FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-14035
STAGE STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 76-0407711
incorporation or organization) (I.R.S. Employer Identifications No.)
10201 MAIN STREET, HOUSTON, TEXAS 77025
(Address of principal executive offices) (Zip Code)
(713) 667-5601
Registrant's telephone number, including area code
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. Yes [X] No [ ]
The number of shares of common stock of Stage Stores, Inc. outstanding as of
December 15, 1998 was 26,686,759 shares of Common Stock and 1,250,584 shares of
Class B Common Stock.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STAGE STORES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands, except par values)
(unaudited)
October 31, January 31,
1998 1998
--------- ---------
ASSETS
Cash and cash equivalents ............................ $ 11,226 $ 23,315
Undivided interest in accounts receivable trust ...... 58,971 61,211
Merchandise inventories, net ......................... 421,658 303,115
Prepaid expenses ..................................... 24,933 20,417
Other current assets ................................. 57,309 57,788
--------- ---------
Total current assets ........................... 574,097 465,846
Property, equipment and leasehold improvements, net .. 225,121 171,654
Goodwill, net ........................................ 93,285 95,486
Other assets ......................................... 24,858 26,410
--------- ---------
Total assets ................................... $ 917,361 $ 759,396
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ..................................... $ 102,787 $ 91,799
Accrued interest ..................................... 11,859 2,044
Accrued expenses and other current liabilities ....... 128,848 53,939
--------- ---------
Total current liabilities ...................... 243,494 147,782
Long-term debt ....................................... 450,311 395,248
Other long-term liabilities .......................... 10,436 11,288
--------- ---------
Total liabilities .............................. 704,241 554,318
--------- ---------
Preferred stock, par value $1.00, non-voting,
3 shares authorized, no shares
issued or outstanding .............................. -- --
Common stock, par value $0.01, 75,000 shares
authorized, 26,687 and 26,500 shares
issued and outstanding, respectively ............... 266 265
Class B common stock, par value $0.01, non-voting,
3,000 shares authorized, 1,250 shares
issued and outstanding ............................. 13 13
Additional paid-in capital ........................... 265,517 264,679
Accumulated deficit .................................. (52,676) (59,324)
Accumulated other comprehensive income ............... -- (555)
--------- ---------
Stockholders' equity .............................. 213,120 205,078
--------- ---------
Commitments and contingencies ........................ -- --
--------- ---------
Total liabilities and stockholders' equity ..... $ 917,361 $ 759,396
========= =========
The accompanying notes are an integral part of this statement.
2
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- -------------------------
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ..................................... $ 271,605 $ 274,269 $ 816,198 $ 703,918
Cost of sales and related buying,
occupancy and distribution expenses ......... 196,353 187,447 571,482 481,269
----------- ----------- ----------- -----------
Gross profit .................................. 75,252 86,822 244,716 222,649
Selling, general and administrative expenses .. 65,140 69,089 194,623 163,752
Store opening and closure costs ............... 2,886 1,944 4,911 2,848
----------- ----------- ----------- -----------
Operating income .............................. 7,226 15,789 45,182 56,049
Interest, net ................................. 12,394 9,767 34,284 28,158
----------- ----------- ----------- -----------
Income (loss) before income tax
and extraordinary item ...................... (5,168) 6,022 10,898 27,891
Income tax expense (benefit) .................. (2,016) 2,349 4,250 10,878
----------- ----------- ----------- -----------
Income (loss) before extraordinary item ....... (3,152) 3,673 6,648 17,013
Extraordinary item - early retirement of debt . -- (150) -- (17,530)
----------- ----------- ----------- -----------
Net income (loss) ............................. $ (3,152) $ 3,523 $ 6,648 $ (517)
=========== =========== =========== ===========
BASIC EARNINGS (LOSS) PER COMMON SHARE DATA:
Basic earnings (loss) per common share before
extraordinary item ....................... $ (0.11) $ 0.13 $ 0.24 $ 0.67
Extraordinary item - early
retirement of debt ....................... -- -- -- (0.69)
----------- ----------- ----------- -----------
Basic earnings (loss) per common share ........ $ (0.11) $ 0.13 $ 0.24 $ (0.02)
=========== =========== =========== ===========
Basic weighted average common
shares outstanding ........................ $ 27,926 $ 27,364 $ 27,864 $ 25,230
=========== =========== =========== ===========
DILUTED EARNINGS (LOSS) PER COMMON SHARE DATA:
Diluted earnings (loss) per common share before
extraordinary item ....................... $ (0.11) $ 0.13 $ 0.23 $ 0.66
Extraordinary item - early retirement of debt . -- -- -- (0.68)
----------- ----------- ----------- -----------
Diluted earnings (loss) per common share ...... $ (0.11) $ 0.13 $ 0.23 $ (0.02)
=========== =========== =========== ===========
Diluted weighted average common
shares outstanding ....................... 28,263 28,113 28,474 25,782
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------
October 31, 1998 November 1, 1997
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................. $ 6,648 $ (517)
---------------- ----------------
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization ........... 21,046 13,091
Deferred income taxes ................... 192 2,086
Accretion of discount ................... 820 1,085
Amortization of debt issue costs ........ 1,808 1,644
Loss on early extinguishment of debt .... -- 17,530
Changes in operating assets and
liabilities:
Decrease in undivided interest in
accounts receivable trust ................ 2,240 16,241
Increase in merchandise inventories ....... (118,543) (92,779)
Increase in other assets .................. (5,297) (19,421)
Increase in accounts payable and
accrued liabilities ..................... 14,909 47,041
---------------- ----------------
Total adjustments ....................... (82,825) (13,482)
---------------- ----------------
Net cash used in operating activities ..... (76,177) (13,999)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired ............ -- (4,946)
Additions to property, equipment and
leasehold improvements ...................... (71,202) (41,744)
---------------- ----------------
Net cash used in investing activities ..... (71,202) (46,690)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from working capital facility ........ 134,650 46,400
Proceeds from long-term debt .................. -- 299,720
Proceeds from issuance of common stock ........ 839 21,125
Payments on long-term debt .................... (199) (297,161)
Additions to debt issue costs ................. -- (12,407)
---------------- ----------------
Net cash provided by financing activities . 135,290 57,677
---------------- ----------------
Net decrease in cash and cash equivalents ..... (12,089) (3,012)
Cash and cash equivalents:
Beginning of period ......................... 23,315 18,286
================ ================
End of period ............................... $ 11,226 $ 15,274
================ ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid ................................. $ 22,433 $ 26,217
================ ================
Income taxes paid (refunded) .................. $ (2,805) $ 3,746
================ ================
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
STAGE STORES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------
Class B
---------------------
Shares Shares
Outstanding Amount Outstanding Amount
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Balance, January 31, 1998 .............. 26,500 $ 265 1,250 $ 13
Net income ............................. -- -- -- --
Adjustment for minimum pension liability -- -- -- --
Issuance of stock ...................... 187 1 -- --
----------- ------ ----------- ------
Balance, October 31, 1998 .............. 26,687 $ 266 1,250 $ 13
=========== ====== =========== ======
<CAPTION>
Additional Accumulated
Paid-in Accumulated Comprehensive
Capital Deficit Income Total
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Balance, January 31, 1998 .............. $ 264,679 $(59,324) $ (555) $205,078
Net income ............................. -- 6,648 -- 6,648
Adjustment for minimum pension liability -- -- 555 555
Issuance of stock ...................... 838 -- -- 839
----------- -------- ----------- --------
Balance, October 31, 1998 .............. $ 265,517 $(52,676) $ -- $213,120
=========== ======== =========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
STAGE STORES, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated condensed financial
statements of Stage Stores, Inc. ("Stage Stores") have been prepared in
accordance with Rule 10-01 of Regulation S-X and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. Those adjustments, which include only normal
recurring adjustments that are in the opinion of management necessary for a fair
presentation of the results of the interim periods, have been made. The results
of operations for such interim periods are not necessarily indicative of the
results of operations for a full year. The unaudited consolidated condensed
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended January 31, 1998 filed
with Stage Stores' Annual Report on Form 10-K. The fiscal years discussed herein
end on the Saturday nearest to January 31 in the following calendar year. For
example, references to "1998" mean the fiscal year ending January 30, 1999.
Stage Stores conducts its business primarily through its wholly owned
subsidiary Specialty Retailers, Inc. ("SRI") which, as of October 31, 1998,
operated 670 family apparel stores predominately located in the central United
States. Stage Stores and SRI are collectively referred to herein as the
"Company".
2. Pursuant to the accounts receivable securitization program (the
"Accounts Receivable Program"), an indirect wholly owned subsidiary of the
Company, SRI Receivables Purchase Co., Inc. ("SRPC") purchases the accounts
receivable generated by the Company's private label credit card program. Such
accounts receivable are transferred to a master trust (the "Trust") which has
issued certain certificates to third parties representing undivided interests in
the Trust. SRPC owns an undivided interest in the accounts receivable not
supporting the certificates issued to third parties by the Trust (the "Retained
Interest"). SRPC is a separate corporate entity from the Company and SRPC's
creditors have a claim on its assets prior to those assets becoming available to
any creditor of the Company. During September 1998, the Company amended the
revolving certificate to increase the limit that may be outstanding from $82.5
million to $165 million through March 31, 1999. The maximum outstanding under
the revolving certificate will be reduced to $144.4 million from April 1, 1999
to September 30, 1999 and $82.5 million thereafter. In addition, a new class of
certificates (the "Class B-2 Certificates") was created under the revolving
certificate to allow for up to an additional $10 million to be outstanding from
October 16, 1998 through December 24, 1998. The Class B-2 Certificates are
collateralized by the accounts receivable transferred to the Trust, subordinated
to certain other classes of certificates outstanding. The Class B-2 Certificates
bear a floating rate of return, which was 10.25% at October 31, 1998.
3. During June 1997, SRI completed an offering of $300.0 million of
long-term indebtedness consisting of $200.0 million in aggregate principal
amount of 8 1/2% Senior Notes due 2005 and $100.0 million in aggregate principal
amount of 9% Senior Subordinated Notes due 2007 (collectively, the "Note
Offering"). The gross proceeds from the issuance of these notes (approximately
$299.7 million) were used to: (i) retire the Company's existing 10% Senior Notes
due 2000 and 11% Senior Subordinated Notes due 2003; (ii) pay related fees and
expenses; and (iii) pay costs associated with the acquisition of C.R. Anthony
Company ("CR Anthony"). Concurrently with this transaction, the Company entered
into a new credit facility with a group of lenders (the "Credit Facility"). The
Credit Facility provides for a $100.0 million working capital and letter of
credit facility and a $100.0 million expansion revolving credit facility. The
Credit Facility replaced the Company's existing $75.0 million credit facility.
In connection with the above transactions, the Company recorded an extraordinary
charge during the second quarter of 1997 of $17.4 million, net of applicable
income taxes of $11.1 million, related to the tender premiums and write off of
unamortized debt issue costs associated with the retired debt. During October
1998, the Credit Facility was amended to reduce certain covenant requirements
and clarify certain defined terms contained in the Credit Facility agreement.
4. During June 1997, the Company acquired CR Anthony which operated 246
family apparel stores in small markets throughout the central and midwestern
United States under the names "Anthony's" and "Anthony's Limited". The Company
issued 3,607,044 shares in exchange for the outstanding common stock of CR
Anthony. The purchase price for CR Anthony (including the common stock issued by
the Company) was approximately $77.2 million, including acquisition costs and
net of cash acquired. CR Anthony had net sales of $288.4 million and net income
of $4.8 million for the year ended February 1, 1997.
5. During September 1997, the Company completed an offering of
approximately 7.1 million shares of common stock, 6.4 million shares of which
were secondary shares representing the shares owned by two venture capital
firms. The remaining 650,000 shares were issued as primary shares, a result of
an over-allotment provision. The shares sold by the Company resulted in net
proceeds to the Company of approximately $20.7 million, which were used to
reduce borrowings outstanding under the Company's Credit Facility.
6
<PAGE>
6. During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. Prior period statements have been
adjusted to reflect retroactive application of the provisions of SFAS 130.
7. On November 2, 1998, the Board of Directors of the Company adopted a
Stockholder Rights Plan (the "Rights Plan") designed to protect Company
stockholders in the event of takeover activity that would deny them the full
value of their investment. As a part of the Rights Plan, the Company declared a
dividend of one Preferred Stock Purchase Right (the "Right(s)") for each
outstanding share of Common Stock, par value $0.01 per share, of the Company.
The dividend is payable as of November 13, 1998 to stockholders of record on
that date. Each Right entitles the registered holder to purchase from the
Company one one-hundred thousandth (1/100,000) of a share of a new series of
preferred shares of the Company, designated as Series A Junior Preferred Stock,
at a price of $60.00 per one one-hundred thousandth (1/100,000) of a share,
subject to certain adjustments. Such Rights will become exercisable only in the
event , with certain exceptions, a person or group of affiliated or associated
persons accumulate 15% or more of the Company's voting stock, or if a person or
group announces an offer to acquire 15% or more of such stock. The description
and terms of the Rights are set forth in a Rights Agreement between the Company
and ChaseMellon Shareholder Services, L.L.C. as Rights Agent, dated as of
November 11, 1998.
8. The consolidating condensed financial information for Stage Stores
and its wholly owned subsidiaries is presented to satisfy disclosure
requirements pursuant to Sections 13 and 15(d) of the Securities Exchange Act of
1934 with respect to wholly owned subsidiaries of Stage Stores who are
individually registrants with the Securities Exchange Commission. SRI is the
primary obligor under the 8 1/2% Senior Notes due 2005 and 9% Senior
Subordinates Notes due 2007 (see Note 3). Stage Stores and Specialty Retailers,
Inc. (NV), a wholly owned subsidiary of Stage Stores which was incorporated
during June 1997, are guarantors under such indebtedness. Stage Stores has not
presented separate financial statements and other disclosures concerning SRI and
Specialty Retailers, Inc. (NV) because management has determined that such
information is not material to investors.
SRPC securitizes the credit receivables of the Company. The results of
operations of SRPC are not indicative of the total operating performance of the
Company's Accounts Receivable Program. For a summary of the total consolidated
operating performance of the Company's Accounts Receivable Program, see Note 4
to the Company's Consolidated Financial Statements filed with Stage Stores'
Annual Report on Form 10-K. The consolidating condensed financial information
for Stage Stores and its wholly-owned subsidiaries are presented below.
7
<PAGE>
CONSOLIDATING CONDENSED BALANCE SHEET
OCTOBER 31, 1998
(in thousands, unaudited)
<TABLE>
<CAPTION>
Specialty SRI
Retailers, Receivables SRI SRI
Inc. Purchase Co. Eliminations Consolidated
------------ ------------ ------------ ------------
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents ........... $ 9,276 $ -- $ -- $ 9,276
Undivided interest in accounts
receivable trust ................. (11,806) 70,777 -- 58,971
Merchandise inventories, net ........ 421,658 -- -- 421,658
Prepaid expenses .................... 24,194 739 -- 24,933
Other current assets ................ 51,901 5,408 -- 57,309
------------ ------------ ------------ ------------
Total current assets ............. 495,223 76,924 -- 572,147
Property, equipment and leasehold
improvements, net ................ 223,311 -- -- 223,311
Goodwill, net ....................... 93,285 -- -- 93,285
Other assets ........................ 19,337 5,461 -- 24,798
Investment in subsidiaries .......... 44,013 -- (44,013) --
------------ ------------ ------------ ------------
$ 875,169 $ 82,385 $ (44,013) $ 913,541
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable .................... $ 102,787 $ -- $ -- $ 102,787
Accrued interest .................... 10,441 1,418 -- 11,859
Accrued expenses and other current
liabilities ...................... 127,225 1,443 -- 128,668
------------ ------------ ------------ ------------
Total current liabilities ........ 240,453 2,861 -- 243,314
Long-term debt ...................... 420,311 30,000 -- 450,311
Intercompany notes/advances ......... 166,629 5,511 -- 172,140
Other long-term liabilities ......... 8,709 -- -- 8,709
------------ ------------ ------------ ------------
Total liabilities ................ 836,102 38,372 -- 874,474
------------ ------------ ------------ ------------
Preferred stock ..................... -- -- -- --
Common stock ........................ -- -- -- --
Class B common stock ................ -- -- -- --
Additional paid-in capital .......... 3,317 37,813 (37,813) 3,317
Accumulated earnings (deficit) ...... 35,750 6,200 (6,200) 35,750
------------ ------------ ------------ ------------
Stockholders' equity ............. 39,067 44,013 (44,013) 39,067
------------ ------------ ------------ ------------
$ 875,169 $ 82,385 $ (44,013) $ 913,541
============ ============ ============ ============
<CAPTION>
Specialty
Stage Retailers, Stage Stores
Stores, Inc. Inc. (NV) Eliminations Consolidated
------------ ------------ ------------ ------------
ASSETS
<S> <C> <C> <C> <C>
Cash and cash equivalents ........... $ 2 $ 1,948 $ -- $ 11,226
Undivided interest in accounts
receivable trust ................. -- -- -- 58,971
Merchandise inventories, net ........ -- -- -- 421,658
Prepaid expenses .................... -- -- -- 24,933
Other current assets ................ -- -- -- 57,309
------------ ------------ ------------ ------------
Total current assets ............. 2 1,948 -- 574,097
Property, equipment and leasehold
improvements, net ................ -- 1,810 -- 225,121
Goodwill, net ....................... -- -- -- 93,285
Other assets ........................ -- 60 -- 24,858
Investment in subsidiaries .......... 212,344 -- (212,344) --
------------ ------------ ------------ ------------
$ 212,346 $ 3,818 $ (212,344) $ 917,361
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable .................... $ -- $ -- $ -- $ 102,787
Accrued interest .................... -- -- -- 11,859
Accrued expenses and other current
liabilities ...................... 180 -- -- 128,848
------------ ------------ ------------ ------------
Total current liabilities ........ 180 -- -- 243,494
Long-term debt ...................... -- -- -- 450,311
Intercompany notes/advances ......... (2,681) (169,459) -- --
Other long-term liabilities ......... 1,727 -- -- 10,436
------------ ------------ ------------ ------------
Total liabilities ................ (774) (169,459) -- 704,241
------------ ------------ ------------ ------------
Preferred stock ..................... -- -- -- --
Common stock ........................ 266 -- -- 266
Class B common stock ................ 13 -- -- 13
Additional paid-in capital .......... 265,517 159,002 (162,319) 265,517
Accumulated earnings (deficit) ...... (52,676) 14,275 (50,025) (52,676)
------------ ------------ ------------ ------------
Stockholders' equity ............. 213,120 173,277 (212,344) 213,120
------------ ------------ ------------ ------------
$ 212,346 $ 3,818 $ (212,344) $ 917,361
============ ============ ============ ============
</TABLE>
8
<PAGE>
CONSOLIDATING CONDENSED BALANCE SHEET
JANUARY 31, 1998
(in thousands)
<TABLE>
<CAPTION>
SRI
Specialty Receivables SRI SRI
Retailers, Inc. Purchase Co. Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ............ $ 23,299 $ -- $ -- $ 23,299
Undivided interest in accounts
receivable trust .................. (11,234) 72,445 -- 61,211
Merchandise inventories, net ......... 303,115 -- -- 303,115
Prepaid expenses ..................... 19,944 473 -- 20,417
Other current assets ................. 49,980 7,808 -- 57,788
--------------- ------------ ------------ ------------
Total current assets .............. 385,104 80,726 -- 465,830
Property, equipment and leasehold
improvements, net ................. 170,401 -- -- 170,401
Goodwill, net ........................ 95,486 -- -- 95,486
Other assets ......................... 20,653 5,757 -- 26,410
Investment in subsidiaries ........... 40,312 -- (40,312) --
--------------- ------------ ------------ ------------
$ 711,956 $ 86,483 $ (40,312) $ 758,127
=============== ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ..................... $ 91,799 $ -- $ -- $ 91,799
Accrued interest ..................... 1,556 488 -- 2,044
Accrued expenses and other current
liabilities ....................... 53,545 142 -- 53,687
--------------- ------------ ------------ ------------
Total current liabilities ......... 146,900 630 -- 147,530
Long-term debt ....................... 365,248 30,000 -- 395,248
Intercompany notes/advances .......... 149,258 14,324 -- 163,582
Other long-term liabilities .......... 9,874 1,217 -- 11,091
--------------- ------------ ------------ ------------
Total liabilities ................. 671,280 46,171 -- 717,451
--------------- ------------ ------------ ------------
Preferred stock ...................... -- -- -- --
Common stock ......................... -- -- -- --
Class B common stock ................. -- -- -- --
Additional paid-in capital ........... 3,317 34,556 (34,556) 3,317
Accumulated earnings (deficit) ....... 37,914 5,756 (5,756) 37,914
Accumulated other comprehensive income (555) -- -- (555)
--------------- ------------ ------------ ------------
Stockholders' equity .............. 40,676 40,312 (40,312) 40,676
--------------- ------------ ------------ ------------
$ 711,956 $ 86,483 $ (40,312) $ 758,127
=============== ============ ============ ============
<CAPTION>
Specialty
Stage Retailers, Stage Stores
Stores, Inc. Inc. (NV) Eliminations Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents ............ $ 16 $ -- $ -- $ 23,315
Undivided interest in accounts
receivable trust .................. -- -- -- 61,211
Merchandise inventories, net ......... -- -- -- 303,115
Prepaid expenses ..................... -- -- -- 20,417
Other current assets ................. -- -- -- 57,788
------------ ------------ ------------ ------------
Total current assets .............. 16 -- -- 465,846
------------ ------------ ------------ ------------
Property, equipment and leasehold
improvements, net ................. -- 1,253 -- 171,654
Goodwill, net ........................ -- -- -- 95,486
Other assets ......................... -- -- -- 26,410
Investment in subsidiaries ........... 205,075 -- (205,075) --
------------ ------------ ------------ ------------
$ 205,091 $ 1,253 $ (205,075) $ 759,396
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ..................... $ -- $ -- $ -- $ 91,799
Accrued interest ..................... -- -- -- 2,044
Accrued expenses and other current
liabilities ....................... 252 -- -- 53,939
------------ ------------ ------------ ------------
Total current liabilities ......... 252 -- -- 147,782
Long-term debt ....................... -- -- -- 395,248
Intercompany notes/advances .......... (436) (163,146) -- --
Other long-term liabilities .......... 197 -- -- 11,288
Total liabilities ................. 13 (163,146) -- 554,318
------------ ------------ ------------ ------------
Preferred stock ...................... -- -- -- --
Common stock ......................... 265 -- -- 265
Class B common stock ................. 13 -- -- 13
Additional paid-in capital ........... 264,679 159,002 (162,319) 264,679
Accumulated earnings (deficit) ....... (59,324) 5,397 (43,311) (59,324)
Accumulated other comprehensive income (555) -- 555 (555)
------------ ------------ ------------ ------------
Stockholders' equity .............. 205,078 164,399 (205,075) 205,078
------------ ------------ ------------ ------------
$ 205,091 $ 1,253 $ (205,075) $ 759,396
============ ============ ============ ============
</TABLE>
9
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED OCTOBER 31, 1998
(in thousands, unaudited)
<TABLE>
<CAPTION>
Specialty SRI
Retailers, Receivables SRI SRI
Inc. Purchase Co. Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ......................... $ 816,198 $ -- $ -- $ 816,198
Cost of sales and related buying,
occupancy and distribution
expenses ...................... 571,482 -- -- 571,482
--------------- ------------ ------------ ------------
Gross profit ...................... 244,716 -- -- 244,716
Selling, general and administrative
expenses ...................... 196,583 204 -- 196,787
Store opening and closure costs ... 4,911 -- -- 4,911
--------------- ------------ ------------ ------------
Operating income (loss) ........... 43,222 (204) -- 43,018
Interest expense, net ............. 48,221 (2,507) -- 45,714
--------------- ------------ ------------ ------------
Income (loss) before income
taxes ........................ (4,999) 2,303 -- (2,696)
Income tax expense (benefit) ...... (1,384) 852 -- (532)
--------------- ------------ ------------ ------------
Income (loss) before equity in net
earnings of subsidiaries ...... (3,615) 1,451 -- (2,164)
Equity in net earnings of
subsidiaries .................. 1,451 -- (1,451) --
--------------- ------------ ------------ ------------
Net income (loss) ................. $ (2,164) $ 1,451 $ (1,451) $ (2,164)
=============== ============ ============ ============
<CAPTION>
Specialty
Stage Retailers, Stage Stores
Stores, Inc. Inc. (NV) Eliminations Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ......................... $ -- $ -- $ -- $ 816,198
Cost of sales and related buying,
occupancy and distribution
expenses ...................... -- -- -- 571,482
------------ ------------ ------------ ------------
Gross profit ...................... -- -- -- 244,716
Selling, general and administrative
expenses ...................... 66 (2,230) -- 194,623
Store opening and closure costs ... -- -- -- 4,911
------------ ------------ ------------ ------------
Operating income (loss) ........... (66) 2,230 -- 45,182
Interest expense, net ............. -- (11,430) -- 34,284
------------ ------------ ------------ ------------
Income (loss) before income
taxes ........................ (66) 13,660 -- 10,898
Income tax expense (benefit) ...... -- 4,782 -- 4,250
------------ ------------ ------------ ------------
Income (loss) before equity in net
earnings of subsidiaries ...... (66) 8,878 -- 6,648
Equity in net earnings of
subsidiaries .................. 6,714 -- (6,714) --
------------ ------------ ------------ ------------
Net income (loss) ................. $ 6,648 $ 8,878 $ (6,714) $ 6,648
============ ============ ============ ============
</TABLE>
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 1, 1997
(in thousands, unaudited)
<TABLE>
<CAPTION>
SRI
Specialty Receivables SRI SRI
Retailers, Inc. Purchase Co. Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ............................ $ 703,918 $ -- $ -- $ 703,918
Cost of sales and related buying,
occupancy and distribution
expenses ......................... 481,269 -- -- 481,269
--------------- ------------ ------------ ------------
Gross profit ......................... 222,649 -- -- 222,649
Selling, general and administrative
expenses ......................... 166,433 (2,717) -- 163,716
Store opening and closure costs ...... 2,848 -- -- 2,848
--------------- ------------ ------------ ------------
Operating income (loss) .............. 53,368 2,717 -- 56,085
Interest expense, net ................ 33,214 (444) -- 32,770
--------------- ------------ ------------ ------------
Income (loss) before income
taxes ........................... 20,154 3,161 -- 23,315
Income tax expense (benefit) ......... 8,100 1,176 -- 9,276
--------------- ------------ ------------ ------------
Income (loss) before equity in net
earnings of subsidiaries and
extraordinary item ............... 12,054 1,985 -- 14,039
Equity in net earnings of
subsidiaries ..................... 1,985 -- (1,985) --
--------------- ------------ ------------ ------------
Income (loss) before extraordinary
item ............................ 14,039 1,985 (1,985) 14,039
Extraordinary item - early
retirement of debt .............. (17,530) -- -- (17,530)
--------------- ------------ ------------ ------------
Net income (loss) .................... $ (3,491) $ 1,985 $ (1,985) $ (3,491)
=============== ============ ============ ============
<CAPTION>
Stage Stage Stores
Stores, Inc. SRI (NV) Eliminations Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ............................ $ -- $ -- $ -- $ 703,918
Cost of sales and related buying,
occupancy and distribution
expenses ......................... -- -- -- 481,269
------------ ------------ ------------ ------------
Gross profit ......................... -- -- -- 222,649
Selling, general and administrative
expenses ......................... 19 17 -- 163,752
Store opening and closure costs ...... -- -- -- 2,848
------------ ------------ ------------ ------------
Operating income (loss) .............. (19) (17) -- 56,049
Interest expense, net ................ -- (4,612) -- 28,158
------------ ------------ ------------ ------------
Income (loss) before income
taxes ........................... (19) 4,595 -- 27,891
Income tax expense (benefit) ......... (7) 1,609 -- 10,878
------------ ------------ ------------ ------------
Income (loss) before equity in net
earnings of subsidiaries and
extraordinary item ............... (12) 2,986 -- 17,013
Equity in net earnings of
subsidiaries ..................... (505) -- 505 --
------------ ------------ ------------ ------------
Income (loss) before extraordinary
item ............................ (517) 2,986 505 17,013
Extraordinary item - early
retirement of debt .............. -- -- -- (17,530)
------------ ------------ ------------ ------------
Net income (loss) .................... $ (517) $ 2,986 $ 505 $ (517)
============ ============ ============ ============
</TABLE>
10
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 31, 1998
(in thousands, unaudited)
<TABLE>
<CAPTION>
SRI
Specialty Receivables SRI SRI
Retailers, Inc. Purchase Co. Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used in operating activities $ (70,740) $ (6,413) $ -- $ (77,153)
--------------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Intercompany notes/advances ............ (119) -- -- (119)
Additions to property, equipment and
leasehold improvements ............. (71,202) -- -- (71,202)
Proceeds from the sales of accounts
receivable, net .................... (7,420) 7,420 -- --
Dividend from subsidiary ............... 1,007 -- (1,007) --
--------------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities .......... (77,734) 7,420 (1,007) (71,321)
--------------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from working capital
facility ........................... 134,650 -- -- 134,650
Proceeds from issuance of common
stock .............................. -- -- -- --
Payments on long-term debt ............. (199) -- -- (199)
Dividend paid .......................... -- (1,007) 1,007 --
--------------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities ............. 134,451 (1,007) 1,007 134,451
--------------- ------------ ------------ ------------
Net decrease in cash and cash
equivalents ........................ (14,023) -- -- (14,023)
Cash and cash equivalents:
Beginning of period ................. 23,299 -- -- 23,299
=============== ============ ============ ============
End of period ....................... $ 9,276 $ -- $ -- $ 9,276
=============== ============ ============ ============
<CAPTION>
Specialty
Stage Retailers, Stage Stores
Stores, Inc. Inc. (NV) Eliminations Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash used in operating activities $ (14) $ 990 $ -- $ (76,177)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Intercompany notes/advances ............ (839) 958 -- --
Additions to property, equipment and
leasehold improvements ............. -- -- -- (71,202)
Proceeds from the sales of accounts
receivable, net .................... -- -- -- --
Dividend from subsidiary ............... -- -- -- --
------------ ------------ ------------ ------------
Net cash provided by (used ..........
