FASHION BUG OF FOSTORIA,INC. (2) PA
FASHION BUG OF FRACKVILLE,INC. PA
FASHION BUG OF FRANKFORT,INC. PA
FASHION BUG OF FRANKLIN COUNTY,INC. PA
FASHION BUG OF FRANKLIN,INC. PA
FASHION BUG OF FREDERICKSBURG,INC. PA
FASHION BUG OF FREEHOLD,INC. NJ
FASHION BUG OF FRONT ROYAL,INC. VA
FASHION BUG OF FT. FINDLAY,INC. PA
FASHION BUG OF FT. MYERS,INC. FL
FASHION BUG OF FULLERTON,INC. PA
FASHION BUG OF GARFIELD HEIGHTS,INC. PA
FASHION BUG OF GEORIA SQUARE,INC. (2) GA
FASHION BUG OF GIBBSTOWN,INC. NJ
FASHION BUG OF GLEN BURNIE,INC. PA
FASHION BUG OF GLEN ELLYN,INC. IL
FASHION BUG OF GORHAM,INC. NH
FASHION BUG OF GREENVILLE PLAZA,INC. PA
FASHION BUG OF GROVE CITY,INC. PA
FASHION BUG OF HACKENSACK,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 5
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF HACKETTSTOWN,INC. PA
FASHION BUG OF HAGERSTOWN,INC. PA
FASHION BUG OF HAMILTON SQUARE,INC. PA
FASHION BUG OF HAMPTON,INC. PA
FASHION BUG OF HANNIBAL,INC. MO
FASHION BUG OF HANOVER,INC. PA
FASHION BUG OF HARRISBURG,INC. PA
FASHION BUG OF HAZELTON,INC. PA
FASHION BUG OF HERSHEY,INC. (2) PA
FASHION BUG OF HIGHLAND RIDGE,INC. OH
FASHION BUG OF HINESVILLE,INC. GA
FASHION BUG OF HOLYOKE,INC. MA
FASHION BUG OF HONESDALE,INC. PA
FASHION BUG OF HOUGHTON,INC. PA
FASHION BUG OF HOWELL,INC. PA
FASHION BUG OF HUNTINGTON PLAZA,INC. IN
FASHION BUG OF HUNTINGTON,INC. PA
FASHION BUG OF IROQUOIS MANOR,INC. PA
FASHION BUG OF JASPER,INC. IN
FASHION BUG OF JOHNSTON,INC. RI
FASHION BUG OF JOHNSTOWN,INC. (2) PA
FASHION BUG OF JOLIET,INC. IL
FASHION BUG OF KEDZIE,INC. PA
FASHION BUG OF KENT,INC. PA
FASHION BUG OF KUTZTOWN,INC. PA
FASHION BUG OF LAKELAND,INC. (2) FL
FASHION BUG OF LAKEMORE PLAZA,INC. PA
FASHION BUG OF LANCASTER,INC. PA
FASHION BUG OF LANGLEY PARK,INC. (2) PA
FASHION BUG OF LANSING,INC. PA
FASHION BUG OF LAUREL,INC. PA
FASHION BUG OF LAVALE,INC. PA
FASHION BUG OF LAWRENCEVILLE,INC. NJ
FASHION BUG OF LEBANON,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 6
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF LEDGEWOOD,INC. PA
FASHION BUG OF LENOX SQUARE,INC. (2) GA
FASHION BUG OF LEWISBURG,INC. PA
FASHION BUG OF LEWISTON,INC. ME
FASHION BUG OF LEXINGTON,INC. (2) PA
FASHION BUG OF LIVONIA,INC. PA
FASHION BUG OF LOCKPORT,INC. NY
FASHION BUG OF LOGAN,INC. PA
FASHION BUG OF LORAIN,INC. OH
FASHION BUG OF LOUISVILLE,INC. PA
FASHION BUG OF LOWER BURRELL,INC. PA
FASHION BUG OF LYNCHBURG,INC. VA
FASHION BUG OF LYNN,INC. MA
FASHION BUG OF MACDADE,INC. PA
FASHION BUG OF MANAHAWKIN,INC. PA
FASHION BUG OF MANCHESTER, N.H.,INC. NH
FASHION BUG OF MAPLE HEIGHTS,INC. PA
FASHION BUG OF MARQUETTE,INC. MI
FASHION BUG OF MARTIN PLAZA,INC. PA
FASHION BUG OF MASON CITY,INC. IA
FASHION BUG OF MASSILLON,INC. OH
FASHION BUG OF MAULDIN,INC. PA
FASHION BUG OF MAYFAIR,INC. PA
FASHION BUG OF MAYFIELD HEIGHTS,INC. (2) OH
FASHION BUG OF MCKEESPORT (2) PA
FASHION BUG OF MEADVILLE,INC. PA
FASHION BUG OF MEDFORD,INC. PA
FASHION BUG OF MERRITT ISLAND,INC. FL
FASHION BUG OF MIDDLESBORO,INC. PA
FASHION BUG OF MIDDLETOWN PLAZA,INC. PA
FASHION BUG OF MIDLAND PLAZA,INC. MI
FASHION BUG OF MIDWAY,INC. MN
FASHION BUG OF MONROEVILLE (2) PA
FASHION BUG OF MONROEVILLE,INC. PA
FASHION BUG OF MONROE,INC. PA
FASHION BUG OF MONTGOMERYVILLE,INC. (2) PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 7
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF MONTPELIER,INC. VT
FASHION BUG OF MOORESTOWN MALL,INC. PA
FASHION BUG OF MOOSIC,INC. PA
FASHION BUG OF MOREHEAD,INC. PA
FASHION BUG OF MORRIS COUNTY,INC. PA
FASHION BUG OF MOUNT PLEASANT,INC. PA
FASHION BUG OF MOUNT VERNON,INC. PA
FASHION BUG OF MT. CLEMENS,INC. PA
FASHION BUG OF MURRAY,INC. PA
FASHION BUG OF NANTICOKE,INC. PA
FASHION BUG OF NASHVILLE,INC. TN
FASHION BUG OF NATRONA,INC. (2) PA
FASHION BUG OF NEW BRITIAN,INC. CT
FASHION BUG OF NEW CASTLE,INC. PA
FASHION BUG OF NEW HOLLAND,INC. PA
FASHION BUG OF NEW LONDON,INC. PA
FASHION BUG OF NEW PHILADELPHIA,INC. PA
FASHION BUG OF NORTH ADAMS,INC. PA
FASHION BUG OF NORTH BRUNSWICK,INC. PA
FASHION BUG OF NORTH EAST,INC. PA
FASHION BUG OF NORTH POINT,INC. PA
FASHION BUG OF NORWELL,INC. PA
FASHION BUG OF NORWIN,INC. PA
FASHION BUG OF N. ROANOKE,INC. VA
FASHION BUG OF OAK RIDGE,INC. (2) PA
FASHION BUG OF OIL CITY,INC. PA
FASHION BUG OF OLEAN,INC. PA
FASHION BUG OF PADUCAH,INC. (2) PA
FASHION BUG OF PAINTSVILLE,INC. PA
FASHION BUG OF PAKA PLAZA,INC. MI
FASHION BUG OF PALM HARBOR,INC. FL
FASHION BUG OF PANAMA CITY,INC. FL
FASHION BUG OF PARKERSBURG,INC. PA
FASHION BUG OF PARLIN,INC. (2) PA
FASHION BUG OF PATCHOQUE,INC. NY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 8
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF PENNSVILLE,INC. PA
FASHION BUG OF PEORIA,INC. PA
FASHION BUG OF PERIMETER MALL,INC. (2) GA
FASHION BUG OF PERRING,INC. PA
FASHION BUG OF PHILLIPSBURG,INC. PA
FASHION BUG OF PIKEVILLE,INC. PA
FASHION BUG OF PITTSTON,INC. PA
FASHION BUG OF PORTSMOUTH,INC. PA
FASHION BUG OF POTTSVILLE,INC. PA
FASHION BUG OF RAVENSWOOD,INC. PA
FASHION BUG OF RAYNHAM,INC. MA
FASHION BUG OF REISTERTOWN,INC. PA
FASHION BUG OF REVERE,INC. MA
FASHION BUG OF REYNOLDSBURG,INC. OH
FASHION BUG OF RISING SUN,INC. PA
FASHION BUG OF RIVERHEAD,INC. (2) NY
FASHION BUG OF RIVERSIDE SQUARE,INC. IL
FASHION BUG OF RIVERTOWNE COMMONS,INC. MD
FASHION BUG OF ROANOKE RAPIDS,INC. (2) PA
FASHION BUG OF ROGERS PLAZA,INC. PA
FASHION BUG OF ROYAL OAK,INC. PA
FASHION BUG OF RUMFORD,INC. (2) RI
FASHION BUG OF SAGINAW,INC. PA
FASHION BUG OF SALEM,INC. MA
FASHION BUG OF SAUGUS,INC. (2) MA
FASHION BUG OF SAUGUS,INC. (2) MA
FASHION BUG OF SCRANTON,INC. PA
FASHION BUG OF SEAFORD,INC. PA
FASHION BUG OF SECURITY,INC. PA
FASHION BUG OF SHARONVILLE,INC. PA
FASHION BUG OF SHARON,INC. PA
FASHION BUG OF SMYRNA,INC. GA
FASHION BUG OF SOLON,INC. OH
FASHION BUG OF SOMERS POINT,INC. NJ