in) investing activities .......... (839) 958 -- (71,202)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from working capital
facility ........................... -- -- -- 134,650
Proceeds from issuance of common
stock .............................. 839 -- 839
Payments on long-term debt ............. -- -- -- (199)
Dividend paid .......................... -- -- -- --
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities ............. 839 -- -- 135,290
------------ ------------ ------------ ------------
Net decrease in cash and cash
equivalents ........................ (14) 1,948 -- (12,089)
Cash and cash equivalents:
Beginning of period ................. 16 -- -- 23,315
============ ============ ============ ============
End of period ....................... $ 2 $ 1,948 $ -- $ 11,226
============ ============ ============ ============
</TABLE>
11
<PAGE>
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED NOVEMBER 1, 1997
(in thousands, unaudited)
<TABLE>
<CAPTION>
SRI
Specialty Receivables SRI SRI
Retailers, Inc. Purchase Co. Eliminations Consolidated
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities ........... $ (439) $ (13,613) $ -- $ (14,052)
--------------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in subsidiaries .......... -- -- -- --
Acquisitions, net of cash acquired .. (4,946) -- -- (4,946)
Intercompany notes/advances ......... 21,178 -- -- 21,178
Additions to property, equipment and
leasehold improvements .......... (41,744) -- -- (41,744)
Proceeds from the sales of accounts
receivable, net ................. (13,683) 13,683 -- --
--------------- ------------ ------------ ------------
Net cash provided by (used
in) investing activities .... (39,195) 13,683 -- (25,512)
--------------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from working capital
facility ........................ 46,400 -- -- 46,400
Proceeds from issuance of
long-term debt ................ 299,720 -- -- 299,720
Proceeds from issuance of
common stock .................. -- -- -- --
Payments on long-term debt .......... (297,161) -- -- (297,161)
Proceeds from capital contributions . -- -- -- --
Additions to debt issue costs ....... (12,337) (70) -- (12,407)
--------------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities .......... 36,622 (70) -- 36,552
--------------- ------------ ------------ ------------
Net decrease in cash and cash
equivalents ..................... (3,012) -- -- (3,012)
Cash and cash equivalents:
Beginning of period .............. 18,270 -- -- 18,270
=============== ============ ============ ============
End of period .................... $ 15,258 $ -- $ -- $ 15,258
=============== ============ ============ ============
<CAPTION>
Stage Stage Stores
Stores, Inc. SRI (NV) Eliminations Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities ........... $ -- $ 53 $ -- $ (13,999)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in subsidiaries .......... (21,178) -- 21,178 --
Acquisitions, net of cash acquired .. -- -- -- (4,946)
Intercompany notes/advances ......... -- (21,178) -- --
Additions to property, equipment and
leasehold improvements .......... -- -- -- (41,744)
Proceeds from the sales of accounts
receivable, net ................. -- -- -- --
------------ ------------ ------------ ------------
Net cash provided by (used
in) investing activities .... (21,178) (21,178) 21,178 (46,690)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from working capital
facility ........................ -- -- -- 46,400
Proceeds from issuance of
long-term debt ................ -- -- -- 299,720
Proceeds from issuance of
common stock .................. 21,178 (53) -- 21,125
Payments on long-term debt .......... -- -- -- (297,161)
Proceeds from capital contributions . -- 21,178 (21,178) --
Additions to debt issue costs ....... -- -- -- (12,407)
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities .......... 21,178 21,125 (21,178) 57,677
------------ ------------ ------------ ------------
Net decrease in cash and cash
equivalents ..................... -- -- -- (3,012)
Cash and cash equivalents:
Beginning of period .............. 16 -- -- 18,286
============ ============ ============ ============
End of period .................... $ 16 $ -- $ -- $ 15,274
============ ============ ============ ============
</TABLE>
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
Certain items discussed or incorporated by reference herein contain
forward-looking statements that involve risks and uncertainties including, but
not limited to, the seasonality of demand for apparel which can be affected by
weather patterns, levels of competition, competitors' marketing strategies,
changes in fashion trends and availability of product, the failure to achieve
the expected results of merchandising and marketing plans or store opening or
closing plans. The occurrence of any of the above could have a material adverse
impact on the Company's operating results. Certain information herein contains
estimates which represent management's best judgement as to the date hereof
based on information currently available; however, the Company does not intend
to update this information to reflect developments or information obtained after
the date hereof and disclaims any legal obligation to the contrary.
GENERAL
OVERVIEW. The Company operates the store of choice for nationally
recognized brand name family apparel, accessories, cosmetics and footwear in
over 500 small towns and communities predominately located across the central
United States. The Company has recognized the high level of brand awareness and
demand for fashionable, quality apparel by consumers in small markets and has
identified these markets as a profitable and underserved niche. The Company has
developed a unique franchise focused on these small markets, differentiating
itself from the competition by offering a broad range of brand name merchandise
with a high level of customer service in convenient locations.
The financial information, discussion and analysis that follow should be
read in conjunction with the Company's Consolidated Financial Statements
included in the Company's 1997 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Sales for the three months ended October 31, 1998 decreased 1.0% to
$271.6 million from $274.3 million in the comparable period of 1997. The decline
in sales was due to a 2.1% decrease in comparable store sales during the quarter
as well as the inclusion in last year's sales of a non-recurring liquidation and
related grand opening volumes of the 130 CR Anthony stores which were converted
to the Company's format and trade names last fall partially offset by $22.5
million in sales from stores opened during 1998. Comparable store sales
increased approximately 5% during the first half of the third quarter, driven by
aggressive initiatives to liquidate spring and summer clearance merchandise in
conjunction with back-to-school promotions. However, these increases were more
than offset by declines in the last half of the quarter as the majority of the
Company's markets were affected by adverse weather which reduced customer
traffic in the Company's stores which continued into the fourth quarter. Sales
for the nine months ended October 31, 1998 increased 16.0% to $816.2 million
from $703.9 million in the comparable period of 1997. The increase in the nine
months ended October 31, 1998 sales was primarily due to an approximately $55.7
million increase in sales from stores opened during 1998 and 1997 which are not
included in comparable store sales, an approximately $67.2 million increase in
non-comparable sales from the acquired CR Anthony stores, partly offset by a
1.3% decline in comparable store sales. Management believes the majority of the
decline in comparable store sales are attributable to the extreme hot weather
and drought conditions during the second quarter in a majority of the Company's
market area and continued unseasonably warm weather during the third quarter.
Gross profit decreased 13.3% to $75.3 million for the third quarter of
1998 from $86.8 million in the comparable period of 1997 and as a rate of sales
decreased to 27.7% for the third quarter of 1998 from 31.7% in 1997. The decline
in the gross profit rate was largely due to the higher levels of markdowns as a
result of the aggressive initiatives undertaken to liquidate the spring and
summer clearance merchandise in conjunction with back-to-school promotions, as
well as softness in sales experienced in fall products during the later part of
the third quarter due to the continued unseasonably warm weather in the majority
of the Company's markets which traditionally produce higher margins. Also, the
gross margin rate was negatively impacted due to the reductions in sales volume
experienced during the third quarter of 1998 without a corresponding reduction
in the buying, occupancy and distribution expense components included in cost of
goods sold. Gross profit increased 9.9% to $244.7 million for the first three
quarters of 1998 from $222.6 million in the comparable period of 1997. Gross
profit as a rate of sales decreased to 30.0% for the first three quarters of
1998 from 31.6% in 1997. Contributing to the decline was the higher levels of
markdowns associated with initiatives to stimulate traffic during the severe
weather conditions in the second quarter and inventory liquidation activities
during the third quarter discussed above.
13
<PAGE>
Selling, general and administrative expenses for the third quarter ended
October 31, 1998 decreased 5.8% to $65.1 million from $69.1 million in the
comparable period of 1997. Selling, general and administrative expenses as a
percentage of sales for the third quarter of 1998 decreased to 24.0% from 25.2%
in the comparable period of 1997. Selling, general and administrative expense
benefited from increased income from the Company's proprietary credit card
operations as the Company's credit card bank, Granite National Bank, became
fully operational during the third quarter which allowed the Company to realize
the benefit of the new service charge and late fee rate structure associated
with the implementation of the bank. Also included in the prior year third
quarter were approximately $2.7 million of certain duplicative and one-time
costs associated with the CR Anthony acquisition. Offsetting these reductions in
selling, general and administrative expenses was increased advertising expense
which as a percentage of sales was 5.2% and 4.4% for the third quarters of 1998
and 1997, respectively, and 4.3% and 3.9% for the first nine months of 1998 and
1997, respectively. Selling, general and administrative expenses for the nine
months ended October 31, 1998 increased to $194.6 million from $163.8 million in
the comparable period of 1997. Selling, general and administrative expenses as a
percentage of sales for the first three quarters of 1998 increased to 23.8% from
23.3% in the comparable period of 1997. Factors contributing to the increase in
selling, general and administrative expenses as a percent of sales were the
comparable store sales declines during the second and third quarters and the
increased advertising expense to stimulate customer traffic.
Store opening and closure costs were $2.9 million for the third
quarter of 1998 as compared to $1.9 million for the same period of 1997. Store
opening and closure costs for the first three quarters of 1998 increased to $4.9
million from $2.8 million for the same period of 1997. The rise in store
openings and closure costs was due to an increase in the number of stores opened
during the first nine months of 1998 as compared to the same period in 1997.
Operating income for the three months ended October 31, 1998
decreased to $7.2 million from $15.8 million for the same period of 1997.
Operating income as a percent of sales for the three months ended October 31,
1998 was 2.7% as compared to 5.8% for the same period of 1997 due to the factors
discussed above. Operating income for the nine months ended October 31, 1998
decreased to $45.2 million from $56.0 million for the same period of 1997.
Operating income as a percent of sales for the nine months ended October 31,
1998 was 5.5% as compared to 8.0% for the same period of 1997.
Net interest expense for the third quarter of 1998 increased 26.5% to
$12.4 million from $9.8 million for the comparable period in 1997 due to higher
levels of borrowings associated with the Company's expansion program and the
impact of the reduced sales volume in the third quarter of 1998. Net interest
expense for the first three quarters of 1998 increased 21.6% to $34.3 million
from $28.2 million for the comparable period in 1997 due to higher levels of
borrowings as noted above.
As a result of the foregoing, the Company's net loss before
extraordinary items for the three months ended October 31, 1998 was $3.2 million
as compared to net income of $3.7 million for the comparable period in 1997. The
Company's net income before extraordinary items for the nine months ended
October 31, 1998 decreased to $6.6 million as compared to $17.0 million for the
comparable period in 1997.
SEASONALITY AND INFLATION
The Company's business is seasonal and its quarterly sales and profits
are traditionally lower during the first three quarters (February through
October) and higher during the fourth quarter (November through January). In
addition, working capital requirements fluctuate throughout the year, increasing
substantially in October and November due to requirements for significantly
higher inventory levels in anticipation of the holiday season.
14
<PAGE>
The following table shows certain unaudited financial information for
the Company by quarter (in thousands):
<TABLE>
<CAPTION>
1998 1997
------------------------------- ----------------------------------------------
Q1 Q2 Q3 Q1 Q2 Q3 Q4
-------- -------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ............. $272,788 $271,805 $ 271,605 $191,512 $ 238,137 $274,269 $369,398
Gross profit .......... 87,225 82,239 75,252 61,925 73,902 86,822 120,488
Operating income ...... 25,278 12,678 7,226 20,524 19,736 15,789 38,391
Quarters'
operating income
as a percent of
total ................ -- -- -- 22% 21% 17% 40%
Income (loss)
before extraordinary
items ................ $ 9,035 $ 765 $ (3,152) $ 7,094 $ 6,246 $ 3,673 $ 17,527
Net income (loss) ..... $ 9,035 $ 765 $ (3,152) $ 7,094 $ (11,134) $ 3,523 $ 16,762
</TABLE>
The Company does not believe that inflation had a material effect on its
results of operations during the past two years. However, there can be no
assurance that the Company's business will not be affected by inflation in the
future.
LIQUIDITY AND CAPITAL RESOURCES
Total working capital increased $12.5 million to $330.6 million
at October 31, 1998 from $318.1 million at January 31, 1998. The most
significant changes in working capital were: (i) an increase in inventories
associated with the 105 CR Anthony stores which the Company converted to its
format and trade names during the first half of 1998 and the 76 new stores
opened during the current year and the seasonal build of inventories in
anticipation of the Christmas selling season; (ii) an increase in accounts
payable associated with the increase in inventory; and (iii) the timing of
interest payments on the Company's long-term debt. Prepaid expenses increased
primarily due to the prepaid expenses associated with new store openings and the
conversion of the CR Anthony stores. The increase in accrued and other current
liabilities is principally due to the classification of $80.4 million of the
outstanding balance under the Company's Credit Facility as short-term due to the
clean-down provision of the Credit Facility.
The Company's primary capital requirements are for working capital, debt
service and capital expenditures. Based upon the current capital structure,
management anticipates cash interest payments to be approximately $44.0 million
during each of 1998 and 1999. Capital expenditures are generally for new store
openings, remodeling of existing stores and facilities and customary store
maintenance. Capital expenditures for the first nine months of 1998 were $71.2
million as compared to $41.7 million for the comparable period of 1997 as a
result of an increase in the number of new stores opened as well as the
conversion of the remaining CR Anthony stores to the Company's format and trade
names. Management expects capital expenditures to be approximately $87.0 million
during 1998, consisting primarily of 86 new store openings, remodeling of
existing stores, the conversion of the majority of the remaining CR Anthony
stores to the Company's format and the implementation of a new merchandising
system. Required aggregate principal payments on debt total $2.7 million and
$4.9 million for 1998 and 1999, respectively.
The Company's current short-term liquidity needs are provided by (i)
existing cash balances, (ii) operating cash flows, (iii) the Accounts Receivable
Program and (iv) the Credit Facility. The Company expects to fund its long-term
liquidity needs from its operating cash flows, the issuance of debt and/or
equity securities, the securitization of its accounts receivable and bank
borrowings. Outstanding borrowings under the Credit Facility were $180.4 million
at October 31, 1998 as compared to $45.7 million at January 31, 1998. The
Company had $7.2 million of availability under the Credit Facility at October
31, 1998. The outstanding balances under the revolving certificates associated
with the Accounts Receivable Program were $81.4 million and $77.0 million at
October 31, 1998 and January 31, 1998, respectively, while outstanding balances
under term certificates were $165.0 million at both October 31, 1998 and January
31, 1998.
The Company continually monitors its liquidity position and compliance
with its various debt agreements. During the third quarter of 1998, the
Company's Credit Facility was amended to reduce certain covenant requirements
and clarify certain defined terms contained in the Credit Facility. The Company
also amended the revolving certificates associated with the Accounts Receivable
Program to increase the limit that may be outstanding from $82.5 million to $165
million through March 31, 1999 to reflect the growth in the Company's accounts
receivable portfolio. The maximum outstanding under the revolving certificate
will be reduced to $144.4 million from April 1, 1999 to September 30, 1999 and
$82.5 million thereafter. In addition, a new class of certificates was created
to allow for up to an additional $10 million to be outstanding
15
<PAGE>
from October 16, 1998 through December 24, 1998. Management believes that funds
provided by operations, together with funds available under the Credit Facility
and the Accounts Receivable Program will be adequate to meet the Company's
anticipated requirements for working capital, interest payments, planned capital
expenditures and principal payments on debt. Estimates as to working capital
needs and other expenditures may be materially affected if the foregoing sources
are not available or do not otherwise provide sufficient funds to meet the
Company's obligations.
YEAR 2000
The Year 2000 issue relates to the way computer systems and programs
define calendar dates. They could fail or make miscalculations due to
interpreting a date including "00" to mean 1900, not 2000. Also, other systems
and equipment may contain imbedded hardware or software that may have a time
element and affect their operation. The Company began working on the Year 2000
compliance issue in 1996 and heightened its focus and resource commitment in
1997 with the establishment of a formalized project plan and management
oversight function. The Company has divided its Year 2000 risk assessment and
remediation efforts into the following three categories: information systems,
peripheral systems and hardware, and third party vendors.
The Company has completed the evaluation of its critical information
systems infrastructure for Year 2000 compliance and has developed detailed work
plans to achieve compliance prior to anticipated system failures. The systems
have been segregated into the following five logical, manageable groups: (1)
human resource, time keeping, and payroll systems (2) point-of-sale and sales
audit systems (3) credit systems (4) financial reporting and accounts payable
systems, and (5) merchandising systems. Year 2000 remediation is being addressed
through a combination of modifications or upgrades to existing applications or
replacement. The Company has dedicated in-house resources and has contracted
with third party vendors to complete the necessary coding changes, testing and
installation. The five groups of systems are in various stages of completion.
The Company estimates Year 2000 readiness related to information systems is
presently 40% complete and anticipates will be 65% complete by the end of the
current fiscal year and substantially complete by the end of the second quarter
of fiscal year 1999.
The Company has substantially completed an inventory of its major
peripheral systems and hardware and is in the process of assessing and
remediating Year 2000 non-compliance issues. These include, but are not limited
to, mainframe computer hardware and operating systems, communications networks,
personal computers and network systems, printers, store register systems and
processors, scanners, and emergency power systems. The Company estimates Year
2000 readiness related to peripheral systems and hardware is presently 50%
complete and anticipates will be 75% complete by the end of the current fiscal
year and substantially complete by the end of the second quarter of fiscal year
1999.
The Company presently has limited information concerning the Year 2000
compliance status of its suppliers. The Company has identified its major
suppliers and has sent a survey letter which will be used to evaluate the
Company's vulnerability to these vendors failure to remedy their own Year 2000
issues. The necessity for contingency planning related to suppliers will be
assessed upon completion and review of the survey results.
The Company is installing a new merchandising system which is
anticipated to be completed during the first half of 1999. If installation is
not complete, the Company has made arrangements with the third party presently
working on the Company's Year 2000 compliance issues to remediate the legacy
system. The Company's plan is to have addressed its significant Year 2000 issues
prior to being affected by them. However, if the Company identifies risks
related to Year 2000 compliance or its progress deviates from the anticipated
timeline, the Company will develop contingency plans as deemed necessary at that
time.
It is currently estimated that the aggregate cost of the Company's Year
2000 efforts paid to third parties to assist in remediation will be
approximately $2.3 million, of which approximately $1.0 million has been spent.
These costs are being expensed as incurred. These amounts do not include any
costs associated with the implementation of contingency plans or the cost
associated with the replacement of information systems, hardware or equipment,
substantially all of which would be capitalized.
The failure to correct a material Year 2000 problem could result in an
interruption in certain normal business activities or operations. Presently, the
Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance. The Company has
limited information concerning Year 2000 compliance status of its suppliers. In
the event that the Company or any of its significant suppliers does not
successfully and timely achieve Year 2000 compliance, the Company's business or
operations could be adversely affected.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
On November 2, 1998, the Board of Directors of the Company, in
conjunction with the adoption of a Stockholder Rights Plan, declared a dividend
of one Preferred Stock Purchase Right (the "Right(s)") for each outstanding
share of Common Stock, par value $0.01 per share, of the Company. The dividend
is payable as of November 13, 1998 to stockholders of record on that date. Each
Right entitles the registered holder to purchase from the Company one
one-hundred thousandth (1/100,000) of a share of a new series of preferred
shares of the Company, designated as Series A Junior Preferred Stock, at a price
of $60.00 per one one-hundred thousandth (1/100,000) of a share, subject to
certain adjustments. The description and terms of the Rights are set forth in a
Rights Agreement between the Company and ChaseMellon Shareholder Services,
L.L.C. as Rights Agent, dated as of November 11, 1998.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
4.1 Third Amendment Agreement dated as of October 6, 1998 by and
among Specialty Retailers, Inc., Stage Stores, Inc., the banks
named therein and Credit Suisse First Boston to the Credit
Agreement dated as of June 17, 1997.
4.2 Amended and Restated Series 1997-1 Supplement dated as of October
16, 1998 to Amended and Restated Pooling and Servicing Agreement
dated as of August 11, 1995 and Amended on May 30, 1996 and
August 1, 1998 by and among SRI Receivables Purchase Co., Inc.,
Specialty Retailers, Inc., and Bankers Trust (Delaware) on behalf
of the Series 1997-1 Certificateholders.
4.3 Class B-2 Certificate Purchase Agreement dated as of October 16,
1998 by and among SRI Receivables Purchase Co., Inc., Specialty
Retailers, Inc., the Class B-2 Purchasers parties thereto, and
Credit Suisse First Boston.
4.4 Amendment No. 1 to Class A Certificate Purchase Agreement dated
as of October 16, 1998 by and among SRI Receivables Purchase Co.,
Inc., Specialty Retailers, Inc., the Class A Purchasers parties
thereto and Credit Suisse First Boston.
4.5 Amendment No. 1 to Class B Certificate Purchase Agreement dated
as of October 16, 1998 by and among SRI Receivables Purchase Co.,
Inc., Specialty Retailers, Inc., the Class B Purchasers parties
thereto and Credit Suisse First Boston.
27.1 Financial Data Schedule.
17
<PAGE>
(b) Reports on Form 8-K
The Company filed a News Release on Form 8-K dated September 16, 1998
related to Stage Stores, Inc. third quarter 1998 sales update.
The Company filed a News Release on Form 8-K dated November 5, 1998
related to Stage Stores, Inc.'s Board adopting a rights plan and third
quarter 1998 sales results.
The Company filed a News Release on Form 8-K dated November 12, 1998
related to Stage Stores, Inc. announcing the resignation of the Chief
Merchandising Officer.
The Company filed a Form 8-K on November 12, 1998 related to the
adoption of the stockholder rights plan. Filed as exhibit was the Rights
Agreement dated as of November 11, 1998 between Stage Stores, Inc. and
ChaseMellon Shareholder Services, L.L.C. as Rights Agent.
The Company filed a News Release on Form 8-K dated November 19, 1998
related to Stage Stores, Inc. third quarter and nine months 1998
results.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STAGE STORES, INC.
DECEMBER 15, 1998 /S/ CARL E. TOOKER
(Date) Carl E. Tooker
Chairman, Chief Executive
Officer and President
(principal executive officer)
DECEMBER 15, 1998 /S/ JAMES A. MARCUM
(Date) James A. Marcum
Vice Chairman and
Chief Financial Officer
(principal financial and
accounting officer)
19
EXHIBIT 4.1
THIRD AMENDMENT AGREEMENT
This THIRD AMENDMENT AGREEMENT, dated as of October 7,
1998 (the "Agreement"), is among Specialty Retailers, Inc. (the
"Borrower"), Stage Stores, Inc. (the "Parent"), the banks named
therein (the "Banks") and Credit Suisse First Boston, as
Administrative Agent, Collateral Agent, Swingline Bank and L/C Bank
(the "Administrative Agent").
PRELIMINARY STATEMENT
WHEREAS, the Borrower, the Parent, the Banks and the Administrative
Agent are parties to the Credit Agreement, dated as of June 16, 1997 (the
"Credit Agreement");
WHEREAS, the Borrower has requested the amendment of
certain provisions set forth in the Credit Agreement;
WHEREAS, the Banks have agreed to amend the specific provisions set
forth herein under the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. SECTION DEFINED TERMS. Capitalized terms used and not defined herein shall
have the meanings assigned to such terms in the Credit Agreement.
2.
3. SECTION AMENDMENTS. The Banks hereby agree to amend the Credit Agreement as
follows:
4.
(a) Section 1.1 of the Credit Agreement is hereby amended by deleting the
definition of "Consolidated EBITDA" in its entirety and replacing it with the
following:
(b)
(c) ""Consolidated EBITDA" shall mean, for any period, the sum, without
duplication, of (i) Consolidated Net Income for such period PLUS (ii)
Consolidated Interest Expense for such period PLUS (iii) amortization of
deferred Indebtedness issuance costs and expenses for such period PLUS (iv)
federal and state income taxes deducted in calculating Consolidated Net Income
for such period, PLUS (v) to the extent deducted in the calculation of
Consolidated Net Income for such period, depreciation and amortization expense
PLUS (vi) to the extent deducted in the calculation of Consolidated Net Income
for such period, any noncash charges related to the issuance by the Parent or
any of its Subsidiaries of stock, warrants or options to any employee thereof
(or any exercise of any such warrants or options) or any re-valuation of such
stock, warrants or options, MINUS to the extent added to the calculation of
Consolidated Net Income for such period, any non-
<PAGE>
cash gain related to the issuance by the Parent or any of its Subsidiaries of
stock, warrants or options to any employee thereof (or any exercise of any such
warrants or options) or any re-valuation of such stock, warrants or options, all
determined on a consolidated basis for the Parent and its Subsidiaries in
accordance with GAAP."
(d)
(e) Section 1.1 of the Credit Agreement is hereby amended by deleting the
definition of "Consolidated Interest Expense" in its entirety and replacing it
with the following:
(f)
(g) ""Consolidated Interest Expense" shall mean, for any fiscal period of the
Parent, the total interest expense (including, without limitation, interest
expense attributable to Capital Leases in accordance with GAAP) of the Parent
and its Subsidiaries for such period, MINUS all interest earnings received by
the Parent and its Subsidiaries in cash during such period, minus amortization
of deferred Indebtedness issuance costs and expenses for such period, in each
case determined on a consolidated basis in accordance with GAAP."
(h)
(i) The definition of "Consolidated Net Income" in Section 1.1 of the Credit
Agreement is hereby amended by adding the following at the end of clause (e):
(j)
"and there shall be included all restructuring charges taken by the
end of the fourth quarter of fiscal year 1998 of up to $16,000,000
of which no more than $2,500,000 is permitted to be charges which
will be settled by the Borrower by making cash payments to any third
party ("Cash Closure Charges"), determined on a consolidated basis
for the Parent and its Subsidiaries in accordance with GAAP"
(a) The definition of "Excess Cash Flow" in Section 1.1 of the Credit Agreement
is hereby amended by (i) inserting the words "plus amortization of deferred
Indebtedness issuance costs and expenses for such period" after the words
"fiscal period" in clause (iii) of the definition, (ii) inserting the words ",
Retained Offering Proceeds" after the words "Retained Equity Proceeds" within
the parenthetical of clause (vi) of the definition and (iii) by adding the
following at the end of clause (ix):
(b)
"MINUS (x) Cash Closure Charges of up to $2,500,000
taken by the end of the fourth quarter of fiscal year
1998"
(a) Section 1.1 of the Credit Agreement is hereby amended by adding the
following definition in correct alphabetical order:
(b)
(c) ""Permitted Senior Debt" shall mean unsecured Indebtedness of the Borrower
if (i) such Indebtedness has no amortization or required sinking fund pay-
<PAGE>
ments and a final maturity no earlier than, and provisions no more onerous or
restrictive on the Borrower and no less favorable to the Banks in any respect
deemed material by the Required Banks than, those terms and provisions of the
Senior Notes, (ii) the interest rate payable in respect of such Indebtedness
shall be a market interest rate as of the time of the incurrence thereof and
shall not, in case of Indebtedness bearing interest at a floating rate, exceed
the rate of interest payable on the Loans and Swingline Loans, (iii) each of the
covenants, events of default and other provisions thereof shall be customary for
issuances of similar indebtedness by companies in a similar financial condition
to the Borrower in accordance with prevailing market conditions in effect at the
time of the issuance thereof and in any event shall be no more onerous or
restrictive on the Borrower than those contained in the Senior Notes and (iv)
the Net Cash Proceeds thereof shall have been applied to the prepayment of the
Loans to the extent provided in Section 2.12(b)."
(d)
(e) Section 1.1 of the Credit Agreement is hereby amended by adding the
following sentence to the end of the definition of "Retained Equity Proceeds":
(f)
(g) "Notwithstanding the foregoing, only 75% of the first $50,000,000 of Net
Cash Proceeds received from New Equity Issuances during the period from
September 30, 1998 through January 31, 2000, shall be included in Retained
Equity Proceeds."
(h)
(i) Section 1.1 of the Credit Agreement is hereby amended by adding the
following definition in the correct alphabetical order:
(j)
(k) ""Retained Offering Proceeds" shall mean at any time the cumulative amount
of (i) 30% of the Net Cash Proceeds received by the Borrower from the issuance
of Permitted Senior Debt and (ii) 40% of the Net Cash Proceeds received by the
Borrower from the issuance of Permitted Subordinated Debt, in each case, to the
extent such Net Cash Proceeds are not required to be applied to the prepayment
of the Loans and Swingline Loans pursuant to Section 2.12(b) MINUS the amount
thereof previously applied to make additional Capital Expenditures pursuant to
Section 6.1(d)."
(l)
(m) Section 2.12(e) of the Credit Agreement is hereby amended by adding the
following new sentence at the end thereof:
(n)
(o) "Notwithstanding the foregoing, for the period from October 7, 1998 through
January 31, 2000, no prepayment of Expansion Loans under this Section 2.12(e)
shall be required for the first $50,000,000 of Net Cash Proceeds received by the
Parent or any of its Subsidiaries from Equity Issuances other than Equity
Issuances in connection with the exercise of outstanding options, warrants,
purchase rights or conversion rights ("New Equity Issuances") during such
period. The amount of Net Cash Pro-
<PAGE>
ceeds received from New Equity Issuances in excess of $50,000,000 during this
period shall be applied in accordance with the first sentence of this Section
2.12(e)."
(p)
(q) Section 6.1(a)(i) of the Credit Agreement is hereby amended by deleting the
grid set forth therein and replacing it with the following:
(r)
DATE RATIO
--------- -----
October 31, 1998 ................................... 5.1:1
From January 31, 1999 until the
third anniversary of the Closing Date ............ 4.5:1
From the third anniversary of the
Closing Date and thereafter ...................... 4.0:1
(a) Section 6.1(b) of the Credit Agreement is hereby amended by deleting the
grid set forth therein and replacing it with the following:
(b)
DATE RATIO
---------- ------
October 31, 1998 .................................. 2.25:1
January 31, 1999 .................................. 2.25:1
April 30, 1999 .................................... 2.25:1
From July 31, 1999 until the
third anniversary of the Closing Date ........... 2.5:1
From the third anniversary of the
Closing Date and thereafter ..................... 3.0:1
(a) Section 6.1(d) of the Credit Agreement is hereby amended by (i) deleting the
number "$63,000,000" opposite the year 1999 and replacing it with the number
"$50,000,000", (ii) inserting the words "other than in fiscal year 1999" after
the words "fiscal year" in the third line of the first proviso and after the
words "fiscal year" in the seventh line of the proviso, (iii) inserting the
words "and Retained Offering Proceeds" after the words "Retained Equity
Proceeds" in clause (b) of the first proviso and (iv) adding at the end thereof
the following:
(b)
(c) "During the fiscal year of the Parent ending closest to December 31, 1999,
the usage of the maximum dollar amount set forth above is restricted in the
fol-
<PAGE>
lowing manner: (i) a maximum of $20,000,000 may be used to finance capital
expenditures for maintenance of existing stores and central offices and (ii) a
maximum of $5,000,000 in the aggregate may be used to finance capital
expenditures for new stores; PROVIDED HOWEVER, that the sum of capital
expenditures for (i) and (ii) shall not exceed $12,000,000 in the first fiscal
quarter of fiscal year 1999. In addition, if (a) the average outstanding Loans
during December, 1998 and January, 1999 is less than $125,000,000 and (b) the
Parent has Consolidated EBITDA in excess of $70,000,000 on a combined basis in
the third and fourth fiscal quarters of fiscal year 1998, then the Borrower
shall be permitted to make additional capital expenditures for new stores during
fiscal year 1999 in an amount not to exceed $5,000,000 in the aggregate. Subject
to the maximum dollar amount set forth above opposite the year 1999, during
fiscal year 1999, the Borrower shall be permitted to apply up to 30% of the Net
Cash Proceeds of the issuance of Permitted Senior Debt, 40% of the Net Cash
Proceeds of the issuance of Permitted Subordinated Debt and, to the extent
permitted under Section 2.12(e), 75% of the Net Cash Proceeds of an Equity
Issuance to finance capital expenditures."
(d)
(e) Section 6.2(e) of the Credit Agreement is hereby amended by adding after the
words "Permitted Subordinated Debt" the words "or Permitted Senior Debt".
(f)
(g) Except as otherwise specified above, there is no amendment of any other
term, condition or provision of the Credit Agreement all of which are hereby
ratified and confirmed by the Borrower and the Parent.
(h)
2. SECTION REPRESENTATIONS AND WARRANTIES; NO DEFAULTS. Each Loan Party hereby
represents and warrants that after giving effect to the amendments set forth in
Section 2 of this Agreement, (a) the representations and warranties contained in
the Credit Agreement and Loan Documents are correct on the effective date of
this Agreement, and (b) no Default or Event of Default has occurred or is
continuing on the date hereof and on the effective date of this Agreement.
3.
4. SECTION COUNTERPARTS. This Agreement (a) may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument, (b) shall be effective
only in this specific instance for the specific purpose set forth herein, and
(c) does not allow any other or further departure from the terms of the Credit
Agreement or the Loan Documents, which terms shall continue in full force and
effect.
5.
6. SECTION CONDITIONS TO EFFECTIVENESS. This Agreement shall become effective as
of the date hereof when (a) copies hereof, when taken together, bearing the
signatures of each of the Loan Parties and the Required Banks have been received
by the Administrative Agent and (b) an amendment fee of 0.25% of the Commit-
<PAGE>
ments of the Banks who have returned executed signature pages of this Agreement
to the Administrative Agent by 5:00 p.m. New York City time on Wednesday,
October 7, 1998 has been received from the Borrower by the Administrative Agent.
7.
8. SECTION APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the date and year
first written above.
SPECIALTY RETAILERS, INC.
By: /S/ MARK HESS
Name: Mark Hess
Title: Treasurer
STAGE STORES, INC.
By: /S/ MARK HESS
Name: Mark Hess
Title: Treasurer
CREDIT SUISSE FIRST BOSTON,
as Administrative Agent, Collateral Agent,
Swingline Bank and L/C Bank
By: /S/ CHRIS T. HORGAN
Name: Chris T. Horgan
Title: Vice President
By: /S/ GREGORY R. PERRY
Name: Gregory R. Perry
Title: Vice President
<PAGE>
BEAR STEARNS INVESTMENT PRODUCTS INC.
By: /S/ HARRY ROSENBERG
Name: Harry Rosenberg
Title: Authorized Signatory
BANK UNITED
By: /S/ PHIL GREEN
Name: Phil Green
Title: Director, Financial Markets
BANQUE WORMS CAPITAL CORPORATION
By: /S/ F. GARNET
Name: F. Garnet
Title: Senior Vice President
By: /S/ C. DEKLERK
Name: C. deKlerk
Title: Vice President
<PAGE>
PARIBAS (f/k/a BANQUE PARIBAS HOUSTON AGENCY)
By: /S/ CHERYL JOHNSON
Name: Cheryl Johnson
Title: Assistant Vice President
By: /S/ ROSINE K. MATTHEWS
Name: Rosine K. Matthews
Title: Vice President
BANK AUSTRIA CREDITANSTALT CORPORATION
FINANCE, Inc. F.K.A. Creditanstalt
Corporation Finance, Inc.
By: /S/ CARL G. DRAKE
Name: Carl G. Drake
Title: Vice President
By: /S/ JOHN G. TAYLOR
Name: John G. Taylor
Title: Senior Associate
HIBERNIA NATIONAL BANK
By: /S/ TROY J. VILLAFARRA
Name: Troy J. Villafarra
Title: Senior Vice president
<PAGE>
IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION
By: /S/ JAMIE HARNEY
Name: Jamie Harney
Title: Vice President
ROYAL BANK OF SCOTLAND
By: /S/ DEREK BONNAR
Name: Derek Bonnar
Title: Vice President
THE FUJI BANK, LIMITED
By: /S/ TEIJI TERAMOTO
Name: Teiji Teramoto
Title: Vice President & Manager
UNION BANK OF CALIFORNIA, N.A.
By: /S/ RICHARD P. DEGREY
Name: Richard P. Degrey
Title: Vice President
<PAGE>
FIRST COMMERCIAL BANK
By: /S/ VINCENT T. C. CHEN
Name: Vincent T. C. Chen
Title: Senior Vice President And
General Manager
EXHIBIT 4.2
SRI RECEIVABLES PURCHASE CO., INC.
Transferor
SPECIALTY RETAILERS, INC.
Servicer
and
BANKERS TRUST (DELAWARE)
Trustee
on behalf of the Series 1997-1 Certificateholders
AMENDED AND RESTATED SERIES 1997-1 SUPPLEMENT
Dated as of October 16, 1998
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of August 11, 1995 and Amended
on May 30, 1996 and August 1, 1998
Class A-1
Variable Funding Certificates, Series 1997-1
Class B-1
Variable Funding Certificates, Series 1997-1
Class B-2
Variable Funding Certificates, Series 1997-1
Class C-1
<PAGE>
Variable Funding Certificates, Series 1997-1
SRI RECEIVABLES MASTER TRUST
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. Designation 1
SECTION 2. Definitions 1
SECTION 3. Reassignment Terms 28
SECTION 4. Delivery and Payment for the Series 1997-1 Variable Funding
Certificates 29
SECTION 5. Form of Delivery of Series 1997-1 Variable Funding
Certificates 29
SECTION 6. Article IV of Agreement 29
ARTICLE IV: RIGHTS OF CERTIFICATEHOLDERS ANDALLOCATION AND APPLICATION
OF COLLECTIONS 29
Section 4.2 Establishment of Accounts 29
Section 4.4 Rights of Certificateholders 31
Section 4.5 Collections and Allocation; Payments on
Exchangeable Transferor Certificate 31
Section 4.6 Application of Funds on Deposit in the
Collection Account for the Certificates 32
Section 4.7 Coverage of Required Amount and Spread Account
for the Series 1997-1 Variable Funding Certificates. 42
Section 4.8 Payment of Certificate Interest and Other Amounts 45
Section 4.9 Payment of Certificate Principal 48
Section 4.10 Investor Charge-Offs 51
Section 4.11 Shared Principal Collections 52
SECTION 7. Article V of the Agreement 52
ARTICLE V: DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS 52
Section 5.1 Distributions 52
Section 5.2 Certificateholders' Statement 55
SECTION 8. Series 1997-1 Pay Out Events 57
SECTION 9. Article VI of the Agreement 59
Section 6.15 Additional Invested Amounts 59
<PAGE>
Section 6.16 Extension 63
SECTION 10. Series 1997-1 Termination 65
SECTION 11. Limitation on Changes in Invested Amount. 65
SECTION 12. Legends; Transfer and Exchange; Restrictions on Transfer of
Series 1997-1 Variable Funding Certificates; Tax Treatment 65
SECTION 13. Successor Trustee 73
SECTION 14. Notice to Facility Agent 73
SECTION 15. Charge Account Agreements and Credit and Collection Policies 73
SECTION 16. Successor Servicer 74
SECTION 17. Series 1997-1 Investor Exchange; Certificate Defeasance 74
SECTION 18. Ratification of Agreement 75
SECTION 19. Counterparts 75
SECTION 20. GOVERNING LAW 75
SECTION 21. The Trustee 75
SECTION 22. Instructions in Writing 75
SECTION 23. Amendment 76
SECTION 24. Discount Option 76
SECTION 25. Rating Agency Condition 76
<PAGE>
EXHIBITS
EXHIBIT A-1 Form of Class A VFC
EXHIBIT A-2 Form of Class B VFC
EXHIBIT A-3 Form of Class B-2 VFC
EXHIBIT A-4 Form of Class C VFC
EXHIBIT B Form of Monthly Certificateholders' Statement
EXHIBIT C Form of Extension Notice
EXHIBIT D Form of Investor Certificateholder Election Notice
EXHIBIT E Form of 144A Exchange Note and Certification
EXHIBIT F Representation Letter
<PAGE>
THE AMENDED AND RESTATED SERIES 1997-1 SUPPLEMENT, dated as of
October 16, 1998 (the "SERIES SUPPLEMENT") by and among SRI RECEIVABLES PURCHASE
CO., INC., a corporation organized and existing under the laws of the State of
Delaware, as Transferor (the "TRANSFEROR"), SPECIALTY RETAILERS, INC., a
corporation organized and existing under the laws of Texas, as Servicer (the
"SERVICER"), and BANKERS TRUST (DELAWARE), a banking corporation organized and
existing under the laws of the State of Delaware as trustee (together with its
successors in trust thereunder as provided in the Agreement referred to below,
the "TRUSTEE") under the Amended and Restated Pooling and Servicing Agreement
dated as of August 11, 1995, and amended as of May 30, 1996 and as of August 1,
1998 (as it may be amended hereafter, the "AGREEMENT"), among the Transferor,
the Servicer and the Trustee.
The original Series 1997-1 Supplement among the parties hereto was
entered into on December 3, 1997 and was amended as of September 28, 1998. This
Series Supplement amends and restates in its entirety such original Series
1997-1 Supplement, as heretofore amended.
Section 6.9 of the Agreement provides, among other things, that the
Transferor and the Trustee may at any time and from time to time enter into a
supplement to the Agreement for the purpose of authorizing the issuance by the
Trustee to the Transferor, for execution and redelivery to the Trustee for
authentication, one or more Series of Certificates.
Pursuant to this Series Supplement, the Transferor and the Trustee
shall create a new Series of Investor Certificates and shall specify the
Principal Terms thereof.
SECTION 1. DESIGNATION. There is hereby created a Series of Investor
Certificates to be issued pursuant to the Agreement and this Series Supplement
to be known generally as the "SERIES 1997-1 VARIABLE FUNDING CERTIFICATES." The
Series 1997-1 Variable Funding Certificates shall be issued in four Classes,
which shall be designated generally as the Class A-1 Variable Funding
Certificates, Series 1997-1 (the "CLASS A VFCS" or the "CLASS A CERTIFICATES"),
the Class B-1 Variable Funding Certificates, Series 1997-1 (the "CLASS B VFCS"
or the "CLASS B CERTIFICATES"), the Class B-2 Variable Funding Certificates,
Series 1997-1 (the "CLASS B-2 VFCS" or the "CLASS B-2 CERTIFICATES") and the
Class C-1 Variable Funding Certificates, Series 1997-1 (the "CLASS C VFCS" or
the "CLASS C CERTIFICATES").
SECTION 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 Series Supplement
shall govern with respect to the Series 1997-1 Variable Funding Certificates.
All Article, Section or subsection references herein shall mean Article, Section
or subsections of the Agreement, as amended or supplemented by this Series
Supplement, except as otherwise provided
<PAGE>
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 Variable Funding Certificates and no other Series of Certificates issued
by the Trust.
"ACCOUNT CAP" shall mean, with respect to any applicable period, the
sum of (i) the Account Cap Base Percentage, (ii) the Account Cap Payment Rate
Adjustment Percentage and (iii) the Account Cap Dilution Rate Adjustment
Percentage MINUS (iv) the Account Cap Holiday Adjustment Factor.
The "ACCOUNT CAP BASE PERCENTAGE" for a Determination Date shall
mean the percentage specified in column (C) of the Account Cap Base Table that
corresponds to the Account Cap Base Effective Level for such Determination Date.
The "ACCOUNT CAP BASE TABLE" is as follows:
-------------------------------------------------------
(A) (B) (C) (D)
Max ESP Min ESP ACBP Level
-------------------------------------------------------
n/a 3.00% 0.00% 7
-------------------------------------------------------
3.00% 2.50 0.50 6
-------------------------------------------------------
2.50 2.00 1.00 5
-------------------------------------------------------
2.00 1.50 1.50 4
-------------------------------------------------------
1.50 1.00 2.00 3
-------------------------------------------------------
1.00 0.50 2.50 2
-------------------------------------------------------
0.50 n/a 3.00 1
-------------------------------------------------------
The "ACCOUNT CAP BASE EFFECTIVE LEVEL" shall mean, on any
Determination Date, the Account Cap Base Last Month Level calculated on such
Determination Date; provided, however, that (i) if the Account Cap Base Last
Month Level calculated on such Determination Date is equal to or less than both
the Account Cap Base Three Month Level and the Account Cap Base Six Month Level,
as calculated on such Determination Date, then the Account Cap Base Effective
Level shall mean the lower of such Account Cap Base Three Month Level and such
Account Cap Base Six Month Level, or (ii) if the Account Cap Base Last Month
Level calculated on such Determination Date is greater than the Account Cap Base
Three Month Level calculated on such Determination Date, the Account Cap Base
Effective Level shall mean such Account Cap Base Three Month Level.
The "ACCOUNT CAP BASE LAST MONTH LEVEL" shall mean, on the Initial
Determination Date, the Account Cap Base Three Month Level, and on any
Determination Date following the Initial Determination Date, the Account Cap
Base Effective Level as of the preceding Determination Date.
<PAGE>
The "ACCOUNT CAP BASE SIX MONTH LEVEL" for a Determination Date
shall be the level specified in column (D) of the Account Cap Base Table at
which the Six Month Excess Spread Percentage calculated on such Determination
Date is less than or equal to the percentage specified in column (A) of the
Account Cap Base Table but in excess of the percentage specified in column (B)
of the Account Cap Base Table.
The "ACCOUNT CAP BASE THREE MONTH LEVEL" for a Determination Date
shall be the level specified in column (D) of the Account Cap Base Table at
which the Three Month Excess Spread Percentage calculated on such Determination
Date is less than or equal to the percentage specified in column (A) of the
Account Cap Base Table but in excess of the percentage specified in column (B)
of the Account Cap Base Table.
The "ACCOUNT CAP DILUTION RATE ADJUSTMENT PERCENTAGE" for a
Determination Date shall mean the percentage specified in column (C) of the
Account Cap Dilution Rate Table that corresponds to the Account Cap Dilution
Rate Effective Level for such Determination Date.
The "ACCOUNT CAP DILUTION RATE TABLE" is as follows:
-------------------------------------------------------
(A) (B) (C) (D)
Max 12M DR Min 12M DR ACDRAP Level
-------------------------------------------------------
n/a 4.00% 6.00% 4
-------------------------------------------------------
4.00% 3.00% 4.00% 3
-------------------------------------------------------
3.00 2.50 2.00 2
-------------------------------------------------------
2.50 n/a 0.00 1
-------------------------------------------------------
The "ACCOUNT CAP DILUTION RATE CURRENT LEVEL" for a Determination
Date shall be the level specified in column (D) of the Account Cap Dilution Rate
Table at which the Twelve Month Dilution Rate calculated on such Determination
Date is less than or equal to the percentage specified in column (A) of the
Account Cap Dilution Table but in excess of the percentage specified in column
(B) of the Account Cap Dilution Table.
The "ACCOUNT CAP DILUTION RATE EFFECTIVE LEVEL" shall mean, on any
Determination Date, the highest Account Cap Dilution Rate Current Level
calculated on any of such Determination Date and the preceding five
Determination Dates (or such lesser number of Determination Dates as have
occurred since the Series 1997-1 Closing Date).
"ACCOUNT CAP HOLIDAY ADJUSTMENT FACTOR" shall mean, for a
Determination Date related to a December Monthly Period or a January Monthly
Period, (i) 0.50%, if the Account Cap Base Percentage would otherwise be 0.50%
and if the Default Ratio calculated on such Determination Date is equal to or
less than 13.0%, and (ii) zero, otherwise.
<PAGE>
The "ACCOUNT CAP PAYMENT RATE ADJUSTMENT PERCENTAGE" for a
Determination Date shall mean the percentage specified in column (C) of the
Account Cap Payment Rate Table that corresponds to the Account Cap Payment Rate
Effective Level for such Determination Date.
The "ACCOUNT CAP PAYMENT RATE TABLE" is as follows:
-------------------------------------------------------
(A) (B) (C) (D)
Max PRP Min PRP ACPRAP Level
-------------------------------------------------------
n/a 10.00% 0.00% 3
-------------------------------------------------------
10.00% 8.00 1.00 2
-------------------------------------------------------
8.00 n/a 2.00 1
-------------------------------------------------------
The "ACCOUNT CAP PAYMENT RATE EFFECTIVE LEVEL" shall mean, on the
Initial Determination Date, in the Account Cap Payment Rate Three Month Level,
and on any Determination Date thereafter, the Account Cap Payment Rate Last
Month Level calculated on such Determination Date; provided, however, that (i)
if the Account Cap Payment Rate Last Month Level calculated on such
Determination Date is equal to or less than both the Account Cap Base Three
Month Level and the Account Cap Base Six Month Level, as calculated on such
Determination Date, then the Account Cap Payment Rate Effective Level shall mean
the lower of such Account Cap Payment Rate Three Month Level and such Account
Cap Base Six Month Level, or (ii) if the Account Cap Payment Rate Last Month
Level calculated on such Determination Date is greater than the Account Cap
Payment Rate Three Month Level calculated on such Determination Date, the
Account Cap Payment Rate Effective Level shall mean such Account Cap Payment
Rate Three Month Level.
The "ACCOUNT CAP PAYMENT RATE LAST MONTH LEVEL" shall mean, on any
Determination Date following the Initial Determination Date, the Account Cap
Payment Rate Effective Level as of the preceding Determination Date.
The "ACCOUNT CAP PAYMENT RATE SIX MONTH LEVEL" for a Determination
Date shall be the level specified in column (D) on the Account Cap Payment Rate
Table at which the Six Month Payment Rate Percentage calculated on such
Determination Date is less than or equal to the percentage specified in column
(A) of the Account Cap Payment Rate Table but in excess of the percentage
specified in column (B) of the Account Cap Payment Rate Table.
The "ACCOUNT CAP PAYMENT RATE THREE MONTH LEVEL" for a Determination
Date shall be the level specified in column (D) of the Account Cap Payment Rate
Table at which the Three Month Payment Rate calculated on such Determination
Date is less than or equal to the percentage specified in column (A) of the
Account Cap Payment Rate
<PAGE>
Table but in excess of the percentage specified in column (B) of the Account Cap
Payment Rate Table.