FASHION BUG OF SOUTH FLINT,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 9
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF SOUTH HILLS VILLAGE (2) PA
FASHION BUG OF SOUTH PLAINFIELD,INC. NJ
FASHION BUG OF SOUTHFIELD,INC. MI
FASHION BUG OF SOUTHGATE,INC. MI
FASHION BUG OF SOUTHLAKE MALL,INC. (2) GA
FASHION BUG OF SPEEDWAY SHOPPING CENTER,INC. IN
FASHION BUG OF SPOTSYLVANIA,INC. PA
FASHION BUG OF SPRINGFIELD PLAZA,INC. MA
FASHION BUG OF STATE COLLEGE,INC. PA
FASHION BUG OF STRATFORD,INC. CT
FASHION BUG OF STROUDSBURG,INC. PA
FASHION BUG OF STRUTHERS,INC. OH
FASHION BUG OF STURGIS,INC. MI
FASHION BUG OF ST. ALBANS,INC. PA
FASHION BUG OF ST. CLAIR SHORES,INC. MI
FASHION BUG OF TAYLOR,INC. MI
FASHION BUG OF TECH PLAZA,INC. PA
FASHION BUG OF THE MARKET PLACE,INC. (2) TN
FASHION BUG OF THORNDALE,INC. PA
FASHION BUG OF TIFFIN,INC. PA
FASHION BUG OF TOMS RIVER,INC. PA
FASHION BUG OF TOPSHAM,INC. (2) ME
FASHION BUG OF TOTOWA,INC. NJ
FASHION BUG OF TROY,INC. NY
FASHION BUG OF TRUMBULL PLAZA,INC. PA
FASHION BUG OF TUNKHANNOCK,INC. PA
FASHION BUG OF UNIONTOWN,INC. PA
FASHION BUG OF UNION,INC. PA
FASHION BUG OF UNIVERSITY MALL,INC. OH
FASHION BUG OF UNIVERSITY PLAZA,INC. TN
FASHION BUG OF VALLEY PLAZA, INC. PA
FASHION BUG OF VAN BUREN,INC. PA
FASHION BUG OF VINELAND,INC. NJ
FASHION BUG OF VIRGINIA BEACH,INC. VA
FASHION BUG OF WALNUTPORT,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 10
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG OF WARREN PLAZA,INC. OH
FASHION BUG OF WARRENTON,INC. PA
FASHION BUG OF WARREN,INC. PA
FASHION BUG OF WARSAW,INC. IN
FASHION BUG OF WATERBURY, INC. PA
FASHION BUG OF WAUKEGAN,INC. IL
FASHION BUG OF WAYNESBURG,INC. PA
FASHION BUG OF WEBSTER,INC. MA
FASHION BUG OF WEIRTON,INC. PA
FASHION BUG OF WEST FRANKFORT,INC. PA
FASHION BUG OF WEST MANCHESTER,INC. PA
FASHION BUG OF WEST MIFFLIN,INC. PA
FASHION BUG OF WEST SPRINGFIELD,INC. (2) MA
FASHION BUG OF WEST TOWN ,INC. (1) (2) PA
FASHION BUG OF WHARTON SQUARE,INC. PA
FASHION BUG OF WHITMAN PLAZA,INC. PA
FASHION BUG OF WILKES BARRE,INC. PA
FASHION BUG OF WILLIAMSON,INC. PA
FASHION BUG OF WILLIAMSPORT,INC. PA
FASHION BUG OF WILLIAMSTOWN,INC. NJ
FASHION BUG OF WILMINGTON,INC. MA
FASHION BUG OF WISCONSIN RAPIDS,INC. WI
FASHION BUG OF WOODBRIDGE,INC. PA
FASHION BUG OF WOODLYN,INC. PA
FASHION BUG OF XENIA,INC. (2) PA
FASHION BUG OF YOUNGSTOWN,INC. PA
FASHION BUG OF ZANESVILLE,INC. PA
FASHION BUG PLUS OF AMERICAN MALL,INC. PA
FASHION BUG PLUS OF APPLETON,INC. PA
FASHION BUG PLUS OF BALTIMORE,INC. MD
FASHION BUG PLUS OF BELOIT,INC. WI
FASHION BUG PLUS OF CHARLESTON,INC. PA
FASHION BUG PLUS OF DETROIT,INC. (1) (2) MI
FASHION BUG PLUS OF DUBOIS,INC. PA
FASHION BUG PLUS OF ERIE,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 11
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG PLUS OF ESSEXVILLE,INC. PA
FASHION BUG PLUS OF FLINT,INC. MI
FASHION BUG PLUS OF FREDERICK,INC. PA
FASHION BUG PLUS OF HADLEY,INC. PA
FASHION BUG PLUS OF HAGERSTOWN,INC. PA
FASHION BUG PLUS OF HARRISBURG,INC. (2) PA
FASHION BUG PLUS OF HYATTSVILLE,INC. PA
FASHION BUG PLUS OF LANCASTER PLAZA,INC. PA
FASHION BUG PLUS OF LAWNSIDE,INC. NJ
FASHION BUG PLUS OF LIVONIA MALL,INC. PA
FASHION BUG PLUS OF MARION,INC. PA
FASHION BUG PLUS OF MARTIN PLAZA,INC. PA
FASHION BUG PLUS OF MELROSE PARK,INC. IL
FASHION BUG PLUS OF MONROEVILLE,INC. (2) PA
FASHION BUG PLUS OF MT. GREENWOOD,INC. IL
FASHION BUG PLUS OF NORTH FT MYERS,INC. FL
FASHION BUG PLUS OF NORTHWEST PLAZA,INC. PA
FASHION BUG PLUS OF PEKIN,INC, PA
FASHION BUG PLUS OF PONTIAC,INC. MI
FASHION BUG PLUS OF SHARON HILL,INC. PA
FASHION BUG PLUS OF SHEBOYGAN,INC. WI
FASHION BUG PLUS OF SOUTH ATTLEBORO,INC. (2) PA
FASHION BUG PLUS OF TURFLAND MALL,INC. PA
FASHION BUG PLUS OF VILLAGE MALL,INC. (2) MA
FASHION BUG PLUS OF WALLKILL,INC. NY
FASHION BUG PLUS OF WASHINGTON,INC. (1) (2) DC
FASHION BUG PLUS OF WHITEHAVEN,INC. TN
FASHION BUG PLUS OF WORCESTER,INC. PA
FASHION BUG PLUS #8005,INC. (2) NJ
FASHION BUG PLUS #8010 OF ROCKY POINT,INC. NY
FASHION BUG PLUS #8014,INC. PA
FASHION BUG PLUS #8019,INC. PA
FASHION BUG PLUS #8023,INC. VA
FASHION BUG PLUS #8024,INC. NJ
FASHION BUG PLUS #8027,INC. (1) (2) OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 12
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG PLUS #8028,INC. (2) CT
FASHION BUG PLUS #8034,INC. PA
FASHION BUG PLUS #8038,INC. MD
FASHION BUG PLUS #8039,INC. (1) (2) OH
FASHION BUG PLUS #8040,INC. PA
FASHION BUG PLUS #8041,INC. (1) (2) CA
FASHION BUG PLUS #8042,INC. (1) (2) MA
FASHION BUG PLUS #8043,INC. (1) (2) NJ
FASHION BUG PLUS #811,INC. MI
FASHION BUG PLUS #818 OF AUBURN,INC. NY
FASHION BUG PLUS #881,INC. MI
FASHION BUG PLUS #904,INC. FL
FASHION BUG PLUS #932,INC. KY
FASHION BUG PLUS #957,INC. (2) PA
FASHION BUG PLUS #961,INC. (1) (2) IN
FASHION BUG PLUS #962,INC. (2) WV
FASHION BUG PLUS #963,INC. MI
FASHION BUG PLUS #964,INC. OH
FASHION BUG PLUS #966,INC. WV
FASHION BUG PLUS #970,INC. GA
FASHION BUG PLUS #972,INC. (2) IL
FASHION BUG PLUS #975 OF HORSEHEADS,INC. NY
FASHION BUG PLUS #976,INC. (2) WI
FASHION BUG PLUS #979,INC. MO
FASHION BUG PLUS #980,INC. ME
FASHION BUG PLUS #981,INC. PA
FASHION BUG PLUS #985,INC. MN
FASHION BUG PLUS #987,INC. PA
FASHION BUG PLUS #991,INC. IA
FASHION BUG PLUS #993,INC. (1) (2) NJ
FASHION BUG #108,INC. MI
FASHION BUG #138,INC. (2) IN
FASHION BUG #139,INC. IN
FASHION BUG #141,INC. NJ
FASHION BUG #144,INC. IN
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 13
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #157,INC. OH
FASHION BUG #168,INC. IN
FASHION BUG #2003,INC. OH
FASHION BUG #2004,INC. MI
FASHION BUG #2006,INC. KY
FASHION BUG #2007,INC. (1) (2) LA
FASHION BUG #2009,INC. PA
FASHION BUG #2010,INC. MI
FASHION BUG #2011,INC. MD
FASHION BUG #2014,INC. MI
FASHION BUG #2015,INC. IN