The "ACCOUNT CAP STARTUP CALCULATION RULE" shall be used in
calculating the percentages specified in column (A) below using the
corresponding inputs specified in column (B) below on any Determination Date
(the "relevant Determination Date") on which the number of Determination Dates
actually preceding the relevant Determination Date is less than the number of
preceding Determination Dates (each, a "requisite Determination Date") specified
in the definition of such percentage. In computing such percentage on any such
relevant Determination Date, the Servicer shall employ the rate specified in
column (C) below for any requisite Determination Date which preceded the Initial
Determination Date:
- -------------------------------------------------------------------------------
(A) (B) (C)
- -------------------------------------------------------------------------------
Three Month Excess Spread Percentage Excess Spread Percentage 4.5%
- -------------------------------------------------------------------------------
Six Month Excess Spread Percentage Excess Spread Percentage 4.5%
- -------------------------------------------------------------------------------
Three Month Payment Rate Percentage Payment Rate 14.0%
- -------------------------------------------------------------------------------
Six Month Payment Rate Percentage Payment Rate 14.0%
- -------------------------------------------------------------------------------
Twelve Month Dilution Rate Dilution Rate 1.75%
- -------------------------------------------------------------------------------
Thus, for example, on the seventh Determination Date, the Servicer shall compute
the Twelve Month Dilution Rate as the quotient of (x) the sum of (i) the actual
Dilution Rate for each of such Determination Date and the preceding six
Determination Dates and (ii) the product of five and 1.75% divided by (y)
twelve.
"ADDITIONAL CLASS A INVESTED AMOUNT" shall have the meaning
specified in Section 6.15 of the Agreement.
"ADDITIONAL CLASS B INVESTED AMOUNT" shall have the meaning
specified in Section 6.15 of the Agreement.
"ADDITIONAL CLASS B-2 INVESTED AMOUNT" shall have the meaning
specified in Section 6.15 of the Agreement.
"ADDITIONAL CLASS C INVESTED AMOUNT" shall have the meaning
specified in Section 6.15 of the Agreement.
"ADDITIONAL INVESTED AMOUNT" shall have the meaning specified in
Section 6.15 of the Agreement.
"ADJUSTED INVESTED AMOUNT" shall mean the sum of the Class A
Adjusted Invested Amount, the Class B Adjusted Invested Amount, the Class B-2
Adjustment Investment Amount and the Class C Adjusted Invested Amount.
<PAGE>
"AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean (a) prior to an
Extension, the earlier of (i) November 30, 2000 and (ii) the Pay Out
Commencement Date and (b) following an Extension, the earlier of (i) the date
specified as such in the Extension Notice and (ii) the Pay Out Commencement
Date.
"APPLICABLE MARGIN" shall mean the percentage per annum specified in
the relevant Fee Letter, with respect to each Bank Rate Tranche and/or Cost of
Funds Rate Tranche of the Class A Invested Amount and/or the Class B Invested
Amount, respectively.
"APPLICABLE RESERVE RATIO" shall mean for the November Monthly
Period, the December Monthly Period and the January Monthly Period, 2.0%, and
for each other Monthly Period, zero.
"AVAILABLE SERIES 1997-1 FINANCE CHARGE COLLECTIONS" shall have the
meaning specified in subsection 4.6(a).
"BANK RATE" shall mean a fluctuating rate per annum on any date
equal to 1.00% in excess of one-month LIBOR prevailing on the related Rate
Determination Date; PROVIDED, HOWEVER, that the Bank Rate shall be calculated on
the basis of the actual number of days elapsed in the applicable Interest
Accrual Period over a year of 360 days. Changes in the Bank Rate shall take
effect immediately upon their occurrence. The Facility Agent will endeavor
promptly to notify the Transferor of changes in the Bank Rate.
"BANK RATE TRANCHE" shall mean a portion of the Class A Principal
Balance and the Class B Principal Balance held by any Senior Certificateholder
which is a Committed Class A Purchaser or a Committed Class B Purchaser pursuant
to the applicable Certificate Purchase Agreement, which shall accrue interest
based on the Bank Rate.
"BUSINESS DAY" shall have the meaning set forth in the Agreement;
PROVIDED that as used in the definition of "LIBOR" and "Rate Determination
Date," "Business Day" shall mean a day that is both a "Business Day" under the
Agreement and a day for dealings by and between banks in Dollar deposits in the
London interbank eurodollar markets.
"CERTIFICATE PURCHASE AGREEMENT" shall mean, with respect to any
Class A Certificates, the Class A Certificate Purchase Agreement, with respect
to any Class B Certificates, the Class B Certificate Purchase Agreement and with
respect to any Class B-2 Certificates, the Class B-2
Certificate Purchase Agreement.
"CERTIFICATE RATE" shall mean the Class A Certificate Rate, the
Class B Certificate Rate, the Class B-2 Certificate Rate or the Class C
Certificate Rate, as applicable.
<PAGE>
"CLASS A ADJUSTED INVESTED AMOUNT" shall mean, when used with
respect to any Business Day, the Class A Invested Amount MINUS the amount on
deposit in the Principal Account allocated to the Class A Certificates.
"CLASS A AGENT" shall have the meaning specified in the preamble of
the Class A Certificate Purchase Agreement.
"CLASS A CERTIFICATE PURCHASE AGREEMENT" shall mean the Class A
Certificate Purchase Agreement, dated as of December 3, 1997 by and among
Specialty Retailers, Inc. individually and as the Originator and the Servicer,
SRI Receivables Purchase Co., Inc. individually and as the Transferor, Credit
Suisse First Boston, New York Branch, as the Class A Agent and the Class A
Purchasers, relating to the Class A Certificates.
"CLASS A CERTIFICATE RATE" shall mean for any day the weighted
average of the Tranche Rates with respect to each portion of the Class A
Principal Balance outstanding at such time (taking into account whether such
rate is calculated on a 360 or 365/6 day basis).
"CLASS A CERTIFICATEHOLDER" shall mean the Person in whose name a
Class A VFC is registered in the Certificate Register.
"CLASS A CERTIFICATEHOLDERS' INTEREST" shall mean the portion of the
Series 1997-1 Certificateholders' Interest evidenced by the Class A VFCs.
"CLASS A DAILY PRINCIPAL AMOUNT" shall have the meaning specified in
subsection 4.6(c)(i).
"CLASS A FACILITY FEE" shall mean, for any Interest Accrual Period,
the amount of "Facility Fees" specified in the Class A Fee Letter as accruing
during such Interest Accrual Period.
"CLASS A FEE LETTER" means the letter agreement dated as of December
3, 1997 among the Class A Agent, the Transferor and the Servicer, as amended
from time to time pursuant to the Class A Certificate Purchase Agreement.
"CLASS A FIXED ALLOCATION PERCENTAGE" shall mean for any Business
Day the percentage equivalent of a fraction, the numerator of which is the Class
A Invested Amount at the end of the last day of the Revolving Period and the
denominator of which is the greater of (a) the aggregate amount of Principal
Receivables in the Trust and the amount on deposit in the Equalization Account
as of the end of the last day of the Revolving Period and (b) the sum of the
numerators used to calculate the allocation percentages with respect to
Principal Collections for all Series.
"CLASS A FLOATING ALLOCATION PERCENTAGE" shall mean, with respect to
any Business Day, the percentage equivalent of a fraction, the numerator of
which is the
<PAGE>
Class A Adjusted Invested Amount as of the end of the preceding Business Day and
the denominator of which is the greater of (a) the sum of the amount of
Principal Receivables in the Trust and the amounts on deposit in the
Equalization Account at the end of the preceding Business Day and (b), with
respect to Principal Collections only, the sum of the numerators with respect to
all Classes of all Series then outstanding on such Business Day used with
respect to Principal Collections, to calculate the applicable allocation
percentage.
"CLASS A INITIAL INVESTED AMOUNT" shall mean the aggregate initial
principal amount of the Class A Certificates, which is $54,000,000.
"CLASS A INTEREST" shall have the meaning specified in subsection
4.8(a)(i).
"CLASS A INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) the Class A Initial Invested Amount, PLUS
(b) the aggregate principal amount of any Additional Class A Invested Amounts
purchased by the Class A Owners through the end of the preceding Business Day
pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments
made to Class A Certificateholders prior to such Business Day, MINUS (d) the
aggregate amount of Class A Investor Charge-Offs for all prior Business Days,
PLUS (e) the aggregate amount allocated with respect to Class A Investor
Charge-Offs and available on all prior Business Days pursuant to subsection
4.6(a)(v) for the purpose of reinstating amounts reduced pursuant to the
foregoing clause (d).
"CLASS A INVESTOR CHARGE-OFFS" shall have the meaning specified
in subsection 4.10(d).
"CLASS A INVESTOR PERCENTAGE" shall mean, for any Business Day, (a)
with respect to Finance Charge Collections and Receivables in Defaulted Accounts
at any time or Principal Collections during the Revolving Period, the Class A
Floating Allocation Percentage and (b) with respect to Principal Collections
during the Amortization Period, the Class A Fixed Allocation Percentage.
"CLASS A OWNER" shall mean a Certificateholder or, with respect to
any Class A Certificate held by the Class A Agent or any Person as nominee on
behalf of a beneficial owner of such Class A Certificate, the Person that is the
beneficial owner of the Class A Invested Amount represented by such Class A
Certificate as reflected on the books of such nominee.
"CLASS A PRINCIPAL BALANCE" shall mean, when used with respect to
any Business Day, an amount equal to (a) the Class A Initial Invested Amount,
PLUS (b) the aggregate principal amount of any Additional Class A Invested
Amounts purchased by the Class A Owners through the end of the preceding
Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of
principal payments made to Class A Certificateholders prior to such Business
Day.
<PAGE>
"CLASS A PURCHASE LIMIT" shall mean (i) $75,000,000 through (but
excluding) September 28, 1998, (ii) $150,000,000 from and after September 28,
1998 through (but excluding) April 1, 1999, (iii) $131,250,000 from and after
April 1, 1999 through but excluding) October 1, 1999, and (iv) $75,000,000
thereafter.
"CLASS A PURCHASER" shall have the meaning specified in Section 1.1
of the Class A Certificate Purchase Agreement.
"CLASS A VFCS" or "CLASS A CERTIFICATES" shall mean any of the
certificates executed by the Transferor and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit A-1 hereto.
"CLASS B ADJUSTED INVESTED AMOUNT" shall mean, when used with
respect to any Business Day, the Class B Invested Amount MINUS the amount on
deposit in the Principal Account allocated to the Class B Certificates.
"CLASS B AGENT" shall have the meaning specified in the preamble of
the Class B Certificate Purchase Agreement.
"CLASS B CERTIFICATE PURCHASE AGREEMENT" shall mean the Class B
Certificate Purchase Agreement, dated as of December 3, 1997 by and among
Specialty Retailers, Inc. individually and as the Originator and the Servicer,
SRI Receivables Purchase Co., Inc. individually and as the Transferor, Credit
Suisse First Boston, New York Branch as the Class B Agent and the Class B
Purchasers, relating to the Class B Certificates.
"CLASS B CERTIFICATE RATE" shall mean for any day the weighted
average of the Tranche Rates with respect to each portion of the Class B
Principal Balance outstanding at such time (taking into account whether such
rate is calculated on a 360 or 365/6 day basis).
"CLASS B CERTIFICATEHOLDER" shall mean the Person in whose name a
Class B VFC is registered in the Certificate Register.
"CLASS B CERTIFICATEHOLDERS' INTEREST" shall mean the portion of the
Series 1997-1 Certificateholders' Interest evidenced by the Class B VFCs.
"CLASS B DAILY PRINCIPAL AMOUNT" shall have the meaning specified in
subsection 4.6(c)(ii).
"CLASS B FACILITY FEE" shall mean, for any Interest Accrual Period,
the amount of "Facility Fees" specified in the Class B Fee Letter as accruing
during such Interest Accrual Period.
<PAGE>
"CLASS B FEE LETTER" means the letter agreement dated as of December
3, 1997 among the Class B Agent, the Transferor and the Servicer, as amended
from time to time pursuant to the Class B Certificate Purchase Agreement.
"CLASS B FIXED ALLOCATION PERCENTAGE" shall mean for any Business
Day the percentage equivalent of a fraction, the numerator of which is the Class
B Invested Amount at the end of the last day of the Revolving Period and the
denominator of which is the greater of (a) the aggregate amount of Principal
Receivables in the Trust and the amount on deposit in the Equalization Account
at the end of the last day of the Revolving Period and (b) the sum of the
numerators used to calculate allocation percentages with respect to Principal
Collections for all Series.
"CLASS B FLOATING ALLOCATION PERCENTAGE" shall mean, with respect to
any Business Day, the percentage equivalent of a fraction, the numerator of
which is the Class B Adjusted Invested Amount as of the end of the preceding
Business Day and the denominator of which is the greater of (a) the sum of the
amount of Principal Receivables in the Trust and the amounts on deposit in the
Equalization Account as of the end of the preceding Business Day and (b) with
respect to Principal Collections only, the sum of the numerators with respect to
all Classes of all Series then outstanding on such Business Day used with
respect to Principal Collections to calculate the applicable allocation
percentage.
"CLASS B INITIAL INVESTED AMOUNT" shall mean the aggregate initial
principal amount of the Class B Certificates, which is $1,000,000.
"CLASS B INTEREST" shall have the meaning specified in subsection
4.8(a)(ii).
"CLASS B INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) the Class B Initial Invested Amount, PLUS
(b) the aggregate principal amount of any Additional Class B Invested Amounts
purchased by the Class B Owners through the end of the preceding Business Day
pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments
made to Class B Certificateholders prior to such Business Day, MINUS (d) the
aggregate amount of Class B Investor Charge-Offs for all prior Business Days,
PLUS (e) the aggregate amount allocated with respect to Class B Investor
Charge-Offs and Reallocated Class B Principal Collections and available on all
prior Business Days pursuant to subsection 4.6(a)(vi) for the purpose of
reinstating amounts reduced pursuant to the foregoing clause (d) MINUS (f) the
amount of Reallocated Class B Principal Collections applied in accordance with
subsection 4.7(i).
"CLASS B INVESTOR CHARGE-OFFS" shall have the meaning specified
in subsection 4.10(c).
"CLASS B INVESTOR PERCENTAGE" shall mean, for any Distribution Date,
(a) with respect to Finance Charge Collections and Receivables in Defaulted
Accounts at any time or Principal Collections during the Revolving Period, the
Class B Floating
<PAGE>
Allocation Percentage and (b) with respect to Principal Collections during the
Amortization Period, the Class B Fixed Allocation Percentage.
"CLASS B OWNER" shall mean a Certificateholder or, with respect to
any Class B Certificate held by the Class B Agent or any Person as nominee on
behalf of a beneficial owner of such Class B Certificate, the Person that is the
beneficial owner of the Class B Invested Amount represented by such Class B
Certificate as reflected on the books of such nominee.
"CLASS B PRINCIPAL BALANCE" shall mean, when used with respect to
any Business Day, an amount equal to (a) the Class B Initial Invested Amount,
PLUS (b) the aggregate principal amount of any Additional Class B Invested
Amounts purchased by the Class B Owners through the end of the preceding
Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of
principal payments made to Class B Certificateholders prior to such Business
Day.
"CLASS B PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier
of (a) the Distribution Date in an Amortization Period on which the Class A
Invested Amount is paid in full or, if there are no Principal Collections
allocable to the Series 1997-1 Variable Funding Certificates remaining after
payments have been made to the Class A VFCs on such Distribution Date, the
Distribution Date following the Distribution Date on which the Class A Invested
Amount is paid in full and (b) the Distribution Date following a sale or
repurchase of the Receivables as set forth in Sections 2.4(e), 9.2, 10.2(a),
12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement.
"CLASS B PURCHASE LIMIT" shall mean (i) $7,500,000 through (but
excluding) September 28, 1998, (ii) $15,000,000 from and after September 28,
1998 through (but excluding) April 1, 1999, (iii) $13,125,000 from and after
April 1, 1999 through (but excluding) October 1, 1999, and (iv) $7,500,000
thereafter.
"CLASS B PURCHASER" shall have the meaning specified in Section 1.1
of the Class B Certificate Purchase Agreement.
"CLASS B VFCS" or "CLASS B CERTIFICATES" shall mean any of the
certificates executed by the Transferor and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit A-2 hereto.
"CLASS B-2 ADJUSTED INVESTED AMOUNT" shall mean, when used with
respect to any Business Day, the Class B-2 Invested Amount MINUS the amount on
deposit in the Principal Account allocated to the Class B-2 Certificates.
"CLASS B-2 AGENT" shall have the meaning specified in the preamble
of the Class B-2 Certificate Purchase Agreement.
"CLASS B-2 CERTIFICATE PURCHASE AGREEMENT" shall mean the Class B-2
Certificate Purchase Agreement, dated as of October 16, 1998 by and among
Specialty Retailers, Inc. individually and as the Originator and the Servicer,
SRI Receivables
<PAGE>
Purchase Co., Inc. individually and as the Transferor, Credit Suisse First
Boston, New York Branch as the Class B-2 Agent and the Class B-2 Purchasers,
relating to the Class B-2 Certificates.
"CLASS B-2 CERTIFICATE RATE" shall have the meaning specified in
subsection 2.1(f) of the Class B-2 Certificate Purchase Agreement.
"CLASS B-2 CERTIFICATEHOLDER" shall mean the Person in whose name a
Class B-2 VFC is registered in the Certificate Register.
"CLASS B-2 CERTIFICATEHOLDERS' INTEREST" shall mean the portion of
the Series 1997-1 Certificateholders' Interest evidenced by the Class B-2 VFCs.
"CLASS B-2 DAILY PRINCIPAL AMOUNT" shall have the meaning specified
in subsection 4.6(c)(iii).
"CLASS B-2 FACILITY FEE" shall mean, for any Interest Accrual
Period, the amount of "Commitment Fees" specified in the Class B-2 Fee Letter as
accruing during such Interest Accrual Period.
"CLASS B-2 FEE LETTER" means the letter agreement dated as of
October 16, 1998 among the Class B-2 Agent, the Transferor and the Servicer, as
amended from time to time pursuant to the Class B-2 Certificate Purchase
Agreement.
"CLASS B-2 FIXED ALLOCATION PERCENTAGE" shall mean for any Business
Day the percentage equivalent of a fraction, the numerator of which is the Class
B-2 Invested Amount at the end of the last day of the Revolving Period and the
denominator of which is the greater of (a) the aggregate amount of Principal
Receivables in the Trust and the amount on deposit in the Equalization Account
at the end of the last day of the Revolving Period and (b) the sum of the
numerators used to calculate allocation percentages with respect to Principal
Collections for all Series.
"CLASS B-2 FLOATING ALLOCATION PERCENTAGE" shall mean, with respect
to any Business Day, the percentage equivalent of a fraction, the numerator of
which is the Class B-2 Adjusted Invested Amount as of the end of the preceding
Business Day and the denominator of which is the greater of (a) the sum of the
amount of Principal Receivables in the Trust and the amounts on deposit in the
Equalization Account as of the end of the preceding Business Day and (b) with
respect to Principal Collections only, the sum of the numerators with respect to
all Classes of all Series then outstanding on such Business Day used with
respect to Principal Collections to calculate the applicable allocation
percentage.
"CLASS B-2 INITIAL INVESTED AMOUNT" shall mean the aggregate initial
principal amount of the Class B-2 Certificates, which is zero.
"CLASS B-2 INTEREST" shall have the meaning specified in
subsection 4.8(a)(vii).
<PAGE>
"CLASS B-2 INTEREST ACCRUAL" shall have the meaning specified in
subsection 4.6(a)(vii).
"CLASS B-2 INVESTED AMOUNT" shall mean, when used with respect to
any Business Day, an amount equal to (a) the Class B-2 Initial Invested Amount,
PLUS (b) the aggregate principal amount of any Additional Class B-2 Invested
Amounts purchased by the Class B-2 Owners through the end of the preceding
Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of
principal payments made to Class B-2 Certificateholders prior to such Business
Day, MINUS (d) the aggregate amount of Class B-2 Investor Charge-Offs for all
prior Business Days, PLUS (e) the aggregate amount allocated with respect to
Class B-2 Investor Charge-Offs and Reallocated Class B-2 Principal Collections
and available on all prior Business Days pursuant to subsection 4.6(a)(viii) for
the purpose of reinstating amounts reduced pursuant to the foregoing clause (d)
MINUS (f) the amount of Reallocated Class B-2 Principal Collections applied in
accordance with subsection 4.7(h).
"CLASS B-2 INVESTOR CHARGE-OFFS" shall have the meaning specified
in subsection 4.10(b).
"CLASS B-2 INVESTOR PERCENTAGE" shall mean, for any Distribution
Date, (a) with respect to Finance Charge Collections and Receivables in
Defaulted Accounts at any time or Principal Collections during the Revolving
Period, the Class B-2 Floating Allocation Percentage and (b) with respect to
Principal Collections during the Amortization Period, the Class B-2 Fixed
Allocation Percentage.
"CLASS B-2 OWNER" shall mean a Certificateholder or, with respect to
any Class B-2 Certificate held by the Class B-2 Agent or any Person as nominee
on behalf of a beneficial owner of such Class B-2 Certificate, the Person that
is the beneficial owner of the Class B-2 Invested Amount represented by such
Class B-2 Certificate as reflected on the books of such nominee.
"CLASS B-2 PRINCIPAL BALANCE" shall mean, when used with respect to
any Business Day, an amount equal to (a) the Class B-2 Initial Invested Amount,
PLUS (b) the aggregate principal amount of any Additional Class B-2 Invested
Amounts purchased by the Class B-2 Owners through the end of the preceding
Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of
principal payments made to Class B-2 Certificateholders prior to such Business
Day.
"CLASS B-2 PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the
earlier of (a) the Distribution Date in an Amortization Period on which the
Class A Invested Amount and the Class B Invested Amount is each paid in full or,
if there are no Principal Collections allocable to the Series 1997-1 Variable
Funding Certificates remaining after payments have been made to the Class A VFCs
and the Class B VFCs on such Distribution Date, the Distribution Date following
the Distribution Date on which the Class A Invested Amount and the Class B
Invested Amount is paid in full and (b) the
<PAGE>
Distribution Date following a sale or repurchase of the Receivables as set forth
in Sections 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement and Section 3 of
this Series Supplement.
"CLASS B-2 PURCHASE LIMIT" shall mean (i) $10,000,000 through and
including December 24, 1998 and (ii) zero thereafter.
"CLASS B-2 PURCHASER" shall have the meaning specified in Section
1.1 of the Class B-2 Certificate Purchase Agreement.
"CLASS B-2 VFCS" or "CLASS B-2 CERTIFICATES" shall mean any of the
certificates executed by the Transferor and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit A-3 hereto.
"CLASS C ADJUSTED INVESTED AMOUNT" shall mean, when used with
respect to any Business Day, the Class C Invested Amount MINUS the amount on
deposit in the Principal Account allocated to the Class C Certificates.
"CLASS C CERTIFICATEHOLDER" shall mean the Person in whose name a
Class C VFC is registered in the Certificate Register.
"CLASS C CERTIFICATEHOLDERS' INTEREST" shall mean the portion of the
Series 1997-1 Certificateholders' Interest evidenced by the Class C VFCs.
"CLASS C CERTIFICATE RATE" shall mean 0%.
"CLASS C DAILY PRINCIPAL AMOUNT" shall have the meaning specified in
subsection 4.6(c)(iv).
"CLASS C FIXED ALLOCATION PERCENTAGE" shall mean for any Business
Day the percentage equivalent to a fraction, the numerator of which is the Class
C Invested Amount at the end of the last day of the Revolving Period and the
denominator of which is the greater of (a) the sum of the amount of Principal
Receivables in the Trust and the amounts on deposit in the Equalization Account
at the end of the last day of the Revolving Period and (b) the sum of the
numerators used to calculate allocation percentages with respect to Principal
Collections for all Series.
"CLASS C FLOATING ALLOCATION PERCENTAGE" shall mean with respect to
any Business Day the percentage equivalent to a fraction, the numerator of which
is the Class C Invested Amount as of the end of the preceding Business Day and
the denominator of which is the greater of (a) the sum of the amount of
Principal Receivables in the Trust and the amounts on deposit in the
Equalization Account at the end of the preceding Business Day and (b) with
respect to Principal Collections only, the sum of the numerators with respect to
all Classes of all Series then outstanding on such Business Day used with
respect to Principal Collections to calculate the applicable allocation
percentage.
<PAGE>
"CLASS C INITIAL INVESTED AMOUNT" shall mean the aggregate initial
principal amount of the Class C Certificates, which is $17,000,000.
"CLASS C INTEREST" shall mean, with respect to any day of the
Interest Accrual Period, an amount equal to the aggregate amount of interest
that has accrued over such period at the Class C Certificate Rate on the Class C
Principal Balance, as of the close of business on the day immediately preceding
such day of the Interest Accrual Period.
"CLASS C INVESTED AMOUNT" shall mean, when used with respect to any
Business Day, an amount equal to (a) the Class C Initial Invested Amount, PLUS
(b) the aggregate principal amount of any Additional Class C Invested Amounts
purchased by the Class C Certificateholders through the end of the preceding
Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of
principal payments made to Class C Certificateholders prior to such Business
Day, MINUS (d) the aggregate amount of Class C Investor Charge-Offs for all
prior Business Days, PLUS (e) the aggregate amount allocated with respect to
Class C Investor Charge-Offs and Reallocated Class C Principal Collections and
available on all prior Business Days pursuant to subsection 4.6(a)(ix) for the
purpose of reinstating amounts reduced pursuant to the foregoing clause (d)
MINUS (f) the amount of Reallocated Class C Principal Collections applied in
accordance with subsection 4.7(g).
"CLASS C PRINCIPAL BALANCE" shall mean, when used with respect to
any Business Day, an amount equal to (a) the Class C Initial Invested Amount,
PLUS (b) the aggregate principal amount of any Additional Class C Invested
Amounts purchased by the Class C Certificateholders through the end of the
preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount
of principal payments made to Class C Certificateholders prior to such Business
Day.
"CLASS C INVESTOR CHARGE-OFFS" shall have the meaning specified
in subsection 4.10(a).
"CLASS C INVESTOR PERCENTAGE" shall mean, for any Business Day, (a)
with respect to Finance Charge Collections and Receivables in Defaulted Accounts
at any time or Principal Collections during the Revolving Period, the Class C
Floating Allocation Percentage and (b) with respect to Principal Collections
during the Amortization Period, the Class C Fixed Allocation Percentage.
"CLASS C PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier
of (a) the Distribution Date on which the Class A Invested Amount and the Class
B Invested Amount (and if any Class B-2 Certificates were theretofore
outstanding, the Class B-2 Invested Amount) is paid in full or, if there are no
Principal Collections allocable to the Series 1997-1 Investor Certificates
remaining after payments have been made to the Class A Certificates and the
Class B Certificates (and, if applicable, the Class B-2 Certificates) on such
Distribution Date, the Distribution Date following the
<PAGE>
Distribution Date on which the Class A Invested Amount and the Class B Invested
Amount (and, if applicable, the Class B-2 Invested Amount) is paid in full and
(b) the Distribution Date following a sale or repurchase of the Receivables as
set forth in Sections 2.4(e), 9.2, 10.2(a), 12.1 and 12.2 of the Agreement and
Section 3 of this Series Supplement.
"CLASS C VFCS" or "CLASS C CERTIFICATES" shall mean any of the
certificates executed by the Transferor and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit A-4 hereto.
"COMMITTED CLASS A PURCHASER" shall have the meaning specified in
Section 1.1 of the Class A Certificate Purchase Agreement.
"COMMITTED CLASS B PURCHASER" shall have the meaning specified in
Section 1.1 of the Class B Certificate Purchase Agreement.
"COMMITMENT" shall have the meaning specified in subsection 1.1 of
the Class A Certificate Purchase Agreement, in subsection 1.1 of the Class B
Certificate Purchase Agreement or in subsection 1.1 of the Class B-2 Certificate
Purchase Agreement, as the case may be, which means, in general, with respect to
any Class A or Class B Committed Purchaser or Class B-2 Purchaser, a commitment
to purchase a portion of the Class A Invested Amount, the Class B Invested
Amount or the Class B-2 Invested Amount, as the case may be, pursuant to the
provisions of the Class A Certificate Purchase Agreement, the Class B
Certificate Purchase Agreement or the Class B-2 Certificate Purchase Agreement,
as the case may be, to which such committed purchaser is a party.
"COMMITMENT PERCENTAGE" shall have the meaning specified in Section
1.1 of the Class A Purchase Agreement, the Class B Purchase Agreement
or the Class B-2 Purchase Agreement, as applicable.
"COST OF FUNDS RATE" shall mean, for a Noncommitted Class A
Purchaser or a Noncommitted Class B Purchaser (a "NONCOMMITTED PURCHASER") and
an Interest Accrual Period the sum of (a) the daily average for each day during
such Interest Accrual Period of the weighted average of the following rates for
such Noncommitted Purchaser:
(i) to the extent that for such day such Noncommitted
Purchaser has allocated its CP Notes which are then
outstanding to its purchase or maintenance of the outstanding
Class A Principal Balance or Class B Principal Balance (as
applicable, the "INVESTOR PRINCIPAL BALANCE") or accrued and
unpaid interest thereon ("ALLOCATED CP Notes"), the rate of
interest per annum (or if more than one rate, the weighted
average of the per annum rates) borne on such day by all
Allocated CP Notes; PROVIDED that if any such rate (or rates)
is a discount rate (or rates), then such rate shall be the
rate (or if more than one rate, the weighted average of the
rates)
<PAGE>
resulting from converting such discount rate (or rates) to an
interest-bearing equivalent rate per annum; PROVIDED FURTHER
that such rates shall in each case be adjusted, as necessary,
to give effect to commercial paper dealer or placement agent
commissions, discounts and similar fees and costs which are
allocated by such Noncommitted Purchaser to Allocated CP
Notes, and
(ii) to the extent that for such day such Noncommitted
Purchaser has not allocated its CP Notes which are then
outstanding to its purchase or maintenance of the outstanding
Investor Principal Balance or accrued and unpaid interest
thereon, the Bank Rate,
plus (b) if (i) such Noncommitted Purchaser has on any date during or prior to
such Interest Accrual Period received a payment of principal in respect of the
Investor Principal Balance or assigned all or any portion of its interest in the
Investor Principal Balance (the date of any such payment or assignment, a
"PRINCIPAL REDUCTION DATE"), in either case in an amount in excess of the
principal component of Allocated CP Notes maturing on such Principal Reduction
Date, and (ii) Allocated CP Notes (or a portion thereof) which were allocated by
such Noncommitted Purchaser to its purchase or maintenance of the repaid or
assigned portion of Investor Principal Balance remain outstanding during such
Interest Accrual Period, an amount equal to the excess, if any, of (A) such
Noncommitted Purchaser's aggregate interest cost (determined in accordance with
clause (a)(i) above) of such Allocated CP Notes (or such portion thereof) during
such Interest Accrual Period, over (B) the net earnings received by such
Noncommitted Purchaser during such Interest Accrual Period from investing the
proceeds of such reduction or assignment of such portion of the Investor
Principal Balance, such excess expressed as a per annum percentage of the daily
average Principal Balance owed to such Noncommitted Purchaser during such
Interest Accrual Period; PROVIDED that if on the last day of an Interest Accrual
Period no Investor Principal Balance is owed to such Noncommitted Purchaser, the
amount described in clause (A) above shall also include such Noncommitted
Purchaser's aggregate interest cost (determined in accordance with clause (a)(i)
above) of such Allocated CP Notes (or such portion thereof) after such Interest
Accrual Period and prior to latest maturity date of such Allocated CP Notes, and
the amount described in clause (B) above shall include the net earnings such
Noncommitted Purchaser estimates in good faith that it will receive after such
Interest Accrual Period and prior to latest maturity date of such Allocated CP
Notes from investing the proceeds of such reduction or assignment of such
portion of the Investor Principal Balance. The Cost of Funds Rate for a
Noncommitted Purchaser and an Interest Accrual Period shall be determined in
good faith by such Noncommitted Purchaser and notice thereof shall be given to
the Servicer by such Noncommitted Purchaser (or the Facility Agent on its
behalf) not later than the last day of such Interest Accrual Period.
"COST OF FUNDS RATE TRANCHE" shall mean a portion of the Class A
Principal Balance or the Class B Principal Balance held by an Class A Owner
which is a Noncommitted Class A Purchaser or a Noncommitted Class B Purchaser
pursuant to the
<PAGE>
relevant Certificate Purchase Agreement, as the case may be, which shall accrue
interest based on the Cost of Funds Rate.
"CP NOTE" shall mean any commercial paper note issued by any
Noncommitted Purchaser.
"CSFB CORPORATE BASE RATE" shall mean, for any day, the higher of
(i) the base commercial lending rate per annum announced from time to time by
Credit Suisse First Boston, New York Branch, in New York in effect on such day,
or (ii) the interest rate per annum quoted by Credit Suisse First Boston, New
York Branch, at approximately 11:00 a.m., New York City time, on such day, to
dealers in the New York Federal funds market for the overnight offering of
Dollars by Credit Suisse First Boston, New York Branch plus one-half of one
percent (0.50%). (The CSFB Corporate Base Rate is not intended to represent the
lowest rate charged by Credit Suisse First Boston, New York Branch, for
extensions of credit.)
"DAILY REQUIRED AMOUNT" shall mean, for any Business Day, the
amount, if any, by which (x) for such Business Day, the sum of the amounts
described in subsections 4.6(a)(i) through (ii) and (iv) through (xi) PLUS the
Class A Floating Allocation Percentage of the amount described in subsection
4.6(a)(iii) PLUS the Class B Floating Allocation Percentage of the amount
described in subsection 4.6(a)(iii) PLUS the Class B-2 Floating Allocation
Percentage of the amount described in subsection 4.6(a)(iii) exceeds (y) the
Finance Charge Collections available for application thereto pursuant to
subsection 4.6(a) on any Business Day.
"DECEMBER MONTHLY PERIOD" means the Monthly Period in each Fiscal
Year ending on the Sunday closest to the last calendar day of December in such
Fiscal Year.
"DEFAULT RATIO" shall mean, for a Monthly Period, the percentage
obtained by (i) dividing (a) the aggregate Default Amounts in all Accounts of
the Trust during such Monthly Period, by (b) the aggregate amount of the
Principal Receivables of the Trust outstanding as of the beginning of such
Monthly Period and (ii) adjusting to a per annum equivalent.
"DEFEASANCE ACCOUNT" shall have the meaning specified in
subsection 17(b) hereof.
"DETERMINATION DATE" shall mean the second Business Day prior to
each Distribution Date.
"DILUTION" with respect to a Receivable shall mean any downward
adjustment of such Receivable because of a rebate, refund, unauthorized charge
or billing error to an Obligor, because such Receivable was created in respect
of merchandise which was refused or returned by an Obligor, or if the Servicer
otherwise adjusts downward the amount of any receivable without receiving
Collections therefor or without changing of such amount as uncollectible.
<PAGE>
"DILUTION RATE" shall mean, with respect to a Determination Date, a
rate obtained by dividing (a) the aggregate amount of Dilution with respect to
Receivables during the related Monthly Period, by (b) the total amount of the
Receivables then outstanding as of the beginning of such Monthly Period.
"DISTRIBUTION DATE" shall mean (i) each Monthly Distribution Date,
and (ii) any date on which payments are received in the Defeasance Account. A
Distribution Date shall relate to the Monthly Period and the Interest Accrual
Period that ended prior to such Distribution Date and to the Determination Date
immediately preceding such Distribution Date.
"EARLY AMORTIZATION PERIOD" shall mean the period commencing on the
Pay Out Commencement Date and ending on the earlier to occur of (i) the date of
termination of the Trust pursuant to Section 12.1 of the Agreement or (ii) the
Series 1997-1 Termination Date.
"ELECTION NOTICE" shall have the meaning specified in subsection
6.16(a).
"ENHANCEMENT" shall mean, with respect to the Class A Certificates,
the subordination of the Class B Invested Amount, the Class B-2 Invested Amount
and the Class C Invested Amount to the Class A Invested Amount and the
reallocation of funds from the Spread Account to cover shortfalls in amounts
owing in respect of the Class A VFCs; and with respect to the Class B VFCs, the
subordination of the Class B-2 Invested Amount and the Class C Invested Amount
to the Class A Invested Amount and the Class B Invested Amount and the
reallocation of funds from the Spread Account to cover shortfalls in amounts
owing in respect of the Class B VFCs; and with respect to the Class B-2 VFCs,
the subordination of the Class C Invested Amount to the Class A Invested Amount,
the Class B Invested Amount and the Class B-2 Invested Amount and the
reallocation of funds from the Spread Account to cover shortfalls in amounts
owing in respect of the Class B-2 VFCs .
"EXCESS FINANCE CHARGE COLLECTIONS" shall mean, with respect to any
Business Day, as the context requires, either (x) the amount described in
subsections 4.6(a)(xii), 4.7(f) (clause FIRST thereof) and 4.8(a)(xiii)
initially allocated to the Series 1997-1 Variable Funding Certificates but
available for the purposes specified in such subsections, or (y) the aggregate
amount of Finance Charge Collections allocable to other Series in excess of the
amounts necessary to make required payments with respect to such Series, if any,
and available to cover shortfalls with respect to the Series 1997-1 Variable
Funding Certificates.
"EXCESS SPREAD BASE RATE" shall mean, with respect to a Monthly
Period, the higher of (x) the per annum percentage equal to the sum of (i) the
result of (a) the sum of Class A Interest, Class B Interest and Program Fees
which have accrued on the Class A VFCs and the Class B VFCs for the Interest
Accrual Period related to such Monthly Period divided by (b) the sum of (1) the
weighted average Class A Invested Amount, (2) the weighted average Class B
Invested Amount and (3) the product of 0.25 and the sum of (A) the weighted
average Class B-2 Invested Amount and (B) the weighted average Class C Invested
Amount, each during such Interest Accrual Period, and (ii) only if SRI or its
Affiliate is not the Servicer during such Monthly Period, the Series Servicing
Fee Percentage, and (y) the per annum percentage equal to the sum of (i) the
result of (a) the sum of Class A Interest, Class B Interest, the Class B-2
Interest, and Program Fees which have accrued on the Class A VFCs, the Class B
VFCs and the Class B-2 VFCs for the Interest Accrual Period related to such
Monthly Period divided by (b) the sum of (1) the weighted average Class A
Invested Amount, (2)
<PAGE>
the weighted average Class B Invested Amount, (3) the weighted average Class B-2
Invested Amount and (4) the weighted average Class C Invested Amount, each
during such Interest Accrual Period, and (ii) only if SRI or its Affiliate is
not the Servicer during such Monthly Period, the Series Servicing Fee
Percentage.
"EXCESS SPREAD PERCENTAGE" shall mean, with respect to any Monthly
Period, a per annum percentage equal to the remainder of (a) the Trust Portfolio
Yield for such Monthly Period MINUS the Excess Spread Base Rate for such Monthly
Period.
"EXITING CLASS A PURCHASER" shall have the meaning specified in
subsection 4.6(e).
"EXITING CLASS B PURCHASER" shall have the meaning specified in
subsection 4.6(e).
"EXITING PURCHASER" shall have the meaning specified in
subsection 4.6(e).
"EXITING PURCHASERS' ALLOCATION PERCENTAGE" shall mean, with respect
to all Exiting Purchasers on any Business Day, a percentage designated by the
Transferor which shall (i) not be less than the percentage equivalent of a
fraction, the numerator of which is the aggregate Adjusted Invested Amount of
all such Exiting Purchasers on such Business Day, and the denominator of which
is the greater of (a) the sum of the amount of Principal Receivables in the
Trust and the amounts on deposit in the Equalization Account as of the end of
the preceding Business Day and (b) the aggregate Invested Amount of all Series
then outstanding on such Business Day (or, for any Series which is then in an
Amortization Period, its Invested Amount as of the end of its Revolving Period)
and (ii) not be greater than 100%.
"EXTENSION" shall mean the procedure by which the Investor
Certificateholders consent to the extension of the Revolving Period to the new
Amortization Period Commencement Date set forth in the Extension Notice,
pursuant to Section 6.16.
"EXTENSION DATE" shall mean November 30, 2000 or if an Extension has
already occurred, the date of the next Extension Date set forth in the Extension
Notice relating to the Extension then in effect (or, if any such date is not a
Business Day, the next preceding Business Day).
<PAGE>
"EXTENSION NOTICE" shall have the meaning specified in subsection
6.16(a) of the Agreement.
"EXTENSION OPINION" shall have the meaning specified in
subsection 6.16(a) of the Agreement.
"EXTENSION TAX OPINION" shall have the meaning specified in
subsection 6.16(a) of the Agreement.
"FACILITIES COSTS" shall mean, for any Interest Accrual Period, an
amount, as notified in writing by the Facility Agent to the Transferor, the
Servicer and the Trustee on or prior to the related Determination Date, equal to
all amounts owing by the Transferor under the applicable Certificate Purchase
Agreement, including Program Fees but excluding those fees and other costs
covered by the calculation of the Cost of Funds Rate.
"FACILITY AGENT" shall mean the agent from time to time serving as
the Facility Agent under the Certificate Purchase Agreements.
"FEE LETTER" means, with respect to the Class A Certificateholders'
Interest, the Class A Fee Letter, with respect to the Class B
Certificateholders' Interest, the Class B Fee Letter, and with respect to the
Class B-2 Certificateholders' Interest, the Class B-2 Fee Letter.
"FIXED ALLOCATION PERCENTAGE" shall mean for any Business Day the
percentage equivalent of a fraction, the numerator of which is the Invested
Amount at the end of the last day of the Revolving Period and the denominator of
which is the greater of (a) the sum of the aggregate amount of Principal
Receivables in the Trust and the amount on deposit in the Equalization Account
as of the end of the last day of the Revolving Period and (b) the sum of the
numerators used to calculate the allocation percentages with respect to
Principal Collections for all Series in their Revolving Periods on such Business
Day or, with respect to any Series in its Amortization Period, for each Class to
which principal is being allocated for payment on such Business Day.
"FLOATING ALLOCATION PERCENTAGE" shall mean for any Business Day the
sum of the applicable Class A Floating Allocation Percentage, Class B Floating
Allocation Percentage, Class B-2 Floating Allocation Percentage and Class C
Floating Allocation Percentage for such Business Day.
"INITIAL DETERMINATION DATE" shall mean January 13, 1998.
"INITIAL INVESTED AMOUNT" shall mean the aggregate initial principal
amount of the Investor Certificates.
"INITIAL MONTHLY DISTRIBUTION DATE" shall mean January 15, 1998.
<PAGE>
"INTEREST ACCRUAL" shall have the meaning specified in subsection
4.6(a)(i).
"INTEREST ACCRUAL PERIOD" shall mean, with respect to a related
Distribution Date, the period from and including the Determination Date related
to the immediately preceding Distribution Date to but excluding the
Determination Date preceding the related Distribution Date; PROVIDED, however,
that the initial Interest Accrual Period will run from and including the Series
1997-1 Closing Date to but excluding the Initial Determination Date; and
PROVIDED, FURTHER, that a final Interest Accrual Period will run from the
Determination Date preceding the final Distribution Date to but excluding the
final Distribution Date. An Interest Accrual Period shall relate to the Monthly
Period that has the same related Distribution Date.
"INTEREST ACCRUAL RATE" shall mean, with respect to an Interest
Accrual Period, a per annum rate equal to LIBOR with respect to such Interest
Accrual Period PLUS 0.50%.
"INTEREST/PROGRAM FEE SHORTFALL" shall mean, with respect to a
Determination Date, the amount, if any, by which (x) the sum of (i) the
aggregate amount of unpaid interest which will have accrued on the Class A VFCs
and the Class B VFCs as of such Determination Date and (ii) the aggregate unpaid
Program Fees with respect to Class A VFCs and Class B VFCs which will have
accrued as of such Determination Date and (iii) all unpaid interest which will
have accrued on unpaid amounts described in clause (i) or (ii) above as of such
Determination Date exceeds (y) the amount of funds that will have been set aside
in the Interest Funding Account as of the related Transfer Date pursuant to
subsections 4.6(a)(i) through (ii).
"INVESTED AMOUNT" shall mean, when used with respect to any Business
Day, an amount equal to the sum of (a) the Class A Invested Amount as of such
Business Day, (b) the Class B Invested Amount as of such Business Day, (c) the
Class B-2 Invested Amount as of such Business Day and (d) the Class C Invested
Amount as of such Business Day.
"INVESTED AMOUNT CHANGE" shall have the meaning specified in Section
11 below.
"INVESTOR CERTIFICATEHOLDERS" shall mean all of the Holders of
record of Investor Certificates of Series 1997-1.
"INVESTOR CERTIFICATES" shall mean the Class A VFCs, the Class B
VFCs, the Class B-2 VFCs and the Class C VFCs.
"INVESTOR CHARGE-OFFS" shall mean the sum of Class A Investor
Charge-Offs, Class B Investor Charge-Offs, Class B-2 Investment Charge-Offs
and Class C Investor Charge-Offs.
<PAGE>
"INVESTOR DEFAULT AMOUNT" shall mean, with respect to each Business
Day, an amount equal to the product of the Default Amount for such Business Day
and the Floating Allocation Percentage applicable for such Business Day.
"INVESTOR PERCENTAGE" shall mean for any Business Day, (a) with
respect to Finance Charge Collections and Receivables in Defaulted Accounts at
any time or Principal Collections during the Revolving Period, the Floating
Allocation Percentage and (b) with respect to Principal Collections during the
Amortization Period, the Fixed Allocation Percentage.
"JANUARY MONTHLY PERIOD" means the Monthly Period in each Fiscal
Year ending on the Sunday closest to the last calendar day of January in such
Fiscal Year.
"LIBOR" shall mean, for an Interest Accrual Period, the rate
obtained by dividing (x) the offered rate for deposits in United States Dollars
having an one-month maturity period which appears on the Dow Jones Telerate
System, page 3750, as of 11:00 a.m. London time on the related Rate
Determination Date by (y) a percentage equal to one minus the stated maximum
rate (stated as a decimal) of all reserves required to be maintained against
"Eurocurrency Liabilities" as specified in Regulation D (or against any other
category of liabilities which includes deposits by reference to which the
interest rate on LIBOR is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any bank to
United States residents). In the event the rate specified in clause (x) shall
not be provided, "LIBOR" shall mean (a) the arithmetic average (rounded upwards
to the nearest 1/16th of l%) of the rates at which deposits in United States
dollars are offered to four reference banks selected by the Facility Agent in
the interbank eurodollar market at approximately 11:00 a.m. (London time) on the
Rate Determination Date divided by (b) the percentage specified in clause (y)
above.
"MAXIMUM SPREAD ACCOUNT AMOUNT" shall have the meaning specified in
subsection 4.2(g).
"MEASURING PERIOD" shall mean, with respect to any day, the period
from (i) the later of (a) the Series 1997-1 Closing Date and (b) the first day
of the eleventh Monthly Period preceding the Monthly Period in which such day
occurs through (ii) such day.
"MINIMUM TRANSFEROR PERCENTAGE" shall mean the Applicable Reserve
Ratio.
"MONTHLY ADJUSTED REQUIRED AMOUNT" shall mean, with respect to a
Determination Date, the sum of (i) the Monthly Required Amount (after giving
effect to allocations on such Determination Date pursuant to subsection 4.7(f))
and (ii) the amount by which the sum of the amounts described in subsections
4.6(a)(xiii) and (xiv) exceeds the amount of Finance Charge Collections
available for application thereto on such Determination Date (after making the
applications described in Section 4.7(b)).
<PAGE>
"MONTHLY DISTRIBUTION DATE" shall mean the Initial Monthly
Distribution Date and fifteenth day of each calendar month thereafter, or if
such day is not a Business Day, the next succeeding Business Day.
"MONTHLY PERIOD" shall have the meaning specified in the Agreement,
except that the first Monthly Period with respect to the Series 1997-1 Variable
Funding Certificates shall begin on and include the Series 1997-1 Closing Date
and shall end on and include December 28, 1997.
"MONTHLY REQUIRED AMOUNT" shall mean, with respect to a
Determination Date, the amount, if any, by which (x) for such Determination
Date, the sum of the amounts described in subsections 4.6(a)(iv) through (xi),
PLUS the Class A Floating Allocation Percentage of the amount described in
subsection 4.6(a)(iii), PLUS the Class B Floating Allocation Percentage of the
amount described in subsection 4.6(a)(iii), PLUS the Class B-2 Floating
Allocation Percentage of the amount described in subsection 4.6(a)(iii), PLUS
any Interest/Program Fee Shortfall exceeds (y) the Finance Charge Collections
available for application thereto pursuant to subsection 4.6(a) on such
Determination Date (after making the applications described in Section 4.7(b)).
"NET BORROWED EXCESS SPREAD AMOUNT" shall mean, on any Business Day
during a Monthly Period, the excess, if any, of (x) the cumulative amounts of
Excess Finance Charge Collections from other Series which, pursuant to
subsection 4.7(b), have been allocated to the Series 1997-1 Variable Funding
Certificates on such Business Day and on each prior Business Day during such
Monthly Period over (y) the cumulative amounts of Available Series 1997-1
Finance Charge Collections which, pursuant to subsection 4.6(a)(xii), have been
allocated to other Series on such Business Day and on each prior Business Day
during such Monthly Period.
"NONCOMMITTED CLASS A PURCHASER" shall have the meaning specified in
Section 1.1 of the Class A Certificate Purchase Agreement.
"NONCOMMITTED CLASS B PURCHASER" shall have the meaning specified in
Section 1.1 of the Class B Certificate Purchase Agreement.
"NONEXTENDING CLASS A PURCHASER" shall have the meaning specified in
Section 1.1 of the Class A Certificate Purchase Agreement.
"NONEXTENDING CLASS B PURCHASER" shall have the meaning specified in
Section 1.1 of the Class B Certificate Purchase Agreement.
"PARTIAL AMORTIZATION AMOUNT" shall mean, as of any date, the
smallest amount that, if distributed to the Senior Certificateholders on such
date, would result in (x) (i) the sum of the Class A Principal Balance and the
Class B Principal Balance on such date not being greater than (ii) the sum of
the Class A Purchase Limit plus the Class B Purchase Limit on such date, and (y)
the Class B-2 Principal Balance on such date not being greater than the Class
B-2 Purchase Limit on such date.
<PAGE>
"PAY OUT COMMENCEMENT DATE" shall mean the date on which a Trust Pay
Out Event is deemed to occur pursuant to Section 9.1 of the Agreement or a
Series 1997-1 Pay Out Event is deemed to occur pursuant to Section 8 of this
Series Supplement.
"PAYMENT RATE" shall mean for any Monthly Period the percentage
obtained by dividing the aggregate amount of Principal Collections during such
Monthly Period by the aggregate amount of Principal Receivables outstanding as
of the beginning of such Monthly Period.
"PORTFOLIO CORRECTION AMOUNT" shall mean the smallest amount which,
if distributed to certificateholders of the Trust in reduction of the aggregate
invested amount of all certificates upon the occurrence of a Portfolio Imbalance
Event, would result in compliance with the percentage limitation in the
definition of Portfolio Imbalance Event the violation of which gave rise to such
Portfolio Imbalance Event.
"PORTFOLIO CORRECTION DISTRIBUTION DATE" shall mean the first
Distribution Date following the occurrence of a Portfolio Imbalance Event.
"PORTFOLIO IMBALANCE EVENT" shall mean an event which will occur if,
on the last day of any Monthly Period occurring during the Revolving Period (the
"MEASUREMENT DAY"), (a) on each of such day and the last day of each of the
preceding eleven consecutive Monthly Periods, (i) the amount of all Cash
Equivalents and other amounts on deposit in the Equalization Account exceeded
25% of (ii) the sum of all Principal Receivables and Cash Equivalents and other
amounts on deposit in the Equalization Account on each such day, or (b) on each
of the measurement day and the last day of the preceding Monthly Period, (i) the
amount of all Cash Equivalents and other amounts on deposit in the Equalization
Account exceeded 45% of (ii) the sum of all Principal Receivables and Cash
Equivalents and other amounts on deposit in the Equalization Account on each
such day. All such amounts shall be calculated after giving effect to all
amounts to be distributed on the Distribution Date following the last day of the
applicable Monthly Period.
"PRINCIPAL DISTRIBUTION DATE" shall mean (i) each Business Day
during the Revolving Period on which the Transferor elects, upon not less than
one Business Day's notice to the Facility Agent, to repay principal on the
Investor Certificates, (ii) each Business Day on which the Transferor elects to
make payments to Exiting Purchasers pursuant to subsection 4.9(c), (iii) the
Business Day following each day during the Revolving Period on which the Partial
Amortization Amount in respect of the Class A VFCs or the Class B VFCs exceeds
zero and there are funds on deposit in the Principal Funding Account in an
amount equal to or greater than $1,000,000, in respect of the aggregate of Class
A VFCs and Class B VFCs, or, if such Partial Amortization Amount in respect of
the aggregate of Class A VFCs and Class B VFCs is then less than $1,000,000, in
an amount equal to or greater than such Partial Amortization Amount, and (iv)
the Business Day following each day during the Revolving Period on which the
<PAGE>
Partial Amortization Amount in respect of the Class B-2 VFCs exceeds zero and
there are funds on deposit in the Principal Funding Account in an amount equal
to or greater than $500,000 or, if such Partial Amortization Amount is then less
than $500,000, in an amount equal to or greater than such Partial Amortization
Amount.
"PRINCIPAL SHORTFALLS" shall mean on any Business Day (x) for the
Series 1997-1 Variable Funding Certificates, the Adjusted Invested Amount of
each class of Senior Certificates then receiving principal payments after the
application of Principal Collections on such Business Day or (y) for any other
Series, the amounts specified as such in the Supplement for such other
Series.
"PROGRAM FEES" shall mean, for any Interest Accrual Period, the sum
of (a) the Class A Facility Fee for such Interest Accrual Period, (b) the Class
B Facility Fee for such Interest Accrual Period (c) the Class B-2 Facility Fee
for such Interest Accrual Period and (d) the Utilization Fee for such Interest
Accrual Period.