FASHION BUG #2018,INC. MI
FASHION BUG #2019,INC. (2) ND
FASHION BUG #2020,INC. VA
FASHION BUG #2021,INC. OH
FASHION BUG #2022,INC. IN
FASHION BUG #2023,INC. PA
FASHION BUG #2026,INC. PA
FASHION BUG #2027,INC. NE
FASHION BUG #2028,INC. GA
FASHION BUG #2029,INC. NH
FASHION BUG #2030,INC. PA
FASHION BUG #2031,INC. KS
FASHION BUG #2032,INC. MI
FASHION BUG #2034,INC. MO
FASHION BUG #2035,INC. MA
FASHION BUG #2036,INC. OH
FASHION BUG #2037,INC. MI
FASHION BUG #2038,INC. (1) (2) KY
FASHION BUG #2039,INC. OH
FASHION BUG #2040,INC. KY
FASHION BUG #2043,INC. IN
FASHION BUG #2044,INC. NC
FASHION BUG #2045 OF EAST GREENBUSH,INC. NY
FASHION BUG #2047,INC. MA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 14
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2048,INC. KY
FASHION BUG #2049,INC. MD
FASHION BUG #2050 OF MASSENA,INC. NY
FASHION BUG #2051,INC. IL
FASHION BUG #2052,INC. MN
FASHION BUG #2053,INC. MO
FASHION BUG #2057,INC. CT
FASHION BUG #2058,INC. MA
FASHION BUG #2063,INC. KS
FASHION BUG #2064,INC. (2) OH
FASHION BUG #2065,INC. GA
FASHION BUG #2067,INC. TN
FASHION BUG #2068,INC. ME
FASHION BUG #2069,INC. AR
FASHION BUG #2070 OF BROOKLYN,INC. NY
FASHION BUG #2072 OF ISLANDIA,INC. NY
FASHION BUG #2074,INC. KY
FASHION BUG #2075,INC. IL
FASHION BUG #2077,INC. MI
FASHION BUG #2078,INC. MI
FASHION BUG #2079,INC, OH
FASHION BUG #2080,INC. OH
FASHION BUG #2081 OF OGDENSBURG,INC. NY
FASHION BUG #2082,INC. NJ
FASHION BUG #2084,INC. OH
FASHION BUG #2085,INC. KS
FASHION BUG #2086,INC. IL
FASHION BUG #2088,INC. CT
FASHION BUG #2090,INC. FL
FASHION BUG #2091,INC. FL
FASHION BUG #2092,INC. WI
FASHION BUG #2093,INC. IL
FASHION BUG #2095,INC. OH
FASHION BUG #2096,INC. MI
FASHION BUG #2097,INC. NJ
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 15
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2100 OF BATAVIA,INC. NY
FASHION BUG #2101,INC. PA
FASHION BUG #2102,INC. WA
FASHION BUG #2103,INC. WA
FASHION BUG #2104,INC. (1) (2) MI
FASHION BUG #2105,INC. (2) NH
FASHION BUG #2106 OF DEPEW,INC. NY
FASHION BUG #2109,INC. GA
FASHION BUG #210,INC. (1) (2) KY
FASHION BUG #2111,INC. NJ
FASHION BUG #2112,INC. FL
FASHION BUG #2113,INC. GA
FASHION BUG #2114,INC. (2) MO
FASHION BUG #2115,INC. WI
FASHION BUG #2118 OF NEWBURGH,INC. NY
FASHION BUG #2119,INC. OH
FASHION BUG #2120,INC. OH
FASHION BUG #2121,INC. IN
FASHION BUG #2123,INC. VA
FASHION BUG #2124,INC. PA
FASHION BUG #2125,INC. WA
FASHION BUG #2126,INC. MI
FASHION BUG #2127,INC. MI
FASHION BUG #2128,INC. CT
FASHION BUG #2129,INC. OH
FASHION BUG #2130,INC. IL
FASHION BUG #2131,INC. WI
FASHION BUG #2132,INC. MO
FASHION BUG #2133,INC. WI
FASHION BUG #2134,INC. IL
FASHION BUG #2135,INC. VT
FASHION BUG #2137,INC. IN
FASHION BUG #2138,INC. OH
FASHION BUG #2139,INC. OR
FASHION BUG #2140,INC. VA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 16
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2141,INC. MI
FASHION BUG #2143,INC. NE
FASHION BUG #2144,INC. (2) VA
FASHION BUG #2145,INC. MI
FASHION BUG #2147,INC. WI
FASHION BUG #2148,INC. WI
FASHION BUG #2149,INC. MA
FASHION BUG #2150,INC. NH
FASHION BUG #2151,INC. NH
FASHION BUG #2152,INC. VA
FASHION BUG #2153,INC. TN
FASHION BUG #2154,INC. WI
FASHION BUG #2155,INC. OH
FASHION BUG #2156,INC. RI
FASHION BUG #2157 OF ONEIDA,INC. NY
FASHION BUG #2158,INC. MO
FASHION BUG #2159,INC. (2) FL
FASHION BUG #2162,INC. NC
FASHION BUG #2163,INC. NC
FASHION BUG #2164,INC. (2) FL
FASHION BUG #2165,INC. FL
FASHION BUG #2166,INC. IA
FASHION BUG #2167,INC. WA
FASHION BUG #2169,INC. WA
FASHION BUG #2170,INC. WA
FASHION BUG #2171,INC. PA
FASHION BUG #2172,INC. KY
FASHION BUG #2173,INC. IN
FASHION BUG #2174,INC. MI
FASHION BUG #2175,INC. CA
FASHION BUG #2177,INC. PA
FASHION BUG #2180,INC. FL
FASHION BUG #2181,INC. CA
FASHION BUG #2182,INC. CA
FASHION BUG #2183,INC. OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 17
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2184 of WEBSTER,INC. NY
FASHION BUG #2185,INC. OH
FASHION BUG #2186,INC. OR
FASHION BUG #2187,INC. MN
FASHION BUG #2189,INC. IN
FASHION BUG #2190,INC. WI
FASHION BUG #2192,INC. OH
FASHION BUG #2193,INC. MA
FASHION BUG #2194,INC. WI
FASHION BUG #2195,INC. WV
FASHION BUG #2196 OF NEWARK,INC. NY
FASHION BUG #2197,INC. (2) OH
FASHION BUG #2198,INC. IN
FASHION BUG #2199,INC. MD
FASHION BUG #2201,INC. WA
FASHION BUG #2202,INC. (2) CA
FASHION BUG #2203,INC. ME
FASHION BUG #2204 OF HORNELL,INC. NY
FASHION BUG #2206,INC. NH
FASHION BUG #2208,INC. (2) VA
FASHION BUG #2209,INC. IL
FASHION BUG #2210 OF KINGSTON,INC. NY
FASHION BUG #2211,INC. MD
FASHION BUG #2212,INC. WI
FASHION BUG #2214,INC. MN
FASHION BUG #2215,INC. FL
FASHION BUG #2217,INC. ID
FASHION BUG #2218,INC. MN
FASHION BUG #2219,INC. (2) WA
FASHION BUG #2220,INC. OH
FASHION BUG #2221,INC. OH
FASHION BUG #2222,INC. KY
FASHION BUG #2223,INC. (2) ID
FASHION BUG #2224,INC. WA
FASHION BUG #2226,INC. MI
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 18
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2227,INC. MI
FASHION BUG #2228,INC. WI
FASHION BUG #2229,INC. MI
FASHION BUG #2230,INC. MI
FASHION BUG #2231,INC. MI
FASHION BUG #2232,INC. MI
FASHION BUG #2233,INC. ME
FASHION BUG #2235,INC. IN
FASHION BUG #2236,INC. MN
FASHION BUG #2237,INC. PA
FASHION BUG #2238,INC. MA
FASHION BUG #2239,INC. OR
FASHION BUG #2240,INC. ID
FASHION BUG #2242,INC. PA
FASHION BUG #2243,INC. WA
FASHION BUG #2244 OF CANANDAIGUA,INC. NY
FASHION BUG #2245,INC. MD
FASHION BUG #2246,INC. MD
FASHION BUG #2247,INC. OH
FASHION BUG #2248,INC. MN
FASHION BUG #2249,INC. OH
FASHION BUG #2250,INC. OH
FASHION BUG #2251,INC. (2) CA
FASHION BUG #2253,INC. (2) CA
FASHION BUG #2254,INC. WI
FASHION BUG #2255,INC. MD
FASHION BUG #2256,INC. (2) CA
FASHION BUG #2257,INC. IL
FASHION BUG #2258,INC. IL
FASHION BUG #2259,INC. IL
FASHION BUG #2260,INC. IL
FASHION BUG #2262,INC. WV
FASHION BUG #2263,INC. IN
FASHION BUG #2264,INC. OH
FASHION BUG #2266,INC. IL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 19
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2270,INC. OR
FASHION BUG #2274,INC. (2) CA
FASHION BUG #2275,INC. MI
FASHION BUG #2276,INC. MI
FASHION BUG #2277,INC. (1) (2) VA
FASHION BUG #2278,INC. NC
FASHION BUG #2279,INC. WI
FASHION BUG #2280,INC. WI
FASHION BUG #2281,INC. OH
FASHION BUG #2283,INC. OH
FASHION BUG #2284,INC. OH
FASHION BUG #2285,INC. CA
FASHION BUG #2286,INC. WI
FASHION BUG #2288,INC. (2) WA
FASHION BUG #2289 OF GARDEN CITY,INC. NY
FASHION BUG #2290,INC. RI
FASHION BUG #2291,INC. IN
FASHION BUG #2292,INC. MI
FASHION BUG #2293,INC. OH
FASHION BUG #2295,INC. WI
FASHION BUG #2296,INC. MA
FASHION BUG #2297,INC. MI
FASHION BUG #2298,INC. (1) (2) WV
FASHION BUG #2299,INC. WV
FASHION BUG #2300,INC. (2) FL
FASHION BUG #2301,INC. FL
FASHION BUG #2302,INC. NC
FASHION BUG #2303,INC. (1) (2) NJ
FASHION BUG #2304,INC. VA
FASHION BUG #2305,INC. PA
FASHION BUG #2306,INC. (2) CA
FASHION BUG #2309,INC. IN
FASHION BUG #2311,INC. GA
FASHION BUG #2313,INC. WA
FASHION BUG #2314,INC. IN
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 20
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2315,INC. WI
FASHION BUG #2318,INC. DE
FASHION BUG #2320,INC. (2) TN
FASHION BUG #2322,INC. ME
FASHION BUG #2325,INC. MI
FASHION BUG #2326,INC. PA
FASHION BUG #2328,INC. MN
FASHION BUG #2329,INC. (2) CA
FASHION BUG #2330,INC. PA
FASHION BUG #2332,INC. VA
FASHION BUG #2334,INC. (2) CA
FASHION BUG #2335,INC. CA
FASHION BUG #2337,INC. OH
FASHION BUG #2338,INC. WI
FASHION BUG #2339,INC. RI
FASHION BUG #2340,INC. MI
FASHION BUG #2343,INC. WI
FASHION BUG #2345,INC. PA
FASHION BUG #2346,INC. CT
FASHION BUG #2347,INC. NH
FASHION BUG #2348,INC. WA
FASHION BUG #2349,INC. IN
FASHION BUG #2350,INC. NH
FASHION BUG #2351,INC. MN
FASHION BUG #2352,INC. WV
FASHION BUG #2353,INC. MI
FASHION BUG #2354,INC. CA
FASHION BUG #2355,INC. PA
FASHION BUG #2356,INC. GA
FASHION BUG #2357,INC. MI
FASHION BUG #2358,INC. ME
FASHION BUG #2359,INC. PA
FASHION BUG #2360,INC. PA
FASHION BUG #2362,INC. PA
FASHION BUG #2364, OF NORTH TONAWANDA,INC. NY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 21
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2366,INC. (2) NV
FASHION BUG #2368,INC. PA
FASHION BUG #2369,INC. SC
FASHION BUG #2370 OF MALONE,INC. NY
FASHION BUG #2371 OF POUGHKEEPSIE,INC. (2) NY
FASHION BUG #2373,INC. ME
FASHION BUG #2374,INC. WI
FASHION BUG #2375,INC. PA
FASHION BUG #2376,INC. IL
FASHION BUG #2377,INC. NH
FASHION BUG #2378,INC. NV
FASHION BUG #2379,INC. MA
FASHION BUG #2380,INC. NC
FASHION BUG #2382,INC. TN
FASHION BUG #2384 OF ROCHESTER,INC. NY
FASHION BUG #2385,INC. ME
FASHION BUG #2387,INC. (2) PA
FASHION BUG #2388,INC. OR
FASHION BUG #2389,INC. PA
FASHION BUG #2390,INC. ND
FASHION BUG #2391,INC. VA
FASHION BUG #2393,INC. VT
FASHION BUG #2394,INC. IN
FASHION BUG #2395,INC. MD
FASHION BUG #2396 OF BIG FLATS,INC. NY
FASHION BUG #2397,INC. CT
FASHION BUG #2398,INC. NH
FASHION BUG #2399,INC. MI
FASHION BUG #2403,INC. CT
FASHION BUG #2404,INC. MD
FASHION BUG #2405,INC. (2) NC
FASHION BUG #2406,INC. MO
FASHION BUG #2407,INC. NH
FASHION BUG #2409,INC. PA
FASHION BUG #2411,INC. MA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 22
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2412,INC. MA
FASHION BUG #2413,INC. (2) CT
FASHION BUG #2414,INC. GA
FASHION BUG #2415,INC. PA
FASHION BUG #2416,INC. MA
FASHION BUG #2418,INC. (2) SC
FASHION BUG #2419,INC. (2) NJ
FASHION BUG #2420,INC. MO
FASHION BUG #2421,INC. NV
FASHION BUG #2422,INC. WA
FASHION BUG #2423,INC. MA
FASHION BUG #2424,INC. MN
FASHION BUG #2425,INC. CT
FASHION BUG #2426 OF EAST AURORA,INC. NY
FASHION BUG #2429,INC. IN
FASHION BUG #2430,INC. (2) MN
FASHION BUG #2431,INC. (2) SD
FASHION BUG #2432,INC. PA
FASHION BUG #2435,INC. OH
FASHION BUG #2436,INC. ME
FASHION BUG #2437,INC. PA
FASHION BUG #2439,INC. MA
FASHION BUG #2440,INC. PA
FASHION BUG #2443,INC. (2) MN
FASHION BUG #2444,INC. (2) MN
FASHION BUG #2446,INC. PA
FASHION BUG #2448,INC. OH
FASHION BUG #2449,INC. NV
FASHION BUG #2450,INC. AL
FASHION BUG #2452,INC. CT
FASHION BUG #2453,INC. PA
FASHION BUG #2454 OF SCHENECTADY,INC. (2) NY
FASHION BUG #2455 OF WILTON,INC. NY
FASHION BUG #2457,INC. VA
FASHION BUG #2458,INC. NH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 23
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2459,INC. PA
FASHION BUG #2460,INC. MA
FASHION BUG #2461,INC. (2) SC
FASHION BUG #2461,INC. (1) (2) GA
FASHION BUG #2462,INC. OR
FASHION BUG #2466,INC. PA
FASHION BUG #2467,INC. (2) KY
FASHION BUG #2468 OF BATH,INC. NY
FASHION BUG #2469,INC. (1) (2) IN
FASHION BUG #2470 OF BINGHAMPTON,INC. NY
FASHION BUG #2472,INC. CT
FASHION BUG #2473,INC. MI
FASHION BUG #2474,INC. OH
FASHION BUG #2475,INC. (2) MN
FASHION BUG #2476 OF MIDDLE ISLAND,INC. NY
FASHION BUG #2477,INC. MI
FASHION BUG #2478,INC. GA
FASHION BUG #2479,INC. IA
FASHION BUG #2484,INC. WA
FASHION BUG #2485,INC. MD
FASHION BUG #2486,INC. (2) IA
FASHION BUG #2487,INC. (2) IN
FASHION BUG #2488,INC. MN
FASHION BUG #2492,INC. PA
FASHION BUG #2493,INC. PA
FASHION BUG #2497,INC. MA
FASHION BUG #2501,INC. MI
FASHION BUG #2502,INC. WI
FASHION BUG #2503,INC. PA
FASHION BUG #2505 OF HUDSON,INC. NY
FASHION BUG #2508,INC. MO
FASHION BUG #2510,INC. OH
FASHION BUG #2511,INC. IN
FASHION BUG #2512,INC. NH
FASHION BUG #2513,INC. ME
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 24
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2517,INC. (1) (2) CT
FASHION BUG #2518,INC. NH
FASHION BUG #2519 OF FULTON,INC. NY
FASHION BUG #2520,INC. (2) MA
FASHION BUG #2521,INC. (2) GA
FASHION BUG #2523,INC. FL
FASHION BUG #2524,INC. CA