"PURCHASE DATE" shall mean any Business Day on which the purchase of
an Additional Invested Amount is to occur pursuant to Section 6.15 of the
Agreement.
"RATE DETERMINATION DATE" shall mean, with respect to any Interest
Accrual Period, the second Business Day before the first day of such Interest
Accrual Period.
"RATING AGENCY" shall mean each of Standard & Poor's Ratings
Services, a Division of the McGraw-Hill Companies, and Moody's Investors
Service, Inc.
"REALLOCATED CLASS B PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.7(i).
"REALLOCATED CLASS B-2 PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.7(h).
"REALLOCATED CLASS C PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.7(g).
"RELEASED SPREAD ACCOUNT AMOUNT" shall have the meaning specified in
subsection 4.2(h).
"REPAYABLE SERVICING FEE AMOUNT" shall mean, for any Business Day of
a Monthly Period, only if SRI or its Affiliate is the Servicer, an amount equal
to the aggregate amounts distributed to the Servicer in respect of the Servicing
Fee pursuant to subsection 4.6(a)(xv) for any preceding Business Day during such
Monthly Period.
"REQUIRED CLASS A PURCHASERS" and "REQUIRED CLASS A OWNERS" shall
have the respective meanings specified in Section 1.1 of the Class A Certificate
Purchase Agreement.
<PAGE>
"REQUIRED CLASS B PURCHASERS" and "REQUIRED CLASS B OWNERS" shall
have the respective meanings specified in Section 1.1 of the Class B Certificate
Purchase Agreement.
"REVOLVING PERIOD" shall mean the period from and including the
Series 1997-1 Closing Date to, but not including, the Amortization Period
Commencement Date.
"SCHEDULED SERIES 1997-1 TERMINATION DATE" shall mean the
December, 2003 Distribution Date.
"SENIOR CERTIFICATEHOLDER" shall mean the Person in whose name a
Class A VFC, a Class B VFC or a Class B-2 VFC is registered in the Certificate
Register.
"SENIOR CERTIFICATES" shall mean the Class A Certificates, the Class
B Certificates and the Class B-2 Certificates.
"SERIES 1997-1" shall mean the Series of the SRI Receivables Master
Trust represented by the Series 1997-1 Variable Funding Certificates.
"SERIES 1997-1 CERTIFICATEHOLDER" shall mean the holder of record of
any Series 1997-1 Variable Funding Certificate.
"SERIES 1997-1 CERTIFICATEHOLDERS' INTEREST" shall have the meaning
specified in Section 4.4.
"SERIES 1997-1 CLOSING DATE" shall mean December 3, 1997.
"SERIES 1997-1 PAY OUT EVENT" shall have the meaning specified in
Section 8.
"SERIES 1997-1 PRINCIPAL COLLECTIONS" shall have the meaning
specified in subsection 4.6(d).
"SERIES 1997-1 TERMINATION DATE" shall mean the earlier to occur of
(i) the day after the Distribution Date on which the Series 1997-1 Variable
Funding Certificates are paid in full, or (ii) the Scheduled Series 1997-1
Termination Date.
"SERIES SERVICING FEE PERCENTAGE" shall mean 2.0%.
"SERVICING FEE" shall mean, for any Monthly Period, an amount equal
to the product of (i) one-twelfth, (ii) the Series Servicing Fee Percentage and
(iii) the Adjusted Invested Amount as of the preceding Record Date, or, in the
case of the first Distribution Date, the Initial Invested Amount.
<PAGE>
"SERVICING FEE ACCRUAL" shall mean, for any Business Day of a
Monthly Period, an amount equal to the product of (i) the number of days elapsed
from the Business Day immediately preceding such Business Day and (ii) the
quotient of (x) the Servicing Fee for such Monthly Period divided by (y) the
number of days in such Monthly Period.
"SHARED PRINCIPAL COLLECTIONS" shall mean, as the context requires,
either (a) the amount allocated to the Series 1997-1 Variable Funding
Certificates which, in accordance with subsection 4.6(d) or 4.9(g), may be
applied in accordance with subsection 4.3(e) of the Agreement or (b) the amounts
allocated to the investor certificates (other than Transferor Retained
Certificates) of other Series which 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 Series 1997-1 Variable
Funding Certificates.
"SIX MONTH EXCESS SPREAD PERCENTAGE" shall mean, for any
Determination Date, the arithmetic average of the Excess Spread Percentages
calculated on such Determination Date and the five preceding Determination Dates
(calculated utilizing the Account Cap Start-up Calculation Rule).
"SIX MONTH PAYMENT RATE PERCENTAGE" shall mean, for any
Determination Date, the arithmetic average of the Payment Rates calculated on
such Determination Date and the five preceding Determination Dates (calculated
utilizing the Account Cap Start-up Calculation Rule).
"SPREAD ACCOUNT" shall have the meaning specified in subsection
4.2(f).
"STORED EXCESS FINANCE CHARGE COLLECTIONS" shall mean (i) with
respect to any Business Day, the Finance Charge Collections that are designated
as such pursuant to subsection 4.6(a)(xvi) and (ii) with respect to any Transfer
Date, the cumulative amount of Finance Charge Collections designated as such
during the related Monthly Period.
"TERMINATION PAYMENT DATE" shall mean the earlier of the first
Distribution Date following the liquidation or sale of the Receivables as a
result of an Insolvency Event and the occurrence of the Scheduled Series 1997-1
Termination Date.
"THREE MONTH EXCESS SPREAD PERCENTAGE" shall mean, for any
Determination Date, the arithmetic average of the Excess Spread Percentages
calculated on such Determination Date and the two preceding Determination Dates
(calculated utilizing the Account Cap Start-up Calculation Rule).
"THREE MONTH PAYMENT RATE PERCENTAGE" shall mean, for any
Determination Date, the arithmetic average of the Payment Rates calculated on
such Determination Date and the two preceding Determination Dates (calculated
utilizing the Account Cap Start-up Calculation Rule).
<PAGE>
"TRANCHE" shall mean a Cost of Funds Rate Tranche or a Bank Rate
Tranche.
"TRANCHE RATE" shall mean the interest rate applicable to each
portion of the Class A Principal Balance and the Class B Principal Balance,
which shall be, with respect to any Cost of Funds Rate Tranche, the Cost of
Funds Rate applicable thereto and with respect to any Bank Rate Tranche, the
Bank Rate applicable thereto.
"TRANSFEROR FINANCE CHARGE COLLECTIONS" shall mean on any Business
Day the product of (a) the Finance Charge Collections for such Business Day, (b)
the Transferor Percentage and (c) the Floating Allocation Percentage.
"TRANSFEROR RETAINED CERTIFICATES" shall mean investor certificates
of any Series, including the Class C VFCs, which the Transferor is required to
retain, but only for so long as the Transferor is the Holder of such
Certificates.
"TRUST BASE RATE" shall mean, with respect to a Monthly Period, the
per annum percentage equal to the sum of (i) the Interest Accrual Rate for the
Interest Accrual Period related to such Monthly Period and (ii) the Series
Servicing Fee Percentage only if SRI or its Affiliate is not the Servicer during
such Monthly Period.
"TRUST PORTFOLIO YIELD" shall mean, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction, (a) the numerator of
which is an amount equal to the result, for all days during such Monthly Period,
of (i) the aggregate Finance Charge Collections, MINUS (ii) the aggregate
Discount Option Receivables Collections, MINUS (iii) the aggregate Default
Amounts and (b) the denominator of which is the aggregate amount of Principal
Receivables outstanding as of the beginning of the Monthly Period.
The "TWELVE MONTH DILUTION RATE" shall mean, for any Determination
Date, the arithmetic average of the Dilution Rates calculated on such
Determination Date and the eleven preceding Determination Dates (calculated
utilizing the Account Cap Start-up Calculation Rule).
"UTILIZATION FEE" shall mean an amount, payable on each Distribution
Date in the amount calculated as provided in Section 2.3(a) of each Certificate
Purchase Agreement.
"VFC ADDITIONAL INVESTED AMOUNT" shall mean an Additional Invested
Amount (as defined in Section 6.15 of the Agreement).
SECTION 3. REASSIGNMENT TERMS. (a) The Senior Certificates shall be
subject to repurchase by the Transferor at its option, in accordance with the
terms specified in subsection 12.2(a) of the Agreement, on any Distribution Date
on or after the Distribution Date on which the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class B-2 Invested Amount is reduced
to an amount less than or
<PAGE>
equal to 10% of the sum of the highest combined Class A Invested Amount, Class B
Invested Amount and Class B-2 Invested Amount at any time during the Revolving
Period. The deposit required in connection with any such repurchase and final
distribution shall be equal to the sum of the Class A Principal Balance Invested
Amount, the Class B Invested Amount and the Class B-2 Invested Amount PLUS any
accrued and unpaid interest on such Certificates PLUS any accrued and unpaid
Facilities Costs PLUS any accrued and unpaid interest on unpaid interest on
Senior Certificates or unpaid Facilities Costs through the day prior to the
Distribution Date on which the final distribution occurs. The deposit required
to be made in connection with a sale or repurchase of the Receivables as set
forth in sections 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement shall,
unless otherwise specified in the Agreement, be equal to the sum of the Class A
Invested Amount and the Class C Invested Amount plus any accrued and unpaid
interest on unpaid interest on Senior Certificates or unpaid Facilities Costs
PLUS any accrued and unpaid interest on unpaid interest on Senior Certificates
or unpaid Facilities Costs through the day prior to the Distribution Date on
which the final distribution occurs.
(b) Each Certificateholder, by accepting and holding such Certificate or
interest therein, will be deemed to have represented and warranted that it is
not (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is
subject to the provisions of Title I of ERISA, (ii) a plan described in Section
4975(c)(1) of the Internal Revenue Code, or (iii) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity.
SECTION 4. DELIVERY AND PAYMENT FOR THE SERIES 1997-1 VARIABLE
FUNDING CERTIFICATES. The Transferor shall execute and deliver the Series 1997-1
Variable Funding Certificates to the Trustee for authentication in accordance
with Section 6.1 of the Agreement. The Trustee shall deliver the Series 1997-1
Variable Funding Certificates to or upon the order of the Transferor when
authenticated in accordance with Section 6.2 of the Agreement.
SECTION 5. FORM OF DELIVERY OF SERIES 1997-1 VARIABLE FUNDING
CERTIFICATES. The Class A VFCs, the Class B VFCs, the Class B-2 VFCs and the
Class C VFCs shall be delivered as Registered Certificates as provided in
Section 6.1 of the Agreement.
SECTION 6. ARTICLE IV OF AGREEMENT. Sections 4.l, 4.2 (a) through
(e) and 4.3 of the Agreement shall read in their entirety as provided in the
Agreement. Article IV of the Agreement (except for Sections 4.1, 4.2(a) through
(e) and 4.3 thereof) shall read in its entirety as follows and shall be
applicable only to the Series 1997-1 Variable Funding Certificates:
<PAGE>
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.2 ESTABLISHMENT OF ACCOUNTS.
(F) THE SPREAD ACCOUNT. The Servicer, for the benefit of the Senior
Certificateholders, shall cause to be established and maintained in the name of
the Trustee, with an office or branch of a Qualified Institution (including
Bankers Trust Company), a segregated trust account for the Series 1997-1 (the
"SPREAD ACCOUNT") bearing a designation clearly indicating that the funds
deposited therein are held in trust for the benefit of the Senior
Certificateholders. The Servicer shall give written notice to the Trustee of the
location and account number of the Spread Account and shall notify the Trustee
in writing prior to any subsequent change thereof. The Trustee shall possess all
right, title and interest in all funds on deposit from time to time in the
Spread Account and in all proceeds thereof. The Spread Account shall be under
the sole dominion and control of the Trustee for the benefit of the Senior
Certificateholders. The Transferor does hereby transfer, assign, set-over, and
otherwise convey to the Trust for the benefit of the Senior Certificateholders,
without recourse, all of its right, title and interest in, to and under:
(i) the Spread Account, all funds, and all investment
property, certificates and instruments, if any, from time to time
representing or evidencing or held in the Spread Account;
(ii) all investments of amounts on deposit in the Spread
Account from time to time and all investment property, certificates and
instruments, if any, from time to time representing or evidencing such
investments;
(iii) all notes, certificates of deposit, investment property
and other instruments from time to time hereafter delivered to or
otherwise possessed by the Trustee for and on behalf of the Transferor in
substitution for or in addition to any of the then existing Spread Account
property;
(iv) all interest, dividends, cash, investment property,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any and all of the
existing Spread Account property; and
(v) all additional property designated as being Spread Account
property that may from time to time hereafter be assigned or pledged to
the Trustee for the benefit of the Series 1997-1 Certificateholders
hereunder by the Transferor or by any Person on the Transferor's behalf.
<PAGE>
(G) MAXIMUM SPREAD ACCOUNT AMOUNT. On each Determination Date, the
Servicer shall compute the Account Cap and the Maximum Spread Account Amount.
The Account Cap determined pursuant to the previous sentence will, except as
specified in the proviso to the following sentence, be in effect from and
including the related Distribution Date to but excluding the next subsequent
Distribution Date. The maximum amount required to be held on deposit in the
Spread Account (the "MAXIMUM SPREAD ACCOUNT AMOUNT") shall be zero until the
Initial Determination Date and on any day thereafter shall equal the product of
(i) the Account Cap established on the most recent Determination Date and (ii)
the Invested Amount as of such day; PROVIDED, HOWEVER, that on or after the
occurrence of a Series 1997-1 Pay Out Event, the Maximum Spread Account Amount
for any day shall equal (i) the sum of the Class A Principal Balance, the Class
B Principal Balance and the Class B-2 Principal Balance on such day, MINUS (ii)
the amount of the available funds in the Principal Account as of such day after
giving effect to all deposits pursuant to subsection 4.6(a)(xiii).
(H) DEPOSITS INTO AND WITHDRAWALS FROM THE SPREAD ACCOUNT. On each
Business Day, the Servicer shall instruct the Trustee to withdraw funds from the
Collection Account in the amount specified in subsection 4.6(a)(xiii) and
deposit them into the Spread Account and to withdraw from the Spread Account
such amounts as are specified in subsection 4.7(d) to be withdrawn from the
Spread Account and to deposit or pay such amounts as provided in subsection
4.7(d). On any Business Day, the Transferor may (but shall have no obligation
to) deposit additional funds into the Spread Account. On any Purchase Date, the
Servicer may cause a portion of the proceeds of the sale of Additional Invested
Amount to be deposited into the Spread Account in satisfaction of the condition
precedent in Section 3.2(e) of each Certificate Purchase Agreement. On any
Business Day, the Servicer may instruct the Trustee to withdraw any excess, of
the funds available in the Spread Account over the Maximum Spread Account Amount
applicable to such Business Day from the Spread Account and pay such funds (the
"RELEASED SPREAD ACCOUNT AMOUNT") to the Transferor. Funds shall be withdrawn
from the Spread Account and applied as provided in Section 4.7(d). Such Related
Spread Account Amount shall be treated on the next succeeding Business Day as
Available Series 1997-1 Finance Charge Collections and the Transferor shall make
the Released Spread Account Amount available to the Trustee on such succeeding
Business Day (to the extent that other services of Available Series 1997-1
Finance Charge collections are insufficient for the uses described in subsection
4.6(a)). Funds in the Spread Account shall be invested at the direction of the
Servicer in Cash Equivalents that mature at or prior to the time required by the
Agreement or the Series 1997-1 Supplement. Any earnings on such invested funds
shall be deposited and held in the Spread Account and applied in the same manner
and priority as other amounts therein.
SECTION 4.4 RIGHTS OF CERTIFICATEHOLDERS. The Series 1997-1 Variable
Funding 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 Series 1997-1 Variable Funding Certificates at the
times and in the amounts specified in this Agreement, (a) the Floating
Allocation Percentage and Fixed Allocation Percentage (as applicable from time
to time) of Collections available in the Collection
<PAGE>
Account, (b) funds allocable to the Series 1997-1 Variable Funding Certificates
on deposit in the Equalization Account and (c) funds on deposit in the Interest
Funding Account, the Principal Account, the Spread Account and the Distribution
Account (for such Series, the "SERIES 1997-1 CERTIFICATEHOLDERS' INTEREST"). The
Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested
Amount shall be subordinated to the Class A VFCs, the Class B-2 Invested Amount
and the Class C Invested Amount shall be subordinated to the Class A VFCs and
the Class B VFCs, and the Class C Invested Amount shall be subordinated to the
Class A VFCs, the Class B VFCs and the Class B-2 VFCs, in each case to the
extent provided in this Article IV.
SECTION 4.5 COLLECTIONS AND ALLOCATION; PAYMENTS ON EXCHANGEABLE
TRANSFEROR CERTIFICATE.
(A) COLLECTIONS. The Servicer will apply or will instruct the
Trustee to apply all funds on deposit in the Collection Account and the
Equalization Account allocable to the Series 1997-1 Variable Funding
Certificates, and all funds on deposit in the Interest Funding Account, the
Principal Account, the Spread Account and the Distribution Account maintained
for this Series, as described in this Article IV.
(B) PAYMENTS TO THE HOLDER OF THE EXCHANGEABLE TRANSFEROR
CERTIFICATE. On each Business Day, the Servicer shall determine whether a Series
1997-1 Pay Out Event is deemed to have occurred with respect to the Series
1997-1 Variable Funding Certificates, and the Servicer shall allocate and pay
Collections in accordance with the Daily Report with respect to such Business
Day to the Holder of the Exchangeable Transferor Certificate as follows:
(i) For each Business Day with respect to the Revolving Period, in
addition to amounts allocated and paid to the Holder of the Exchangeable
Transferor Certificate pursuant to subsection 4.3(b) of the Agreement, an
amount equal to the product of the Class C Floating Allocation Percentage
and the amount of Principal Collections on such Business Day (net of any
Reallocated Class C Principal Collections on such Business Day).
(ii) For each Business Day with respect to the Amortization Period
prior to the Business Day on which an amount equal to the Class B Invested
Amount has been deposited in the Principal Account in addition to amounts
allocated and paid to the Holder of the Exchangeable Transferor
Certificate pursuant to subsection 4.3(b) of the Agreement, an amount
equal to the product of the Class C Fixed Allocation Percentage and the
amount of Principal Collections on such Business Day.
(iii) For each Business Day on and after the day on which Principal
Collections are being deposited in the Principal Account pursuant to
subsections 4.6(c)(i), (ii) and (iii), the amount of payments made to the
Holder of the
<PAGE>
Exchangeable Transferor Certificate shall be determined only as provided
in subsection 4.3(b) of the Agreement.
Notwithstanding the foregoing, amounts payable to the Holders of the
Exchangeable Transferor Certificate pursuant to subsection 4.5(b)(i) or (ii)
shall instead be deposited in the Equalization Account to the extent necessary
to prevent the Transferor Interest from being less than the Minimum Transferor
Interest.
The allocations to be made pursuant to this subsection 4.5(b) also
apply to deposits into the Collection Account that are treated as Principal
Collections, including Adjustment Payments, payment of the reassignment price
pursuant to subsection 2.4(e) of the Agreement and proceeds from the sale,
disposition or liquidation of the Receivables pursuant to Section 9.2, 10.2(a),
12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement, such
deposits to be treated as Collections and will be allocated as Finance Charge
Receivables or Principal Receivables as provided in the Agreement.
SECTION 4.6 APPLICATION OF FUNDS ON DEPOSIT IN THE COLLECTION
ACCOUNT FOR THE CERTIFICATES.
(a) On each Business Day, the Servicer shall deliver to the Trustee
a Daily Report in which it shall instruct the Trustee to withdraw, and the
Trustee, acting in accordance with such instructions, shall withdraw, to the
extent of (x) the sum of (i) the Floating Allocation Percentage of Finance
Charge Collections available in the Collection Account, (ii) amounts released
from the Spread Account pursuant to subsection 4.2(h) and (iii) investment
earnings on amounts on deposit in the Principal Account (the "AVAILABLE SERIES
1997-1 FINANCE CHARGE COLLECTIONS"), the amounts required to be withdrawn from
the Collection Account, pursuant to subsections 4.6(a)(i) through 4.6(a)(xvi).
(i) INTEREST ACCRUAL. On each Business Day during an Interest
Accrual Period except for any Transfer Date, the Trustee, acting in
accordance with instructions from the Servicer, shall withdraw from the
Collection Account to the extent of the Available Series 1997-1 Finance
Charge Collections for such Business Day, and deposit into the Interest
Funding Account, an amount equal to the amount accrued since the preceding
Business Day on the sum of the Class A Principal Balance and the Class B
Principal Balance at the Interest Accrual Rate in effect for such Interest
Accrual Period (the "INTEREST ACCRUAL") plus any Interest Accrual due with
respect to any prior Business Day but not previously deposited in the
Interest Funding Account. On each Transfer Date immediately following an
Interest Accrual Period, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account
to the extent of the Available Series 1997-1 Finance Charge Collections
for such Transfer Date, and deposit into the Interest Funding Account, an
amount which, when aggregated with amounts on deposit therein on such
Transfer Date, shall equal to the amount of interest and Program Fees
which are payable to the Senior Certificateholders on such Transfer Date
pursuant to subsections 4.8(a)(i) through (iv).
<PAGE>
(ii) ADDITIONAL INTEREST ON UNPAID CLASS A INTEREST, CLASS B
INTEREST AND PROGRAM FEES. On each Business Day during an Interest Accrual
Period, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account to the extent of any
Available Series 1997-1 Finance Charge Collections remaining after giving
effect to the withdrawals pursuant to subsections 4.6(a)(i), and deposit
into the Interest Funding Account for distribution on the next
Distribution Date as provided in Section 4.8(a), the sum of (1) additional
interest at the CSFB Corporate Base Rate for interest that has accrued on
interest that was payable pursuant to subsection 4.8(a)(i) but was not
previously paid to the Class A Certificateholders, (2) additional interest
at the CSFB Corporate Base Rate on Program Fees payable to Class A
Certificateholders pursuant to subsection 4.8(a)(iii) but that were not
previously paid to such Class A Certificateholders, (3) additional
interest at the CSFB Corporate Base Rate for interest that has accrued on
interest that was payable pursuant to subsection 4.8(a)(ii) but was not
previously paid to the Class B Certificateholders and (4) additional
interest at the CSFB Corporate Base Rate on Program Fees due and payable
to Class B Certificateholders pursuant to subsection 4.8(a)(iv) but that
were not previously paid to such Class B Certificateholders.
(iii) SERVICING FEE. On each Business Day on which SRI or an
Affiliate of SRI is not the Servicer, the Trustee, acting in accordance
with instructions from the Servicer, shall withdraw from the Collection
Account and distribute to the Servicer, to the extent of any Available
Series 1997-1 Finance Charge Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.6(a)(i) and (ii), an amount
equal to the excess of (1) the Servicing Fee Accrual for such Business Day
plus any unpaid Servicing Fees from prior Interest Accrual Periods over
(2) any amounts with respect thereto previously distributed to the
Servicer during the relevant Interest Accrual Period.
(iv) INVESTOR DEFAULT AMOUNT. On each Business Day, the
Trustee, acting in accordance with instructions from the Servicer, shall
withdraw from the Collection Account, to the extent of any Available
Series 1997-1 Finance Charge Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.6(a)(i) through (iii), an amount
equal to the sum of (1) the aggregate Investor Default Amount for such
Business Day PLUS (2) the unpaid Investor Default Amount for any previous
Business Day during such Monthly Period, such amount to be (A) treated as
Shared Principal Collections during the Revolving Period, (B) during the
Amortization Period on and prior to the day on which an amount equal to
the Class A Invested Amount is deposited in the Principal Account,
deposited in the Principal Account for distribution to the Class A
Certificateholders on the next Distribution Date, (C) during the
Amortization Period, on and after the day on which such deposit to the
Principal Account with respect to the Class A Invested Amount has been
made and on and prior to the day on which an amount equal to the Class B
Invested Amount is deposited in the Principal Account, deposited in the
Principal Account for payment to the Class B
<PAGE>
Certificateholders on the next Distribution Date, (D) during the
Amortization Period, on and after the day on which such deposit to the
Principal Account with respect to the Class A Invested Amount and Class B
Invested Amount has been made and on and prior to the day on which an
amount equal to the Class B-2 Invested Amount is deposited in the
Principal Account, deposited in the Principal Account for payment to the
Class B-2 Certificateholders on the next Distribution Date, and (E) on and
after such deposit to the Principal Account with respect to the Class B-2
Invested Amount has been made, paid to the Class C Certificateholders.
(v) REIMBURSEMENT OF CLASS A INVESTOR CHARGE-OFFS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account to the extent of any
Available Series 1997-1 Finance Charge Collections remaining after giving
effect to the withdrawals pursuant to subsections 4.6(a)(i) through (iv),
an amount equal to the unreimbursed Class A Investor Charge-Offs, such
amount (A) during the Revolving Period to be treated as Shared Principal
Collections, and (B) during the Amortization Period on and prior to the
day on which an amount equal to the Class A Invested Amount is deposited
in the Principal Account to be deposited in the Principal Account for
distribution to the Class A Certificateholders on the next Distribution
Date.
(vi) REIMBURSEMENT OF CLASS B INVESTOR CHARGE-OFFS. On each
Business Day, the Trustee, acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Account to the extent of any
Available Series 1997-1 Finance Charge Collections remaining after giving
effect to the withdrawals pursuant to subsections 4.6(a)(i) through (v),
an amount equal to the sum of the unreimbursed Class B Investor
Charge-Offs and the unreimbursed Reallocated Class B Principal
Collections, such amount, (A) during the Revolving Period, to be treated
as Shared Principal Collections, (B) during the Amortization Period, on
and prior to the day on which an amount equal to the Class A Invested
Amount is deposited in the Principal Account, to be deposited in the
Principal Account for distribution to the Class A Certificateholders on
the next Distribution Date, and (C) during the Amortization Period, on and
after the day on which such deposit has been made, to be deposited in the
Principal Account for payment to the Class B Certificateholders on the
next Distribution Date.
<PAGE>
(vii) CLASS B-2 INTEREST ACCRUAL AND CLASS B-2 FACILITY FEE
ACCRUAL. On each Business Day during an Interest Accrual Period, the
Trustee, acting in accordance with instructions from the Servicer, shall
withdraw from the Collection Account and deposit into the Interest Funding
Account, to the extent of any Available Series 1997-1 Finance Charge
Collections for such Business Day remaining after giving effect to the
withdrawals and deposits pursuant to subsection 4.6(a)(i) through (vi), an
amount equal to the sum of (1) the amount accrued since the preceding
Business Day on the Class B-2 Principal Balance at the Class B-2
Certificate Rate in effect (the "CLASS B-2 INTEREST ACCRUAL"), plus (2)
any Class B-2 Interest Accrual due with respect to any prior Business Day
but not previously deposited in the Interest Funding Account, plus (3)
additional interest at the Class B-2 Certificate Rate plus 2.0% for
interest that has accrued on interest that was payable pursuant to
subsection 4.8(a)(vii) but was not previously paid to the Class B-2
Certificateholders, plus (4) additional interest at the Class B-2
Certificate Rate plus 2.0% on Program Fees due and payable to Class B-2
Certificateholders pursuant to subsection 4.8(a)(viii) but that were not
previously paid to such Class B-2 Certificateholders, plus (5) the amount
of Class B-2 Facility Fees accrued since the preceding Business Day (the
"CLASS B-2 FACILITY ACCRUAl"), plus (6) any Class B-2 Facility Accrual due
with respect to any prior Business Day but not previously deposited in the
Interest Funding Account.
(viii) REIMBURSEMENT OF CLASS B-2 INVESTOR CHARGE-OFFS. On
each Business Day, the Trustee, acting in accordance with instructions
from the Servicer, shall withdraw from the Collection Account, to the
extent of any Available Series 1997-1 Finance Charge Collections remaining
after giving effect to the withdrawals and deposits pursuant to subsection
4.6(a)(i) through (vii), an amount equal to the sum of the unreimbursed
Class B-2 Investor Charge-Offs and the unreimbursed Reallocated Class B-2
Principal Collections, such amount, (A) during the Revolving Period, to be
treated as Shared Principal Collections, (B) during the Amortization
Period, on and prior to the day on which an amount equal to the Class A
Invested Amount is deposited in the Principal Account, to be deposited in
the Principal Account for distribution to the Class A Certificateholders
on the next Distribution Date, (C) during the Amortization Period, on and
after the day on which such deposit to the Principal Account with respect
to the Class A Investor Amount has been made and on and prior to the day
on which an amount equal to the Class B Invested Amount is deposited in
the Principal Account to be deposited in the Principal Account for payment
to the Class B Certificateholders on the next Distribution Date, and (D)
on and after the day of such deposit to the Principal Account with respect
to Class B Invested Amount has been made, to be paid to the Class B-2
Certificateholders directly or through depositing to the Principal Account
in accordance with the instructions given by the Class B-2
Certificateholders.
(ix) REIMBURSEMENT OF CLASS C INVESTOR CHARGE-OFFS. On each
Business Day, the Trustee, acting in accordance with instructions from the
<PAGE>
Servicer, shall withdraw from the Collection Account, to the extent of any
Available Series 1997-1 Finance Charge Collections remaining after giving
effect to the withdrawals and deposits pursuant to subsections 4.6(a)(i)
through (viii), an amount equal to the sum of the unreimbursed Class C
Investor Charge-Offs and the unreimbursed Reallocated Class C Principal
Collections, such amount, (A) during the Revolving Period, to be treated
as Shared Principal Collections, (B) during the Amortization Period on and
prior to the day on which an amount equal to the Class A Invested Amount
is deposited in the Principal Account to be deposited in the Principal
Account for distribution to the Class A Certificateholders on the next
Distribution Date, (C) during the Amortization Period, on and after the
day on which such deposit to the Principal Account with respect to the
Class A Invested Amount has been made and on and prior to the day on which
an amount equal to the Class B Invested Amount is deposited in the
Principal Account, to be deposited in the Principal Account for Payment to
the Class B Certificateholders on the next Distribution Date, (D) during
the Amortization Period and on and after the day on which an amount equal
to the Class B Invested Amount is deposited in the Principal Account to be
deposited in the Principal Account for payment to the Class B-2
Certificateholders on the next Distribution Date, and (E) on and after the
day such deposit to the Principal Account with respect to Class B-2
Invested Amount has been made, paid to the Class C Certificateholders
directly or through depositing to the Principal Account in accordance with
the instructions given by the Class C Certificateholders.
(x) MEZZANINE FACILITIES COSTS. On each Business Day during an
Interest Accrual Period, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account
and deposit into the Interest Funding Account, to the extent of any
Available Series 1997-1 Finance Charge Collections remaining after giving
effect to the withdrawals and deposits pursuant to subsections 4.6(a)(i)
through (ix), an amount equal to the excess of (1) the lesser of (A) the
product of (x) one-twelfth, (y) 0.50% and (z) the sum of the Class A
Purchase Limit, the Class B Purchase Limit and the Class B-2 Purchase
Limit as of the first day of such Interest Accrual Period and (B) the
aggregate amount of unreimbursed Facilities Costs (other than Program Fees
and additional interest thereon) of which the Transferor or the Servicer
has theretofore received notice pursuant to a Certificate Purchase
Agreement over (2) the amount previously deposited into the Interest
Funding Account pursuant to this subsection 4.6(a)(x) during such Interest
Accrual Period.
(xi) CLASS C INTEREST. On each Business Day, the Trustee,
acting in accordance with instructions from the Servicer, shall withdraw
from the Collection Account and pay to the Class C Certificateholders, to
the extent of any Available Series 1997-1 Finance Charge Collections
remaining after giving effect to the withdrawals and deposits pursuant to
subsections 4.6(a)(i) through (x), an amount equal to the sum of (1) the
amount of interest which has accrued with respect to the outstanding
aggregate principal amount of the Class C Certificates
<PAGE>
at the Class C Certificate Rate but which has not been paid to the Class C
Certificateholders and (2) any additional interest at the Class C
Certificate Rate for interest that has accrued on interest that was due
during a prior Monthly Period pursuant to this subsection but not paid to
the Class C Certificateholders.
(xii) REIMBURSEMENT OF FUNDS ALLOCATED FROM EXCESS FINANCE
CHARGE COLLECTIONS OF OTHER SERIES. On each Business Day, the Trustee,
acting in accordance with instructions from the Servicer, shall withdraw
from the Collection Account and make any amounts remaining in the
Collection Account available to pay to Certificateholders of other Series
any shortfalls in amount payable to such Certificateholders from Finance
Charge Collections (but not from Excess Finance Charge Collections)
allocated to such other Series, to the extent of any Available Series
1997-1 Finance Charge Collections remaining after giving effect to the
withdrawals and deposits pursuant to subsections 4.6(a)(i) through (xi),
the lesser of (1) the aggregate amount of such shortfalls and (2) the Net
Borrowed Excess Spread Amount for such Business Day.
(xiii) MAXIMUM SPREAD ACCOUNT AMOUNT. On each Business Day,
the Trustee, acting in accordance with instructions from the Servicer,
shall withdraw from the Collection Account any Available Series 1997-1
Finance Charge Collections remaining after giving effect to the
withdrawals pursuant to subsections 4.6(a)(i) through (xii), and shall
deposit such funds into the Spread Account until the amount therein equals
the Maximum Spread Account Amount as of such Business Day.
(xiv) OTHER REMAINING FACILITIES COSTS. On each Business Day
during an Interest Accrual Period, the Trustee acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account
and deposit into the Interest Funding Account, to the extent of Available
Series 1997-1 Finance Charge Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.6(a)(i) through (xiii), the
excess of (1) the unreimbursed Facilities Costs (other than Program Fees
and additional interest thereon) as to which the Transferor or the
Servicer has theretofore received notice pursuant to a Certificate
Purchase Agreement over (2) the aggregate amount previously deposited into
the Interest Funding Account pursuant to subsection 4.6(a)(x) and this
subsection 4.6(a)(xiv) during such Interest Accrual Period.
(xv) SERVICING FEE. On each Business Day, if SRI or an
Affiliate of SRI is the Servicer, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw from the Collection Account
and distribute to the Servicer, to the extent of Available Series 1997-1
Finance Charge Collections for such Business Day remaining after giving
effect to the withdrawals and deposits pursuant to subsections 4.6(a)(i)
through (xiv), an amount equal to the excess of (1) the Servicing Fee
Accrual for such Business Day plus any unpaid Servicing Fees from prior
Monthly Periods over (2) any amounts with respect thereto previously
distributed to the Servicer during the relevant Monthly Period.
<PAGE>
(xvi) STORED EXCESS FINANCE CHARGE COLLECTIONS. Any amounts
remaining in the Collection Account to the extent of any Available Series
1997-1 Finance Charge Collections remaining after giving effect to the
withdrawals and deposits pursuant to subsection 4.6(a)(i) through (xv)
shall be treated as Stored Excess Finance Charge Collections, and the
Servicer shall direct the Trustee in writing on each Business Day to
withdraw such amounts from the Collection Account and pay them to the
Servicer.
(b) For each Business Day with respect to the Revolving Period, the
funds on deposit in the Collection Account to the extent of the product of (i)
the sum of the Class A Floating Allocation Percentage, the Class B Floating
Allocation Percentage and the Class B-2 Floating Allocation Percentage and (ii)
Principal Collections with respect to such Business Day will be treated as
Shared Principal Collections and applied, pursuant to the written direction of
the Servicer in the Daily Report for such Business Day, as provided in
subsection 4.3(e) of the Agreement.
(c) For each Business Day on and after the Amortization Period
Commencement Date, the amount of funds available in the Collection Account as
described below will be distributed, pursuant to the written direction of the
Servicer in the Daily Report for such Business Day, in the following priority:
(i) on and prior to the day on which an amount equal to the
Class A Invested Amount has been deposited in the Principal Account to be
applied to the payment of Class A Principal, an amount (not in excess of
the Class A Invested Amount) equal to the sum of (w) the product of the
Class A Fixed Allocation Percentage and Principal Collections in the
Collection Account at the end of the preceding Business Day, (x) any
amount on deposit in the Equalization Account allocated to the Class A
VFCs on such Business Day pursuant to subsection 4.6(f), (y) amounts to be
paid pursuant to subsections 4.6(a)(iv), (v), (vi), (viii) and (ix) on
such Business Day and (z) the amount of Shared Principal Collections
allocated to the Series 1997-1 Variable Funding Certificates in accordance
with Section 4.11 on such Business Day (such sum, the "CLASS A DAILY
PRINCIPAL AMOUNT"), will be deposited into the Principal Account to be
applied to the payment of the Class A Invested Amount;
(ii) on and after the day on which an amount equal to the
Class A Invested Amount has been deposited in the Principal Account to be
applied to the payment of Class A Principal, an amount (not in excess of
the Class B Invested Amount) equal to the sum of (w) an amount equal to
the product of the Class B Fixed Allocation Percentage and Principal
Collections in the Collection Account at the end of the preceding Business
Day, (x) any amount on deposit in the Equalization Account allocated to
the Class B VFCs on such Business Day pursuant to subsection 4.6(f), (y)
the amount, if any, allocated to be paid to the Class B VFCs pursuant to
subsections 4.6(a)(iv), (vi), (viii) and (ix) with respect to such
Business Day and (z) the amount of Shared Principal
<PAGE>
Collections allocated to the Series 1997-1 Variable Funding Certificates
in accordance with Section 4.11 on such Business Day (such sum, the "CLASS
B DAILY PRINCIPAL AMOUNT") will be deposited into the Principal Account to
be applied to the payment of the Class B Invested Amount);
(iii) on and after the day on which an amount equal to the
Class B Invested Amount has been deposited in the Principal Account to be
applied to the payment of Class B Principal, an amount (not in excess of
the Class B-2 Invested Amount) equal to the sum of (w) an amount equal to
the product of the Class B-2 Fixed Allocation Percentage and Principal
Collections in the Collection Account at the end of the preceding Business
Day, (x) any amount on deposit in the Equalization Account allocated to
the Class B-2 VFCs on such Business Day pursuant to subsection 4.6(f), (y)
the amount, if any, allocated to be paid to the Class B-2 VFCs pursuant to
subsections 4.6(a)(iv), (viii) and (ix) with respect to such Business Day
and (z) the amount of Shared Principal Collections allocated to the Series
1997-1 Variable Funding Certificates in accordance with Section 4.11 on
such Business Day (such sum, the "CLASS B-2 DAILY PRINCIPAL AMOUNT") will
be deposited in the Principal Account to be applied to the payment of the
Class B-2 Invested Amount;
(iv) on and after the day on which an amount equal to the
Class B-2 Invested Amount has been deposited in the Principal Account to
be applied to the payment of Class B-2 Principal, an amount equal to the
sum of (w) an amount equal to the product of the Class C Fixed Allocation
Percentage and Principal Collections in the Collection Account at the end
of the preceding Business Day, (x) any amount on deposit in the
Equalization Account allocated to the Class C VFCs on such Business Day
pursuant to subsection 4.6(f), (y) the amount, if any, allocated to be
paid to the Class C VFCs pursuant to subsections 4.6(a)(iv) and (ix) with
respect to such Business Day and (z) the amount of Shared Principal
Collections allocated to the Series 1997-1 Variable Funding Certificates
in accordance with Section 4.11 on such Business Day (such sum, the "CLASS
C DAILY PRINCIPAL AMOUNT") will be distributed to the Class C
Certificateholders; and
(v) an amount equal to the excess, if any, of (A) the product
of (x) the sum of the Class A Fixed Allocation Percentage, the Class B
Fixed Allocation Percentage and the Class B-2 Fixed Allocation Percentage
and (y) Principal Collections in the Collection Account at the end of the
preceding Business Day over (B) the sum of the amounts deposited in the
Principal Account pursuant to clauses (i)(w), (ii)(w) and (iii)(w) above
will be treated as Shared Principal Collections and applied as provided in
subsection 4.3(e) of the Agreement.
(d) Prior to the Amortization Period Commencement Date, pursuant to
subsection 4.3(e) of the Agreement, the Transferor may at its option apply
Shared Principal Collections after the applications with respect thereto
specified in the provisions of
<PAGE>
subsection 4.3(e) of the Agreement, to make payments of principal or deposits to
the Principal Account with respect to the Series 1997-1 Variable Funding
Certificates. Such Shared Principal Collections allocated to the Series 1997-1
Variable Funding Certificates (the "SERIES 1997-1 PRINCIPAL COLLECTIONS") may be
applied on each Business Day with respect to the Revolving Period, at the option
of the Transferor and in an amount to be determined by the Transferor, to make
deposits to the Principal Account, for payment as provided in Sections 4.9 and
5.1.
(e) Notwithstanding the foregoing provisions of this Section 4.6,
but subject to the provisions of subsection 4.6(i) below, if:
(x) if both (1) any Class A Purchaser does not elect to
approve an Extension hereunder (an "EXITING CLASS A PURCHASER"), as
provided in subsection 6.16(a) of this Agreement, and (2) the Class A VFC
held by such Exiting Class A Purchaser has not been acquired by another
Class A Purchaser who agreed to the Extension, or
(y) both (1) any Class B Purchaser does not elect to approve
an Extension hereunder (an "EXITING CLASS B PURCHASER"), as provided in
subsection 6.16(a) of this Agreement, and (2) (A) the Class B VFC held by
such Exiting Class B Purchaser has not been acquired by another Class B
Purchaser who agreed to the Extension and (B) the Class C Invested Amount
has not been increased on or prior to the original Extension Date before
the Extension so that the new Class B Invested Amount plus the Class B-2
Invested Amount plus the new Class C Invested Amount is no less than the
greater of (I) 25% of the new Invested Amount on the Business Day
preceding the original Extension Date or (II) 5% of the highest Invested
Amount at any point during the preceding 180 days,
then, commencing on the original Extension Date and on each Business Day
thereafter during the Revolving Period on which there remains a positive
Adjusted Invested Amount for any Exiting Class A Purchaser or Exiting Class B
Purchaser (either, an "EXITING PURCHASER"), the Servicer shall instruct the
Trustee in writing to deposit, and the Trustee, acting in accordance with such
instructions, shall deposit into the Principal Account for payment to the
Exiting Purchasers pursuant to subsection 5.1(e), the Exiting Purchasers'
Allocation Percentage of the Shared Principal Collections allocable to the
Series 1997-1 Investor Certificates pursuant to subsection 4.3(e) of the
Agreement (until such time as the amount on deposit therein equals the aggregate
Invested Amount of all Exiting Purchasers) PLUS, if any Exiting Purchaser is a
Class B Purchaser, that additional amount of Shared Principal Collections which
(upon concurrent application in reduction of the Class A Invested Amount and
taking into account any concurrent increase in the Class B-2 Invested Amount and
the Class C Invested Amount) will result in the sum of the Class B Invested
Amount, the Class B-2 Invested Amount and the Class C Invested Amount being at
least 25% of the Invested Amount. Upon making any such deposit into the
Principal Account, the Transferor may, at its option, apply amounts allocable to
the Transferor pursuant to subsection 4.5(b) or allocable to the Transferor with
respect to any
<PAGE>
other Transferor Retained Class pursuant to any other Supplement to make a
payment to the Class C VFCs in an amount not to exceed the amount which would
(after giving effect to the payments of principal to be made to the Exiting
Purchasers) cause (1) the sum of the Class C Invested Amount, the Class B-2
Invested Amount and the Class B Invested Amount to be at least equal to 25% of
the Invested Amount, (2) the Class C Invested Amount to be at least equal to
17.5/25ths of the sum of the Class B Invested Amount and the Class C Invested
Amount, and (3) the Class C Invested Amount to be at least 5% of the highest
Invested Amount during the immediately preceding 180 days.
(f) On the first Business Day of the Amortization Period funds on
deposit in the Equalization Account will be deposited in the Principal Account
to the extent of the lesser of (x) the Adjusted Invested Amount and (y) the
product of (i) the product of (A) 100% minus the Transferor Percentage minus the
fixed allocation percentage represented by any Transferor Retained Certificates
and (B) the amount on deposit in the Equalization Account at the beginning of
the Amortization Period and (ii) the Senior Equalization Account Percentage with
respect to Series 1997-1. Any funds in the Equalization Account on any
subsequent day will be allocated to the Class A VFCs, the Class B VFCs and the
Class B-2 VFCs, to the extent that Default Amounts allocated to the Transferor
Interest or adjustments as described in Section 3.8 of the Agreement would cause
the Transferor Interest to be less than the Minimum Transferor Interest and,
with respect to any credit adjustment, the Transferor has not made an Adjustment
Payment to the Collection Account, in an amount equal to the least of (i) the
product of (A) the amount of such reduction below the Minimum Transferor
Interest and (B) the Senior Equalization Account Percentage with respect to
Series 1997-1, (ii) the product of (A) the amount of funds available in the
Equalization Account and (B) the Senior Equalization Account Percentage and
(iii) the sum of the Class A Adjusted Invested Amount, Class B Adjusted Invested
Amount and the Class B-2 Adjusted Invested Amount. On any Determination Date
that occurs during the Amortization Period and prior to the Class C Principal
Payment Commencement Date on which a Class C Investor Charge-Off is recorded,
funds in the Equalization Account shall be allocated to the Senior Certificates
in an amount equal to the least of (i) the amount of such Class C Investor
Charge-Off, (ii) the product of (A) the amount of funds available in the
Equalization Account and (B) the Senior Equalization Account Percentage with
respect to Series 1997-1 and (iii) the aggregate remaining Class A Adjusted
Invested Amount, Class B Adjusted Invested Amount and Class B-2 Adjusted
Invested Amount. The amounts allocated in the preceding two sentences will be
allocated, in accordance with written instructions from the Servicer, in the
following order of priority: (i) to the Class A VFCs in an amount not to exceed
the Class A Invested Amount after subtracting therefrom any amounts to be
deposited in the Principal Account with respect thereto pursuant to subsections
4.6(c)(i)(w) and (y), and (ii) to the Class B VFCs in an amount not to exceed
the Class B Invested Amount after subtracting therefrom any amounts to be
deposited in the Principal Account with respect thereto pursuant to subsections
4.6(c)(ii)(w) and (y), and (iii) to the Class B-2 VFCs in an amount not to
exceed the Class B-2 Invested Amount after subtracting therefrom any amounts to
be deposited in the Principal Account with respect thereto pursuant to
subsections 4.6(c)(iii)(w) and (y). On the day on which an amount equal to the
sum of the Class A Invested Amount, the Class B Invested Amount and the
<PAGE>
Class B-2 Invested Amount has been deposited in the Principal Account to be
applied to the payment of Class A Principal, Class B Principal and Class B-2
Principal, as applicable, amounts remaining on deposit in the Equalization
Account will be allocated to the Series 1997-1 Variable Funding Certificates and
deposited in the Principal Account in an amount not to exceed the lesser of (i)
the Class C Invested Amount after subtracting therefrom any amounts to be
deposited in the Principal Account with respect thereto pursuant to subsections
4.6(c)(iv)(w) and (y) and (ii) the product of (A) such amounts remaining on
deposit and (B) a fraction, the numerator of which is the Class C Invested
Amount and the denominator of which is the sum of the invested amounts of all
Transferor Retained Classes of Series then in amortization periods on such day.
(g) Any application of funds pursuant to subsections 4.6(a)(xvi) or
4.6(f) shall not discharge the Transferor from its obligation to make any
Adjustment Payment pursuant to Section 3.8 of the Agreement.
(h) The Transferor shall maintain the Class C Adjusted Invested
Amount at an amount greater than zero at any time that any of the Class A
Invested Amount, the Class B Invested Amount or the Class B-2 Invested Amount
is greater than zero.
(i) Notwithstanding the provisions of subsections 4.6(a) through
4.6(e), if during the Revolving Period there is any Partial Amortization Amount
on any Business Day, the Servicer shall instruct the Trustee in writing to
deposit, and the Trustee, acting in accordance with such instructions, shall
deposit into the Principal Account for payment to the Senior Certificateholders
pursuant subsections 4.9(b) and 5.1(e), all Shared Principal Collections
allocable to the Series 1997-1 Investor Certificates pursuant to subsection
4.3(e) of the Agreement, until the amount on deposit therein equals the Partial
Amortization Amount. Upon making any such deposit into the Principal Account,
the Transferor may, at its option, apply amounts allocable to the Transferor
pursuant to subsection 4.5(b) or allocable to the Transferor with respect to any
other Transferor Retained Class pursuant to any other Supplement to make a
payment to the Class C VFCs in an amount not to exceed the amount which would
(after giving effect to the payments of principal to be made to the Senior
Certificateholder) cause (1) the sum of the Class C Invested Amount, the Class
B-2 Invested Amount and the Class B Invested Amount to be at least equal to 25%
of the Invested Amount, (2) the sum of the Class C Invested Amount and the Class
B-2 Invested Amount to be at least equal to 17.5/25ths of the sum of the Class B
Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount,
(3) the Class B-2 Invested Amount to be no greater than 10% of the Invested
Amount, (4) the Class C Invested Amount to be at least equal to 7.5/17.5ths of
the sum of the Class B-2 Invested Amount and the Class C Invested Amount, and
(5) the sum of the Class B-2 Invested Amount and the Class C Invested Amount to
be at least 5% of the highest Invested Amount during the immediately preceding
180 days. The allocations pursuant to this paragraph shall be made prior to any
deposits described in subsection 4.6(e).
<PAGE>
SECTION 4.7 COVERAGE OF REQUIRED AMOUNT AND SPREAD ACCOUNT FOR
THE SERIES 1997-1 VARIABLE FUNDING CERTIFICATES.
(a) On each Business Day, the Servicer shall determine the Daily
Required Amount, if any. On each Determination Date, the Servicer shall
determine the Monthly Required Amount, if any.
(b) In the event that the Daily Required Amount for a Business Day
is greater than zero, the Servicer shall reflect such positive Daily Required
Amount on the Daily Report for such Business Day. To the extent of any Daily
Required Amount, the Servicer shall apply all or a portion of the Excess Finance
Charge Collections of other Series with respect to such Business Day allocable
to the Series 1997-1 Variable Funding Certificates in an amount equal to the
Daily Required Amount for such Business Day in the manner specified in
subsections 4.6(a)(i) through (xi).
(c) Excess Finance Charge Collections allocated to the Series 1997-1
Variable Funding Certificates for any Business Day shall mean an amount equal to
the product of (i) Excess Finance Charge Collections available from all other
Series for such Business Day and (ii) a fraction, the numerator of which is the
Daily Required Amount for such Business Day remaining after the application of
Transferor Finance Charge Collections and the denominator of which is the
aggregate amount of shortfalls in required amounts or other amounts to be paid
from Finance Charge Collections for all Series for such Business Day.
(d) In the event that a Monthly Adjusted Required Amount exists on
any Determination Date, on the related Transfer Date to the extent of the lesser
of (i) such Monthly Adjusted Required Amount and (ii) the Stored Excess Finance
Charge Collections for the relevant Monthly Period, the Servicer shall, from its
own funds, FIRST, deposit into the Interest Funding Account an amount equal to
any Interest/Program Fee Shortfall, and SECOND, pay the remaining amount in the
manner specified in subsections 4.6(a)(iii) through (xi), (xiii) and (xiv). If
such Monthly Adjusted Required Amount exceeds the amount so deposited and paid
by the Servicer pursuant to the immediately preceding sentence, on such Transfer
Date to the extent of the lesser of (i) such excess and (ii) the Repayable
Servicing Fee Amount for the relevant Monthly Period, the Servicer shall, from
its own funds, FIRST, deposit into the Interest Funding Account an amount equal
to any remaining Interest/Program Fee Shortfall, and SECOND, pay the remaining
amount in the manner specified in subsections 4.6(a)(iii) through (xi), (xiii)
and (xiv). Then, if there is any remaining excess of such Monthly Adjusted
Required Amount (excluding for purposes of this sentence any remaining amount
thereof arising due to shortfalls in the amounts payable pursuant to clauses
(xi) through (xiv) of subsection 4.6(a)), over the aggregate amounts so
deposited and paid by the Transferor and the Servicer pursuant to the
immediately preceding two sentences, the Servicer shall withdraw from the Spread
Account an amount equal to the lesser of (i) such net Monthly Adjusted Required
Amount and (ii) the available funds in the Spread Account, and shall apply such
funds on such Determination Date, FIRST, by depositing into the Interest
<PAGE>
Funding Account an amount equal to any remaining Interest/Program Fee Shortfall,
and SECOND, to the extent of any funds remaining after the application described
in the preceding clause first, in the manner specified in subsections
4.6(a)(iii) through (x).
(e) On each Transfer Date, following the applications described in
subsection 4.7(d), the Servicer shall deposit from its own funds into the Spread
Account an amount equal to the lesser of (i) the excess of the Maximum Spread
Account Amount on such Transfer Date over the amount of funds then on deposit in
the Spread Account and (ii) the Stored Excess Finance Charge Collections for the
related Monthly Period remaining after the application described in subsection
4.7(d).
(f) Any Stored Excess Finance Charge Collections with respect to a
Monthly Period remaining on a Transfer Date after the prior applications
described in this Section 4.7 shall be treated as Excess Finance Charge
Collections and shall be, FIRST, made available on such Transfer Date by the
Servicer to pay to Certificateholders of other Series to the extent of
shortfalls, if any, in amounts payable to such Certificateholders from Finance
Charge Collections (but not Excess Finance Charge Collections) allocated to such
other Series, SECOND, applied by the Servicer to make any required payment by
the Transferor pursuant to Section 2.4(d) or any overdue required Adjustment
Payment pursuant to Section 3.8(a) of the Agreement with respect to any
preceding Monthly Period, and THIRD, transferred by the Servicer to the
Transferor. Any Repayable Servicing Fee Amount with respect to a Monthly Period
remaining on a Transfer Date after the applications described in this Section
4.7 shall be retained by the Servicer. No such remaining Stored Excess Finance
Charge Collections or Repayable Servicing Fee Amount shall be subject to further
applications hereunder.