FASHION BUG #2529,INC. AZ
FASHION BUG #2530,INC. AZ
FASHION BUG #2531,INC. GA
FASHION BUG #2533,INC. NJ
FASHION BUG #2534,INC. NJ
FASHION BUG #2536,INC. PA
FASHION BUG #2537,INC. KY
FASHION BUG #2538,INC. VA
FASHION BUG #2540,INC. FL
FASHION BUG #2541,INC. NC
FASHION BUG #2542,INC. PA
FASHION BUG #2543,INC. CT
FASHION BUG #2547,INC. VA
FASHION BUG #2548,INC. PA
FASHION BUG #2549,INC. (2) NE
FASHION BUG #2550,INC. VA
FASHION BUG #2551 OF CLAY,INC. NY
FASHION BUG #2553,INC. OH
FASHION BUG #2554,INC. PA
FASHION BUG #2555,INC. ME
FASHION BUG #2556,INC. OH
FASHION BUG #2557,INC. UT
FASHION BUG #2558,INC. (2) UT
FASHION BUG #2559,INC. UT
FASHION BUG #255,INC. ME
FASHION BUG #2560,INC. UT
FASHION BUG #2561,INC. OH
FASHION BUG #2562,INC. OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 25
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2564,INC. KY
FASHION BUG #2565,INC. KY
FASHION BUG #2568,INC. FL
FASHION BUG #2569,INC. (1) (2) CA
FASHION BUG #2571,INC. OH
FASHION BUG #2573,INC. WI
FASHION BUG #2574,INC. NH
FASHION BUG #2575,INC. TN
FASHION BUG #2577,INC. KY
FASHION BUG #2578,INC. OH
FASHION BUG #2579,INC. PA
FASHION BUG #2580,INC. OH
FASHION BUG #2581,INC. (2) NE
FASHION BUG #2582,INC. SC
FASHION BUG #2583,INC. (1) (2) WV
FASHION BUG #2584 OF CORTLAND,INC. NY
FASHION BUG #2585,INC MD
FASHION BUG #2586,INC. OH
FASHION BUG #2587,INC. OH
FASHION BUG #2588,INC. PA
FASHION BUG #2589,INC. TN
FASHION BUG #258,INC. TN
FASHION BUG #2593,INC. AZ
FASHION BUG #2594,INC. CA
FASHION BUG #2597 OF COLONIE,INC. NY
FASHION BUG #2601,INC. IN
FASHION BUG #2603,INC. KY
FASHION BUG #2604 OF VESTAL,INC. NY
FASHION BUG #2605,INC. MD
FASHION BUG #2606,INC. (2) OH
FASHION BUG #2607,INC. NJ
FASHION BUG #2608,INC. WI
FASHION BUG #2609,INC. WI
FASHION BUG #2610,INC. MI
FASHION BUG #2612,INC. AL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 26
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2613,INC. (1) (2) WV
FASHION BUG #2614,INC. (2) MS
FASHION BUG #2616,INC. MA
FASHION BUG #2617,INC. WA
FASHION BUG #2618,INC. (2) VA
FASHION BUG #2619,INC. IL
FASHION BUG #2620,INC. GA
FASHION BUG #2621,INC. PA
FASHION BUG #2623,INC. (2) ID
FASHION BUG #2626,INC. IL
FASHION BUG #2627 OF WEST SENECA,INC. NY
FASHION BUG #2629,INC. MI
FASHION BUG #2631,INC. (2) TN
FASHION BUG #2635 OF GENESEO,INC. NY
FASHION BUG #2636,INC. NH
FASHION BUG #2637,INC. IA
FASHION BUG #2639,INC. AZ
FASHION BUG #263,INC. OH
FASHION BUG #2643,INC. OH
FASHION BUG #2644,INC. (2) UT
FASHION BUG #2646,INC. (2) CA
FASHION BUG #2647,INC. (2) CA
FASHION BUG #2649,INC. NM
FASHION BUG #2650,INC. IA
FASHION BUG #2651,INC. MN
FASHION BUG #2658,INC. PA
FASHION BUG #2659,INC VT
FASHION BUG #265,INC. ME
FASHION BUG #2661 OF LAKEWOOD,INC. NY
FASHION BUG #2662,INC. (1) (2) NJ
FASHION BUG #2663,INC. PA
FASHION BUG #2665,INC. WI
FASHION BUG #2666,INC. VA
FASHION BUG #2667,INC. (DUE TO TORNATO) (2) VA
FASHION BUG #2667,INC. (REOPENED) VA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 27
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2670,INC. MD
FASHION BUG #2671,INC. MI
FASHION BUG #2673,INC. NC
FASHION BUG #2675,INC. (2) CO
FASHION BUG #2676,INC. OH
FASHION BUG #2677,INC. IL
FASHION BUG #2679,INC. CA
FASHION BUG #2680,INC. IA
FASHION BUG #2681,INC. (2) OH
FASHION BUG #2682,INC. CO
FASHION BUG #2684,INC. (2) UT
FASHION BUG #2685,INC. MO
FASHION BUG #2688,INC. KY
FASHION BUG #2689,INC. UT
FASHION BUG #2690,INC. DE
FASHION BUG #2692,INC. OH
FASHION BUG #2695,INC. PA
FASHION BUG #2696,INC. CA
FASHION BUG #2697,INC. MA
FASHION BUG #2698,INC. (1) (2) MA
FASHION BUG #2699,INC. MA
FASHION BUG #2700 OF PORT JEFFERSON,INC. NY
FASHION BUG #2701,INC. CA
FASHION BUG #2702,INC. IN
FASHION BUG #2705,INC. OH
FASHION BUG #2707,INC. MD
FASHION BUG #2708,INC. OH
FASHION BUG #2709,INC. OH
FASHION BUG #2711,INC. MI
FASHION BUG #2713,INC. (2) IA
FASHION BUG #2715 OF SYRACUSE,INC. (2) NY
FASHION BUG #2716,INC. IN
FASHION BUG #2717,INC. WI
FASHION BUG #2718,INC. (2) GA
FASHION BUG #2719,INC. IA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 28
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2720,INC. WV
FASHION BUG #2721,INC. PA
FASHION BUG #2722,INC. IN
FASHION BUG #2724,INC. IN
FASHION BUG #2727,INC. CA
FASHION BUG #2729,INC. WI
FASHION BUG #2730,INC. DE
FASHION BUG #2731,INC. DE
FASHION BUG #2732,INC. (2) GA
FASHION BUG #2733,INC. MO
FASHION BUG #2736,INC. MO
FASHION BUG #2737,INC. MI
FASHION BUG #2738,INC. KY
FASHION BUG #2739 OF ROTTERDAM,INC. NY
FASHION BUG #2740,INC KS
FASHION BUG #2741,INC. OH
FASHION BUG #2744,INC. (2) MA
FASHION BUG #2749,INC. MN
FASHION BUG #2750,INC. PA
FASHION BUG #2751,INC. IN
FASHION BUG #2752,INC. (2) AL
FASHION BUG #2753,INC. (2) MS
FASHION BUG #2754,INC. TN
FASHION BUG #2755,INC. (1) (2) MO
FASHION BUG #2756,INC. (2) ME
FASHION BUG #2757,INC. SC
FASHION BUG #2759,INC. PA
FASHION BUG #2761,INC. (2) KY
FASHION BUG #2762,INC. (2) NJ
FASHION BUG #2763,INC. PA
FASHION BUG #2766,INC. PA
FASHION BUG #2767,INC. PA
FASHION BUG #2768,INC. IN
FASHION BUG #2769,INC. WY
FASHION BUG #2773,INC. ID
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 29
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2775,INC. IN
FASHION BUG #2777,INC. (1) (2) MI
FASHION BUG #2779,INC. OH
FASHION BUG #2781,INC. NC
FASHION BUG #2783,INC. (2) MN
FASHION BUG #2787,INC. ME
FASHION BUG #2789,INC. VA
FASHION BUG #2790,INC. WA
FASHION BUG #2791,INC. OH
FASHION BUG #2792,INC. (2) CA
FASHION BUG #2793,INC. (2) CA
FASHION BUG #2794,INC. NV
FASHION BUG #2795,INC. WI
FASHION BUG #2796 OF COBLESKILL,INC. NY
FASHION BUG #2797,INC. NJ
FASHION BUG #2798,INC. (2) FL
FASHION BUG #279,INC. PA
FASHION BUG #2801,INC. (1) (2) MA
FASHION BUG #2802,INC. PA
FASHION BUG #2803,INC. (2) TX
FASHION BUG #2804,INC. (2) TX
FASHION BUG #2805,INC. (2) TX
FASHION BUG #2807,INC. IN
FASHION BUG #2808,INC. KS
FASHION BUG #2809,INC. IN
FASHION BUG #2810,INC. OH
FASHION BUG #2811,INC. PA
FASHION BUG #2814,INC. (2) WY
FASHION BUG #2816,INC. MA
FASHION BUG #2817,INC. (1) (2) MO
FASHION BUG #2818,INC. (2) IL
FASHION BUG #2820,INC. CT
FASHION BUG #2821,INC. VA
FASHION BUG #2822,INC. (1) (2) MI
FASHION BUG #2822,INC. MI
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 30
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2826,INC. RI
FASHION BUG #2827,INC. (1) (2) KY
FASHION BUG #2828,INC. OH
FASHION BUG #2829,INC. OH
FASHION BUG #2830,INC. WA
FASHION BUG #2833,INC. (2) IA
FASHION BUG #2836,INC. (2) UT
FASHION BUG #2838,INC. OR
FASHION BUG #2841,INC. IN
FASHION BUG #2842,INC. IL
FASHION BUG #2844,INC. PA
FASHION BUG #2845,INC. (2) CA
FASHION BUG #2850,INC. MI
FASHION BUG #2851,INC. NJ
FASHION BUG #2852,INC. CO
FASHION BUG #2853 OF ROME,INC. NY
FASHION BUG #2855,INC. IL
FASHION BUG #2856,INC. (2) WI
FASHION BUG #2857,INC. OH
FASHION BUG #2858,INC. CA
FASHION BUG #2861,INC. (2) AL
FASHION BUG #2863,INC. MA
FASHION BUG #2864,INC. OH
FASHION BUG #2868,INC. AZ
FASHION BUG #2869,INC. MD
FASHION BUG #2871 OF ALBANY,INC. NY
FASHION BUG #2872,INC. WI
FASHION BUG #2874,INC. IN
FASHION BUG #2877,INC. AL
FASHION BUG #2879,INC. OR
FASHION BUG #2880,INC. (2) CA
FASHION BUG #2881,INC. NH
FASHION BUG #2882,INC. (1) (2) NH
FASHION BUG #2883,INC. (1) (2) WV
FASHION BUG #2886,INC. IL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 31
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2891,INC. (2) TX
FASHION BUG #2892,INC. (2) ID
FASHION BUG #2893,INC. (2) MT
FASHION BUG #2894,INC. IL
FASHION BUG #2895,INC. TN
FASHION BUG #2896,INC. (1) (2) UT
FASHION BUG #2898,INC. CA
FASHION BUG #2899,INC. WA
FASHION BUG #2902,INC. IA
FASHION BUG #2903,INC. (2) NE
FASHION BUG #2905,INC. IN
FASHION BUG #2906,INC. IN
FASHION BUG #2907,INC. IL
FASHION BUG #2909,INC. PA
FASHION BUG #2911,INC. TN
FASHION BUG #2912 OF VICTOR,INC. (2) NY
FASHION BUG #2913,INC. PA
FASHION BUG #2915,INC. MA
FASHION BUG #2919,INC. (2) FL
FASHION BUG #2920,INC. WA
FASHION BUG #2922,INC. PA
FASHION BUG #2923 OF AMSTERDAM,INC. NY
FASHION BUG #2924,INC. WI
FASHION BUG #2926,INC. KS
FASHION BUG #2927,INC. (2) NJ
FASHION BUG #2928,INC. RI
FASHION BUG #2930,INC. IL
FASHION BUG #2932,INC. MA
FASHION BUG #2934,INC. CA
FASHION BUG #2937,INC. GA
FASHION BUG #2941,INC. DE
FASHION BUG #2942,INC. (2) UT
FASHION BUG #2943,INC. (1) (2) UT
FASHION BUG #2944,INC. CA
FASHION BUG #2945 OF MEDIA,INC. NY
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 32
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #2948,INC. (2) FL
FASHION BUG #2951,INC. NC
FASHION BUG #2952,INC. OH
FASHION BUG #2954,INC. MI
FASHION BUG #2956,INC. MI
FASHION BUG #2958,INC. MI
FASHION BUG #2959 OF BUFFALO,INC. NY
FASHION BUG #2968,INC. (2) OR
FASHION BUG #2969,INC. WY
FASHION BUG #2974,INC. MI
FASHION BUG #2975,INC. (1) (2) MO
FASHION BUG #2978,INC. OH
FASHION BUG #2980,INC. (2) FL
FASHION BUG #2982,INC. VT
FASHION BUG #2983,INC. ME
FASHION BUG #2987,INC. IN
FASHION BUG #2988,INC. IN
FASHION BUG #2989,INC. IN
FASHION BUG #2990,INC. WI
FASHION BUG #2992,INC. (2) CO
FASHION BUG #2994,INC. (2) VA
FASHION BUG #2995,INC. OH
FASHION BUG #2998,INC. PA
FASHION BUG #2999,INC. NC
FASHION BUG #3000,INC. KS
FASHION BUG #3001,INC. VA
FASHION BUG #3003,INC. (2) MT
FASHION BUG #3005,INC. OH
FASHION BUG #3006,INC. AZ
FASHION BUG #3008,INC. MA
FASHION BUG #3009,INC. WI
FASHION BUG #3011,INC. PA
FASHION BUG #3016,INC. OH
FASHION BUG #3018,INC. WV
FASHION BUG #3022,INC. IL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 33
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #3023,INC. WI
FASHION BUG #3026,INC. WV
FASHION BUG #3027,INC. (1) (2) UT
FASHION BUG #3030,INC. AZ
FASHION BUG #3033,INC. NH
FASHION BUG #3034,INC. MO
FASHION BUG #3038,INC. VT
FASHION BUG #3040,INC. MO
FASHION BUG #3042,INC. IN
FASHION BUG #3044,INC. GA
FASHION BUG #3046,INC. GA
FASHION BUG #3047,INC. TN
FASHION BUG #3048 OF WELLSVILLE,INC. NY
FASHION BUG #3049,INC. CT
FASHION BUG #3050,INC. MA
FASHION BUG #3052,INC. MO
FASHION BUG #3054,INC. IL
FASHION BUG #3056,INC. GA
FASHION BUG #3057,INC. PA
FASHION BUG #3058,INC. CT
FASHION BUG #3060,INC. (2) SD
FASHION BUG #3061,INC. DE
FASHION BUG #3062,INC. GA
FASHION BUG #3063,INC. (1) (2) VA
FASHION BUG #3064,INC. (1) (2) MI
FASHION BUG #3065,INC. (1) (2) TN
FASHION BUG #3066,INC. (1) (2) MI
FASHION BUG #3067,INC (1) (2) TX
FASHION BUG #3068,INC. (1) (2) MN
FASHION BUG #3069,INC. NJ
FASHION BUG #3070,INC. (1) (2) MO
FASHION BUG #3071,INC. (1) (2) WA
FASHION BUG #3072,INC. (1) (2) AR
FASHION BUG #3073,INC. (1) (2) WA
FASHION BUG #3078,INC. IL
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 34
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #3079,INC. MO
FASHION BUG #3080,INC. (1) (2) ME
FASHION BUG #3081,INC. PA
FASHION BUG #3082,INC. (1) (2) CT
FASHION BUG #3088,INC. (1) (2) WA
FASHION BUG #3091,INC. PA
FASHION BUG #3092,INC. WI
FASHION BUG #3093,INC. (1) (2) MA
FASHION BUG #3094,INC. ME
FASHION BUG #3099,INC. (1) (2) MD
FASHION BUG #3100,INC. OH
FASHION BUG #3101,INC. MO
FASHION BUG #3102,INC. (1) (2) WV
FASHION BUG #3103,INC. IL
FASHION BUG #3104,INC. GA
FASHION BUG #3105 OF WILLIAMSVILLE,INC. NY
FASHION BUG #3106,INC. IN
FASHION BUG #3107,INC. (1) (2) PA
FASHION BUG #3108,INC. KY
FASHION BUG #3109,INC. CT
FASHION BUG #3110,INC. IL
FASHION BUG #3111,INC. IL
FASHION BUG #3112,INC. OH
FASHION BUG #3113,INC. FL
FASHION BUG #3114,INC. AZ
FASHION BUG #3115,INC. MI
FASHION BUG #3116,INC. MO
FASHION BUG #3117,INC. FL
FASHION BUG #3118,INC. CO
FASHION BUG #3119,INC. (1) (2) CT
FASHION BUG #3120,INC. AZ
FASHION BUG #3121,INC PA
FASHION BUG #3122,INC PA
FASHION BUG #3123,INC. MO
FASHION BUG #3124,INC. PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 35
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #3125,INC. MD
FASHION BUG #3126,INC. MA
FASHION BUG #3127,INC. MO
FASHION BUG #3128,INC. (1) (2) MD
FASHION BUG #3129,INC. (1) (2) MD
FASHION BUG #3130,INC. (1) (2) NJ
FASHION BUG #3131,INC. (1) (2) OH
FASHION BUG #3133,INC. (1) (2) CA
FASHION BUG #3134,INC. (1) (2) IL
FASHION BUG #3135,INC. (1) (2) NY
FASHION BUG #3136,INC. (1) (2) GA
FASHION BUG #3138,INC. (1) (2) CA
FASHION BUG #3139,INC. (1) (2) OH
FASHION BUG #3140,INC. (1) (2) CA
FASHION BUG #3141,INC. (1) (2) VA
FASHION BUG #3142,INC. (1) (2) CA
FASHION BUG #3143 OF NORWICH,INC. (1) (2) NY
FASHION BUG #3144,INC. (1) (2) AZ
FASHION BUG #3145,INC. (1) (2) DE
FASHION BUG #3146,INC. (1) (2) FL
FASHION BUG #3147,INC. (1) (2) GA
FASHION BUG #3148,INC. (1) (2) IL
FASHION BUG #3149,INC. (1) (2) OH
FASHION BUG #3150,INC. (1) (2) CA
FASHION BUG #3151,INC. (1) (2) LA
FASHION BUG #3152,INC. (1) (2) LA
FASHION BUG #3153,INC. (1) (2) LA
FASHION BUG #3154,INC. (1) (2) MD
FASHION BUG #3155,INC. (1) (2) AZ
FASHION BUG #3156,INC. (1) (2) MD
FASHION BUG #3157,INC. (1) (2) MD
FASHION BUG #3158,INC. (1) (2) MD
FASHION BUG #3159,INC. (1) (2) NM
FASHION BUG #3160,INC. (1) (2) MI
FASHION BUG #3161,INC. (1) (2) NC
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 36
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #3162,INC. (1) (2) NC
FASHION BUG #3163,INC. (1) (2) NJ
FASHION BUG #3164,INC. (1) (2) NJ
FASHION BUG #3165,INC. (1) (2) NJ
FASHION BUG #3166,INC. (1) (2) NJ
FASHION BUG #3167,INC. (1) (2) PA
FASHION BUG #3168,INC. (1) (2) PA
FASHION BUG #3169,INC. (1) (2) PA
FASHION BUG #3170,INC. (1) (2) TX
FASHION BUG #3171,INC. (1) (2) TX
FASHION BUG #3172,INC. (1) (2) TX
FASHION BUG #3173,INC. (1) (2) TX
FASHION BUG #3174,INC. (1) (2) VA
FASHION BUG #3175,INC. (1) (2) VA
FASHION BUG #3176,INC. (1) (2) VA
FASHION BUG #3177,INC. (1) (2) DE
FASHION BUG #3178,INC. (1) (2) CO
FASHION BUG #3179,INC. (1) (2) VA
FASHION BUG #3180,INC. (1) (2) VA
FASHION BUG #3181,INC. (1) (2) WA
FASHION BUG #3182,INC. (1) (2) NM
FASHION BUG #3183,INC. (1) (2) MA
FASHION BUG #3184,INC. (1) (2) MI
FASHION BUG #3185,INC. (1) (2) NM
FASHION BUG #3186,INC. (1) (2) CO
FASHION BUG #3187,INC. (1) (2) KS
FASHION BUG #3188,INC. (1) (2) LA
FASHION BUG #3189,INC. (1) (2) TX
FASHION BUG #3190,INC. (1) (2) UT
FASHION BUG #3191,INC. (1) (2) LA
FASHION BUG #3192,INC. (1) (2) MD
FASHION BUG #3193,INC. (1) PA
FASHION BUG #3194,INC. (1) (2) MI
FASHION BUG #3195,INC. (1) (2) MD
FASHION BUG #3196,INC. (1) (2) CA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 37
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #3197,INC. (1) (2) MO
FASHION BUG #336,INC. IN
FASHION BUG #3906,INC. (1) (2) NJ
FASHION BUG #3907,INC. (1) (2) NJ
FASHION BUG #4001,INC. NJ
FASHION BUG #4002,INC. CT
FASHION BUG #4004,INC. NJ
FASHION BUG #4005,INC. MA
FASHION BUG #4006,INC. PA
FASHION BUG #4007,INC. PA
FASHION BUG #4008,INC. NJ
FASHION BUG #4009,INC. RI
FASHION BUG #4010,INC. MA
FASHION BUG #4011,INC. NH
FASHION BUG #4012,INC. NY
FASHION BUG #4013,INC. NJ
FASHION BUG #418,INC. NJ
FASHION BUG #44,INC. PA
FASHION BUG #471,INC. MN
FASHION BUG #47,INC. IN
FASHION BUG #508,INC. PA
FASHION BUG #519,INC. WV
FASHION BUG #520,INC. MA
FASHION BUG #527,INC. KS
FASHION BUG #529 OF HAMBURG,INC. NY
FASHION BUG #534,INC. IN
FASHION BUG #538,INC. ME
FASHION BUG #545,INC. VT
FASHION BUG #548,INC. ME
FASHION BUG #554,INC. PA
FASHION BUG #558,INC. (2) TN
FASHION BUG #560 OF GLOVERSVILLE,INC. NY
FASHION BUG #561,INC. FL
FASHION BUG #562,INC. NJ
FASHION BUG #564,INC. MO
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 38
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #565,INC. MI
FASHION BUG #566,INC. IN
FASHION BUG #567,INC. IL
FASHION BUG #571,INC. TN
FASHION BUG #572,INC. (2) LA
FASHION BUG #573,INC. PA
FASHION BUG #574 OF SYRACUSE,INC. NY
FASHION BUG #575,INC. MN
FASHION BUG #576,INC. NJ
FASHION BUG #580,INC. ME
FASHION BUG #581,INC. NH
FASHION BUG #583,INC. KY
FASHION BUG #584 OF YONKERS,INC. NY
FASHION BUG #585,INC. NJ
FASHION BUG #586,INC. NJ
FASHION BUG #588,INC. IL
FASHION BUG #589,INC. IL
FASHION BUG #591,INC. (2) MO
FASHION BUG #592,INC. IL
FASHION BUG #593 OF SELDEN,INC. NY
FASHION BUG #594,INC. KS
FASHION BUG #595,INC. IN
FASHION BUG #596,INC. CT
FASHION BUG #597,INC. MN
FASHION BUG #600,INC. (2) PA
FASHION BUG #601,INC. SC
FASHION BUG #602,INC. PA
FASHION BUG #605,INC. (2) MI
FASHION BUG #606,INC. MI
FASHION BUG #607,INC. MI
FASHION BUG #612,INC. OH
FASHION BUG #614,INC. MA
FASHION BUG #615,INC. PA
FASHION BUG #617,INC. MA
FASHION BUG #618,INC. (2) SC
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 39
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #622,INC. WI
FASHION BUG #624,INC. MO
FASHION BUG #626,INC. (2) MD
FASHION BUG #627,INC. OH
FASHION BUG #629,INC. NJ
FASHION BUG #630,INC. IN
FASHION BUG #631,INC. PA
FASHION BUG #636,INC. IL
FASHION BUG #638,INC. MI
FASHION BUG #642,INC. PA
FASHION BUG #643,INC. PA
FASHION BUG #644,INC. GA
FASHION BUG #645,INC. MI
FASHION BUG #646,INC. OH
FASHION BUG #647,INC. ME
FASHION BUG #649,INC. PA
FASHION BUG #650,INC. (2) VA
FASHION BUG #651,INC. MI
FASHION BUG #653,INC. NJ
FASHION BUG #654,INC. AL
FASHION BUG #656,INC. FL
FASHION BUG #657,INC. MO
FASHION BUG #658,INC. MA
FASHION BUG #660 OF ALBANY,INC. NY
FASHION BUG #661,INC. WV
FASHION BUG #662,INC. PA
FASHION BUG #663,INC. PA
FASHION BUG #664,INC. CO
FASHION BUG #667,INC. MI
FASHION BUG #668 OF SHIRLEY,INC. NY
FASHION BUG #670,INC. MA
FASHION BUG #672,INC. MI
FASHION BUG #673,INC. KY
FASHION BUG #674,INC. IL
FASHION BUG #675,INC. (2) LA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 40
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #676 OF OZONE PARK,INC. NY
FASHION BUG #678,INC. OH
FASHION BUG #679 OF WATERTOWN,INC. NY
FASHION BUG #681,INC. IN
FASHION BUG #683,INC. (2) WI
FASHION BUG #684,INC. NC
FASHION BUG #686,INC. (2) IL
FASHION BUG #687,INC. IL
FASHION BUG #689,INC. PA
FASHION BUG #691,INC. MD
FASHION BUG #692,INC. (2) MO
FASHION BUG #693,INC. MI
FASHION BUG #694,INC. MI
FASHION BUG #697,INC. OH
FASHION BUG #698,INC. OH
FASHION BUG #716,INC. RI
FASHION BUG #719,INC. OH
FASHION BUG #720 OF OSWEGO,INC. NY
FASHION BUG #721,INC. (2) MA
FASHION BUG #723,INC. (2) AL
FASHION BUG #724,INC. NH
FASHION BUG #727,INC. ME
FASHION BUG #729,INC. MI
FASHION BUG #730,INC. (2) OH
FASHION BUG #731,INC. IL
FASHION BUG #732,INC. MI
FASHION BUG #733,INC. IN
FASHION BUG #734 OF DUNKIRK,INC. NY
FASHION BUG #736,INC. (2) MO
FASHION BUG #737,INC. MA
FASHION BUG #738,INC. NC
FASHION BUG #739,INC. (2) OH
FASHION BUG #740,INC. WI
FASHION BUG #741,INC. OH
FASHION BUG #742,INC. OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 41
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #743,INC. (2) OH
FASHION BUG #745,INC. PA
FASHION BUG #748,INC. OH
FASHION BUG #751,INC. MI
FASHION BUG #752,INC. VT
FASHION BUG #754,INC. PA
FASHION BUG #755,INC. ME
FASHION BUG #756,INC. CT
FASHION BUG #757 OF BROCKPORT,INC. NY
FASHION BUG #758,INC. WI
FASHION BUG #759,INC. MI
FASHION BUG #760 OF PINE PLAZA,INC. PA
FASHION BUG #761,INC. MO
FASHION BUG #762,INC. MO
FASHION BUG #763,INC. MO
FASHION BUG #764,INC. IL
FASHION BUG #766,INC. OH
FASHION BUG #767,INC. (2) WV
FASHION BUG #768,INC. VA
FASHION BUG #769,INC. OH
FASHION BUG #771,INC. MI
FASHION BUG #772 OF MIDDLETOWN,INC. NY
FASHION BUG #773,INC. TN
FASHION BUG #774,INC. PA
FASHION BUG #775,INC. VT
FASHION BUG #776,INC. KY
FASHION BUG #778,INC. PA
FASHION BUG #779,INC. KY
FASHION BUG #781,INC. OH
FASHION BUG #784,INC. VA
FASHION BUG #785,INC. MI
FASHION BUG #786,INC. CT
FASHION BUG #787,INC. RI
FASHION BUG #788,INC. MA
FASHION BUG #790,INC. (2) OH
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 42
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
FASHION BUG #792,INC. NC
FASHION BUG #793,INC. VA
FASHION BUG #795,INC. MI
FASHION BUG #797,INC. KS
FASHION BUG #799,INC. VA
FASHION BUG #84 OF QUEENS,INC. NY
FASHION BUG #863,INC. IN
FASHION BUG #95,INC.(907) (2) MD
FASHION BUG & FASHION BUG PLUS #2179,INC. FL
FASHION SERVICE CORP (2) PA
FASHION VALUE OUTLET OF CAMPHILL,INC. (1) (2) PA
FB APPAREL IN
FB CLOTHING,INC. (2) IN
FB DISTRO IN
FESTUS #2733 DEVELOPMENT CO.,INC. MO
FSC SERVICE CORP. (2) PA
FSHC,INC. (2) DE
F.B. PLUS WOMEN'S APPAREL OF JOHNSON CITY,INC. (2) PA
F.B. PLUS WOMEN'S APPAREL OF KINGSTON,INC. PA
F.B. PLUS WOMEN'S APPAREL OF RIVERSIDE,INC. (2) NY
F.B. WOMEN'S APPAREL OF CLAY,INC. (2) PA
F.B. WOMEN'S APPAREL OF DELMAR,INC. PA
F.B. WOMEN'S APPAREL OF DEPEW,INC. PA
F.B. WOMEN'S APPAREL OF ONEONTA,INC. PA
F.B. WOMEN'S APPAREL OF PANORAMA PLAZA,INC. NY
F.B. WOMEN'S APPAREL OF WEST SENECA,INC. (1) (2) NY
F.B. WOMEN'S APPAREL OF YORKTOWN HEIGHTS,INC. (2) PA
F.B. WOMEN'S APPAREL #2481 OF RIVERSIDE,INC. PA
F.B. WOMEN'S APPAREL #3097 OF NEW HARTFORD,INC.(1) (2) NY
INTERNATIONAL APPAREL, INC. (2) PA
J.M. BALTER CO (1) (2) PA
J.P.A. CLOTHING COMPANY (2) GA
J.P.A. SERVICE CO. (1) (2) PA
J.P.A. SERVICE CO. PA
KAFCO DEVELOPMENT CO., INC. (2) PA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 43
<TABLE>
<CAPTION>
State or
Jurisdiction
of
Name Organization
- ---- ------------
<S> <C>
KIRKSTONE LTD (2) HONG KONG
MACOMB #2619 DEVELOPMENT CO., INC. IL
ORLE (2) DE
PRESQUE ISLE #2756 DEVELOPMENT CO.,INC. (2) ME
PRICE APPEAL #5001 OF STATEN ISLAND,INC. (1) (2) NY
PRICE APPEAL #5015,INC. (1) (2) NJ
PRICE APPEAL #5020,INC. (1) (2) OH
PRICE APPEAL #5060,INC. (1) (2) MI
ROLLA #2685 DEVELOPMENT CO.,INC. MO
S A FUNDING,INC. (2) DE
SALINA #2926 DEVELOPMENT CO.,INC. KS
SAN ANGELO #2973 DEVELOPMENT CO.,INC. (2) TX
SENTANI TRADING LTD. (2) HONG KONG
SIKESTON #2736 DEVELOPMENT CO.,INC. MO
SPECIALTY FIXTURES,INC. (2) DE
SPIRIT OF AMERICA NATIONAL BANK (2) PA
VICTORIA #2972 DEVELOPMENT CO.,INC. (2) TX
WINKS LANE,INC. (2) PA
W.L. DISTRIBUTORS,INC. (2) PA
YARDARM TRADING LTD. (2) HONG KONG
YUCCA #2524 DEVELOPMENT CO.,INC. CA
</TABLE>
- --------------------
(1) These companies are not included in the consolidated financial statements
for the fiscal year ended January 31, 1998, as they had not then commenced
operations and the original capitalization was not then paid in.
(2) These companies do not currently operate stores.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement (Form
S-8, No. 333-43117), dated December 23,1997, Registration Statement (Form S-8,
No. 333-22323), dated February 25, 1997, Registration Statement (Form S-8, No.
33-56145) and Registration Statement (Form S-8, No. 33-56147), dated October 25,
1994, Registration Statement (Form S-8, No. 33-39558), dated March 25, 1991 and
Registration Statement (Form S-8 No. 2-92975), dated September 17, 1984, of our
report dated April 27, 1998 with respect to the consolidated financial
statements of Charming Shoppes, Inc. included in this Annual Report (Form 10-K)
for the year ended January 31, 1998.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 27, 1998
(72)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 12,349
<SECURITIES> 84,909
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 175,785
<CURRENT-ASSETS> 305,881
<PP&E> 443,017
<DEPRECIATION> 257,013
<TOTAL-ASSETS> 709,738
<CURRENT-LIABILITIES> 142,673
<BONDS> 138,116
0
0
<COMMON> 10,625
<OTHER-SE> 406,185
<TOTAL-LIABILITY-AND-EQUITY> 709,738
<SALES> 1,016,537
<TOTAL-REVENUES> 1,016,537
<CGS> 772,709
<TOTAL-COSTS> 772,709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,390
<INCOME-PRETAX> 29,422
<INCOME-TAX> 10,088
<INCOME-CONTINUING> 19,334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,334
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