(g) In the event that the Monthly Required Amount (excluding for
purposes of this subsection 4.7(g) any remaining amount thereof arising due to
shortfalls in the amounts payable pursuant to clause (ix) of subsection 4.6(a))
for a Transfer Date exceeds the amount of Stored Excess Finance Charge
Collections, Repayable Servicer Fee Amount and Spread Account funds allocated
thereto or to the Monthly Adjusted Required Amount on such Transfer Date, a
portion of the Series 1997-1 Principal Collections allocable to the Class C VFCs
in an amount equal to the lesser of such excess and the product of (i)(x) during
the Revolving Period, the Class C Floating Allocation Percentage or (y) during
the Amortization Period, the Class C Fixed Allocation Percentage and (ii) the
amount of Principal Collections in the Collection Account with respect to such
Transfer Date shall be allocated to the Senior Certificates and applied on such
Transfer Date in accordance with the provisions of subsections 4.6(a)(i) through
(viii); provided, however, that with respect to amounts applied pursuant to
subsections 4.6(a)(iii), such amounts shall be applied only to the extent of the
product of (x) the Class A Floating Allocation Percentage plus the Class B
Floating Allocation Percentage plus the Class B-2 Floating Allocation Percentage
and (y) the shortfall arising pursuant to such subsections (any such amount so
applied, "REALLOCATED CLASS C PRINCIPAL COLLECTIONS").
<PAGE>
(h) In the event that the Monthly Required Amount (excluding for
purposes of this subsection 4.7(h) any remaining amount thereof arising due to
shortfalls in the amounts payable pursuant to clause (viii) of subsection
4.6(a)) for a Transfer Date exceeds the amount of Stored Excess Finance Charge
Collections, Repayable Servicer Fee Amount, Spread Account funds and Reallocated
Class C Principal Collections allocated thereto or to the Monthly Adjusted
Required Amount on such Transfer Date, a portion of the Series 1997-1 Principal
Collections allocable to the Class B-2 VFCs in an amount equal to the lesser of
such excess and the product of (i)(x) during the Revolving Period, the Class B-2
Floating Allocation Percentage or (y) during the Amortization Period, the Class
B-2 Fixed Allocation Percentage and (ii) the amount of Principal Collections in
the Collection Account with respect to such Transfer Date shall be allocated to
the Class A Certificates and Class B Certificates and applied on such Transfer
Date in accordance with the provisions of subsections 4.6(a)(i) through (vi);
provided, however, that with respect to amounts applied pursuant to subsection
4.6(a)(iii), such amounts shall be applied only to the extent of the product of
(x) the Class A Floating Allocation Percentage plus the Class B Floating
Allocation Percentage and (y) the shortfall arising pursuant to such subsections
(any such amount so applied, "REALLOCATED CLASS B-2 PRINCIPAL COLLECTIONS").
(i) In the event that the Monthly Required Amount (excluding for
purposes of this subsection 4.7(i) any remaining amount thereof arising due to
shortfalls in the amounts payable pursuant to clause (vi) of subsection 4.6(a))
for a Transfer Date exceeds the amount of Stored Excess Finance Charge
Collections, Repayable Servicer Fee Amount, Spread Account funds and Reallocated
Class C Principal Collections and Reallocated Class B-2 Principal Collections
allocated thereto or to the Monthly Adjusted Required Amount on such Transfer
Date, a portion of the Series 1997-1 Principal Collections allocable to the
Class B VFCs in an amount equal to the lesser of such excess and the product of
(i)(x) during the Revolving Period, the Class B Floating Allocation Percentage
or (y) during the Amortization Period, the Class B Fixed Allocation Percentage
and (ii) the amount of Principal Collections in the Collection Account with
respect to such Transfer Date shall be allocated to the Class A Certificates and
applied on such Transfer Date in accordance with the provisions of subsections
4.6(a)(i) through (v); provided, however, that with respect to amounts applied
pursuant to subsection 4.6(a)(iii), such amounts shall be applied only to the
extent of the product of (x) the Class A Floating Allocation Percentage and (y)
the shortfall arising pursuant to such subsections (any such amount so applied,
"REALLOCATED CLASS B PRINCIPAL COLLECTIONS").
SECTION 4.8 PAYMENT OF CERTIFICATE INTEREST AND OTHER AMOUNTS. (a)
On the Transfer Date immediately prior to each Distribution Date, the Trustee,
acting in accordance with instructions from the Servicer set forth in the Daily
Report for such Transfer Date, shall for the purpose of making payments for the
relevant Monthly Period and Interest Accrual Period, as the case may be,
allocable to the Series 1997-1 Variable Funding Certificates, take the following
actions:
(i) CLASS A INTEREST. First, withdraw from the Interest
Funding Account (and, if applicable, the Defeasance Account) to the extent
of the funds
<PAGE>
available therein as of such Transfer Date, for payment to Class A
Certificateholders, an amount equal to the interest accrued on each
Tranche of the Class A Principal Balance at the applicable Tranche Rate
for the period of time such Tranche was outstanding during the Interest
Accrual Period with respect to the Distribution Date (the "CLASS A
INTEREST" for such Interest Accrual Period) PLUS any Class A Interest due
with respect to any prior Interest Accrual Period pursuant to this
subsection but not previously deposited in the Distribution Account plus
interest on such undeposited amounts as described in clause (1) of
subsection 4.6(a)(ii). Notwithstanding anything to the contrary herein,
Class A Interest shall be payable or distributable to Class A
Certificateholders only to the extent permitted by applicable law.
(ii) CLASS B INTEREST. Second, withdraw from the Interest
Funding Account (and, if applicable, the Defeasance Account) to the extent
of the funds available therein remaining after giving effect to the
withdrawal pursuant to subsection 4.8(a)(i), and deposit into the
Distribution Account for payment to Class B Certificateholders, an amount
equal to the interest accrued on each Tranche of the Class B Principal
Balance at the applicable Tranche Rate for the period of time such Tranche
was outstanding during the Interest Accrual Period with respect to the
Distribution Date (the "CLASS B INTEREST" for such Interest Accrual
Period) PLUS any Class B Interest due with respect to any prior Interest
Accrual Period pursuant to this subsection but not previously deposited in
the Distribution Account plus interest on such undeposited amounts as
described in clause (3) of subsection 4.6(a)(ii). Notwithstanding anything
to the contrary herein, Class B Interest shall be payable or distributable
to Class B Certificateholders only to the extent permitted by applicable
law.
(iii) CLASS A PROGRAM FEES. Third, withdraw from the Interest
Funding Account, to the extent of the funds available therein remaining
after giving effect to the withdrawals pursuant to subsections 4.8(a)(i)
and (ii), an amount equal to all unpaid Program Fees which have accrued
during such Interest Accrual Period with respect to the Class A VFCs plus
interest on such undeposited amounts as described in clause (2) of
subsection 4.6(a)(ii), and deposit such amount into the Distribution
Account for payment to the Class A Certificateholders.
(iv) CLASS B PROGRAM FEES. Fourth, withdraw from the Interest
Funding Account, to the extent of the funds available therein remaining
after giving effect to the withdrawals pursuant to subsections 4.8(a)(i)
through (iii), an amount equal to all unpaid Program Fees which have
accrued during such Interest Accrual Period with respect to the Class B
VFCs plus interest on such undeposited amounts as described in clause (4)
of subsection 4.6(a)(ii), and deposit such amount into the Distribution
Account for payment to the Class B Certificateholders.
<PAGE>
(v) CLASS A MEZZANINE FACILITIES COSTS. Fifth, withdraw from
the Interest Funding Account, to the extent of the funds available therein
remaining after giving effect to the withdrawals pursuant to subsections
4.8(a)(i) through (iv), an amount equal to all unpaid Facilities Costs
(other than Program Fees) which have accrued during such Interest Accrual
Period with respect to the Class A VFCs, and deposit such amount into the
Distribution Account for payment to the Class A Certificateholders
(ratably as provided in the Class A Certificate Purchase Agreement);
PROVIDED that there shall not be distributed pursuant to this clause (v)
on any Distribution Date an amount in excess of the amounts then on
deposit in the Interest Funding Account which were allocated to such
Facilities Costs pursuant to subsection 4.6(a)(x).
(vi) CLASS B MEZZANINE FACILITIES COSTS. Sixth, withdraw from
the Interest Funding Account, to the extent of the funds available therein
remaining after giving effect to the withdrawals pursuant to subsections
4.8(a)(i) through (v), an amount equal to all unpaid Facilities Costs
(other than Program Fees) which have accrued during such Interest Accrual
Period with respect to the Class B VFCs, and deposit such amount into the
Distribution Account for payment to the Class B Certificateholders
(ratably as provided in the Class B Certificate Purchase Agreement);
PROVIDED that there shall not be distributed pursuant to this clause (vi)
on any Distribution Date an amount in excess of the amounts then on
deposit in the Interest Funding Account which were allocated to such
Facilities Costs pursuant to subsection 4.6(a)(x).
(vii) CLASS B-2 INTEREST. Seventh, withdraw from the Interest
Funding Account (and, if applicable, the Defeasance Account) to the extent
of the funds available therein remaining after giving effect to the
withdrawal pursuant to subsections 4.8(a)(i) through (vi), and deposit
into the Distribution Account for payment to Class B-2 Certificateholders,
an amount equal to the aggregate of the daily interest accrued on the
Class B-2 Principal Balance on each day of the Interest Accrual Period
with respect to the Distribution Date at the Class B-2 Certificate Rate on
such day (the "CLASS B-2 INTEREST" for such Interest Accrual Period) PLUS
any Class B-2 Interest due with respect to any prior Interest Accrual
Period pursuant to this subsection but not previously deposited in the
Distribution Account plus interest on such undeposited amounts as
described in clause (3) of subsection 4.6(a)(vii). Notwithstanding
anything to the contrary herein, Class B-2 Interest shall be payable or
distributable to Class B-2 Certificateholders only to the extent permitted
by applicable law.
(viii) CLASS B-2 PROGRAM FEES. Eighth, withdraw from the
Interest Funding Account, to the extent of the funds available therein
remaining after giving effect to the withdrawals pursuant to subsections
4.8(a)(i) through (vii), an amount equal to all unpaid Program Fees which
have accrued during such Interest Accrual Period with respect to the Class
B-2 VFCs plus interest on such undeposited amounts as described in clause
(4) of subsection 4.6(a)(vii), and
<PAGE>
deposit such amount into the Distribution Account for payment to the Class
B-2 Certificateholders.
(ix) REMAINING CLASS A FACILITIES COSTS. Ninth, withdraw from
the Interest Funding Account, to the extent of the funds available therein
remaining after giving effect to the withdrawals pursuant to subsections
4.8(a)(i) through (viii), an amount equal to all remaining unpaid
Facilities Costs (other than Program Fees) which have accrued during such
Interest Accrual Period with respect to the Class A VFCs, and deposit such
amount into the Distribution Account for payment to the Class A
Certificateholders (ratably as provided in the Class A Certificate
Purchase Agreement).
(x) REMAINING CLASS B FACILITIES COSTS. Tenth, withdraw from
the Interest Funding Account, to the extent of the funds available therein
remaining after giving effect to the withdrawals pursuant to subsections
4.8(a)(i) through (ix), an amount equal to all remaining unpaid Facilities
Costs (other than Program Fees) which have accrued during such Interest
Accrual Period with respect to the Class B VFCs, and deposit such amount
into the Distribution Account for payment to the Class B
Certificateholders (ratably as provided in the Class B Certificate
Purchase Agreement).
(xi) CLASS B-2 FACILITIES COSTS. Eleventh, withdraw from the
Interest Funding Account, to the extent of the funds available therein
remaining after giving effect to the withdrawals pursuant to subsections
4.8(a)(i) through (x), an amount equal to all unpaid Facilities Costs
(other than Program Fees) which have accrued during such Interest Accrual
Period with respect to the Class B-2 VFCs, and deposit such amount into
the Distribution Account for payment to the Class B-2 Certificateholders
(ratably as provided in the Class B-2 Certificate Purchase Agreement).
(xii) MAXIMUM SPREAD ACCOUNT AMOUNT. Twelfth, withdraw from
the Interest Funding Account, to the extent of the funds available therein
remaining after giving effect to the withdrawals pursuant to subsections
4.8(a)(i) through (xii), and deposit into the Spread Account until the
amount therein equals the Maximum Spread Account Amount as of such
Transfer Date.
(xiii) Any amounts available in the Interest Funding Account
remaining after giving effect to the payments pursuant to subsections
4.8(a)(i) through (xii) shall be treated as Excess Finance Charge
Collections on such Transfer Date and the Servicer shall direct the
Trustee to make such Excess Finance Charge Collections available on such
date for the applications described in subsection 4.7(f).
(b) On each Distribution Date, the Paying Agent shall pay in
accordance with Section 5.1 of the Agreement to (w) the Class A
Certificateholders from the Distribution Account such amount deposited into the
Distribution Account on the
<PAGE>
related Transfer Date allocable thereto pursuant to subsection 4.8(a)(i), (x)
the Class B Certificateholders from the Distribution Account the amount
deposited into the Distribution Account allocable thereto pursuant to subsection
4.8(a)(ii), (y) the Class B-2 Certificateholders from the Distribution Account
the amount deposited into the Distribution Account allocable thereto pursuant to
subsection 4.8(a)(vii) and (z) the Facility Agent from the Distribution Account
the amount deposited into the Distribution Account allocable thereto pursuant to
subsection 4.8(a)(iii), (iv), (v), (vi), (viii), (ix), (x) and (xi).
SECTION 4.9 PAYMENT OF CERTIFICATE PRINCIPAL. (a) No later than
10:00 a.m. on the Business Day immediately prior to each Principal Distribution
Date, the Transferor shall provide written notice to the Trustee and the
Facility Agent of such Principal Distribution Date and of the amount of
principal to be repaid on such Principal Distribution Date.
(b) On the Business Day preceding each Principal Distribution Date
during the Revolving Period, the Trustee, in accordance with the instructions
from the Servicer set forth in the Daily Report for such day, shall withdraw
from the Principal Account and deposit in the Distribution Account, to the
extent of the funds deposited in the Principal Account pursuant to subsection
4.6(d) and available therein as of such Business Day, an amount equal to the
largest multiple of US$50,000 that is available. On each Principal Distribution
Date with respect to the Revolving Period, the Paying Agent shall pay the amount
so deposited in the Distribution Account in accordance with Section 5.1 to the
Investor Certificateholders, in accordance with the instructions of the
Transferor, as set forth by the Servicer on its behalf in the Daily Report for
such Business Day, which instructions satisfy one or more of the following
provisions:
(A) the Transferor may apply all such funds to the
reduction of the Class A Invested Amount; or
(B) the Transferor may apply all such funds to the
reduction of the Class A Invested Amount, the Class B Invested
Amount, the Class B-2 Invested Amount and the Class C Invested
Amount in such proportions as it selects if, after giving effect to
the principal payments to be made on such Principal Distribution
Date, (1) no Series 1997-1 Pay Out Event has occurred and is
continuing, (2) the sum of the Class C Invested Amount, the Class
B-2 Invested Amount and the Class B Invested Amount to be at least
equal to 25% of the Invested Amount, (3) the Class B-2 Invested
Amount to be no greater than 10% of the Invested Amount, (4) the sum
of the Class C Invested Amount and the Class B-2 Invested Amount to
be at least equal to 17.5/25ths of the sum of the Class B Invested
Amount, the Class B-2 Invested Amount and the Class C Invested
Amount, (5) the Class C Invested Amount to be at least equal to
7.5/17.5ths of the sum of the Class B-2 Invested Amount and the
Class C Invested Amount, and (6) the sum of the Class B-2 Invested
Amount and
<PAGE>
the Class C Invested Amount to be at least 5% of the highest
Invested Amount during the immediately preceding 180 days.
Notwithstanding the foregoing, at the option of the Transferor and to the extent
specified in the Daily Report, such amounts on deposit in the Principal Account
may, on any Business Day prior to such Transfer Date, be applied to the purchase
of VFC Additional Invested Amounts if the conditions precedent thereto pursuant
to Section 6.15 of the Agreement and Section 3.2 of the Class A Certificate
Purchase Agreement, Class B Certificate Purchase Agreement or Class B-2
Certificate Purchase Agreement, as the case may be, have been met on such
Business Day and the Transferor has delivered an Officer's Certificate to such
effect to the Trustee and the Servicer.
(c) Notwithstanding the provisions of subsection 4.9(b) above, if
subsection 4.6(e) is applicable, on the original Extension Date before the
relevant Extension occurs and on each Distribution Date thereafter during the
Revolving Period while subsection 4.6(e) remains applicable (and on such other
dates as the Transferor may elect with one day prior written notice to the
Facility Agent), the Trustee, in accordance with the instructions from the
Servicer set forth in the Daily Report for such day, shall withdraw from the
Principal Account and deposit in the Distribution Account, to the extent of the
funds deposited in the Principal Account pursuant to subsection 4.6(e) and
available therein as of such Business Day, an amount equal to the largest
multiple of US$50,000 that is available.
(d) On the Transfer Date preceding each Distribution Date with
respect to the Amortization Period, the Trustee, acting in accordance with
instructions from the Servicer set forth in the Daily Report for such day, shall
withdraw from the Principal Account and deposit in the Distribution Account an
amount equal to the lesser of the Class A Invested Amount (after taking into
account amounts set aside or paid with respect thereof pursuant to Sections 4.6
and 4.7) and the amount available in the Principal Account allocable to the
Series 1997-1 Variable Funding Certificates, and on each Distribution Date with
respect to the Amortization Period until the Class A Invested Amount is paid in
full, the Paying Agent shall pay in accordance with Section 5.1 to the Class A
Certificateholders from the Distribution Account such amount deposited into the
Distribution Account on the related Transfer Date.
(e) On the Transfer Date preceding the Class B Principal Payment
Commencement Date and each Distribution Date thereafter, the Trustee, acting in
accordance with instructions from the Servicer set forth in the Daily Report for
such day, shall withdraw from the Principal Account and deposit in the
Distribution Account an amount equal to the lesser of the Class B Invested
Amount (after taking into account amounts set aside or paid with respect thereof
pursuant to Sections 4.6 and 4.7) and the amount on deposit in the Principal
Account allocable to the Series 1997-1 Variable Funding Certificates (after
giving effect to transfers pursuant to subsection 4.9(a)). On the Class B
Principal Payment Commencement Date, after the payment of any principal amounts
with respect to the Class A Certificates on such day, and on each Distribution
Date thereafter until the Class B Invested Amount is paid in full, the Paying
Agent shall
<PAGE>
pay in accordance with Section 5.1 to the Class B Certificateholders from the
Distribution Account such amount deposited into the Distribution Account on the
related Transfer Date.
(f) On the Transfer Date preceding the Class B-2 Principal Payment
Commencement Date and each Distribution Date thereafter, the Trustee, acting in
accordance with instructions from the Servicer set forth in the Daily Report for
such day, shall withdraw from the Principal Account and deposit in the
Distribution Account an amount equal to the lesser of the Class B-2 Invested
Amount (after taking into account amounts set aside or paid with respect thereof
pursuant to Sections 4.6 and 4.7) and the amount on deposit in the Principal
Account allocable to the Series 1997-1 Variable Funding Certificates (after
giving effect to transfers pursuant to subsection 4.9(a)). On the Class B-2
Principal Payment Commencement Date, after the payment of any principal amounts
with respect to the Class A Certificates and Class B Certificates on such day,
and on each Distribution Date thereafter until the Class B-2 Invested Amount is
paid in full, the Paying Agent shall pay in accordance with Section 5.1 to the
Class B-2 Certificateholders from the Distribution Account such amount deposited
into the Distribution Account on the related Transfer Date.
(g) On the Class C Principal Payment Commencement Date and each
Business Day thereafter, the Trustee, acting in accordance with instructions
from the Servicer set forth in the Daily Report for such day, shall make
payments of principal to the Class C Certificateholder in accordance with
subsection 4.6(c)(iv).
(h) On the Business Day preceding each Principal Distribution Date,
the Trustee, acting in accordance with instructions from the Servicer set forth
in the Daily Report for such day, shall withdraw from the Principal Account and
deposit into the Distribution Account, the amount of funds deposited in the
Principal Account pursuant to subsection 4.6(i) and available therein as of such
Business Day. On each Principal Distribution Date with respect to the Revolving
Period, the Paying Agent shall pay the amount so deposited in the Distribution
Account in accordance with Section 5.1 to the Investor Certificateholders, in
accordance with instructions of the Transferor, as set forth by the Servicer on
its behalf in the Daily Report for such Business Day, which instructions shall
satisfy one or more of the following provisions:
(i) the Transferor shall first apply all such funds to the
reduction of the Class A Invested Amount until either (A) the Partial
Amortization Amount has been reduced to zero or (B) the sum of the Class C
Invested Amount, the Class B-2 Invested Amount and the Class B Invested
Amount is at least equal to 25% of the Invested Amount;
(ii) after giving effect to the application of funds, if any,
pursuant to clause (i) above, the Transferor shall apply all such funds to
the reduction of the Class A Invested Amount and the Class B Invested
Amount, pro rata based on, in the case of the Class A Certificates, the
excess of the Class A Principal Balance over the Class A Purchase Limit
and, in the case of the Class B
<PAGE>
Certificates, the excess of the Class B Principal Balance over the Class B
Purchase Limit, until the partial Amortization Amounts in respect of each
of the Class A VFCs and the Class B VFCs have been reduced to zero;
(iii) after giving effect to the application of funds, if any,
pursuant to clause (i) and (ii) above, the Transferor shall apply all such
funds to the reduction of the Class B-2 Invested Amount, until the Partial
Amortization Amounts in respect of the Class B-2 VFCs has been reduced to
zero; and
(iv) the Transferor may apply any such remaining funds to the
reduction of the Class A Invested Amount, the Class B Invested Amount, the
Class B-2 Invested Amount and the Class C Invested Amount in such
proportions as it selects if, after giving effect to the principal
payments to be made on such Principal Distribution Date, (1) no Series
1997-1 Pay Out Event has occurred and is continuing, (2) the sum of the
Class C Invested Amount, the Class B-2 Invested Amount and the Class B
Invested Amount to be at least equal to 25% of the Invested Amount, (3)
the Class B-2 Invested Amount to be no greater than 10% of the Invested
Amount, (4) the sum of the Class C Invested Amount and the Class B-2
Invested Amount to be at least equal to 17.5/25ths of the sum of the Class
B Invested Amount, the Class B-2 Invested Amount and the Class C Invested
Amount, (5) the Class C Invested Amount to be at least equal to
7.5/17.5ths of the sum of the Class B-2 Invested Amount and the Class C
Invested Amount, and (6) the sum of the Class B-2 Invested Amount and the
Class C Invested Amount to be at least 5% of the highest Invested Amount
during the immediately preceding 180 days.
Any amounts remaining in the Principal Account and allocable to the
Series 1997-1 Variable Funding Certificates, after the Class C Invested Amount
has been paid in full, will be treated as Shared Principal Collections and
applied in accordance with subsection 4.3(e) of the Agreement.
SECTION 4.10 INVESTOR CHARGE-OFFS. (a) If, on any Determination Date
with respect to a Distribution Date on or prior to the Class C Principal Payment
Commencement Date, the aggregate Investor Default Amount, if any, for each
Business Day in the preceding Monthly Period exceeded the Available Series
1997-1 Finance Charge Collections allocated to the payment thereof pursuant to
subsection 4.6(a)(iv) and the amount of Excess Finance Charge Collections,
Stored Excess Finance Charge Collections, Repayable Service Fee Amount, Spread
Account funds, Reallocated Class C Principal Collections, Reallocated Class B-2
Principal Collections and Reallocated Class B Principal Collections allocated
thereto pursuant to subsection 4.7, the Class C Invested Amount will be reduced
by the amount by which such aggregate Investor Default Amount exceeds the amount
applied with respect thereto during such preceding Monthly Period or on the
Transfer Date in respect of such Monthly Period (the "CLASS C INVESTOR
CHARGE-OFFS"). To the extent that on any subsequent Business Day there is a
positive balance of Available Series 1997-1 Finance Charge Collections after
giving effect to subsections 4.6(a)(i) through (viii), the Servicer will apply
such Excess Finance
<PAGE>
Charge Collections as provided in subsection 4.6(a)(ix) to reimburse the
aggregate amount of Class C Investor Charge-Offs not previously reimbursed, up
to the amount so available.
(b) In the event that any such reduction of the Class C Invested
Amount would cause the Class C Invested Amount to be a negative number, the
Class C Invested Amount will be reduced to zero, and the Class B-2 Invested
Amount will be reduced by the amount by which the Class C Invested Amount would
have been reduced below zero, but not more than the aggregate Investor Default
Amount for such Monthly Period (the "CLASS B-2 INVESTOR CHARGE-OFFS"). To the
extent that on any subsequent Business Day there is a positive balance of
Available Series 1997-1 Finance Charge Collections after giving effect to
subsections 4.6(a)(i) through (vii), the Servicer will apply such Excess Finance
Charge Collections as provided in subsection 4.6(a)(viii) to reimburse the
aggregate amount of Class B-2 Investor Charge-Offs not previously reimbursed, up
to the amount so available.
(c) In the event that any such reduction of the Class B-2 Invested
Amount would cause the Class B-2 Invested Amount to be a negative number, the
Class B-2 Invested Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the Class B-2 Invested Amount
would have been reduced below zero, but not more than the aggregate Investor
Default Amount for such Monthly Period (the "CLASS B INVESTOR CHARGE-OFFS"). To
the extent that on any subsequent Business Day there is a positive balance of
Available Series 1997-1 Finance Charge Collections after giving effect to
subsections 4.6(a)(i) through (v), the Servicer will apply such Excess Finance
Charge Collections as provided in subsection 4.6(a)(vi) to reimburse the
aggregate amount of Class B Investor Charge-Offs not previously reimbursed, up
to the amount so available.
(d) In the event that any such reduction of the Class B Invested
Amount would cause the Class B Invested Amount to be a negative number, the
Class B Invested Amount will be reduced to zero, and the Class A Invested Amount
will be reduced by the amount by which the Class B Invested Amount would have
been reduced below zero, but not more than the aggregate Investor Default Amount
for such Monthly Period (the "CLASS A INVESTOR CHARGE-OFFS"). To the extent that
on any subsequent Business Day there is a positive balance of Available Series
1997-1 Finance Charge Collections after giving effect to subsections 4.6(a)(i)
through (iv), the Servicer will apply such Excess Finance Charge Collections as
provided in subsection 4.6(a)(v) to reimburse the aggregate amount of Class A
Investor Charge-Offs not previously reimbursed, up to the amount so available.
SECTION 4.11 SHARED PRINCIPAL COLLECTIONS. Shared Principal
Collections allocated to the Series 1997-1 Variable Funding Certificates and to
be applied pursuant to subsections 4.6(c)(i)(z), 4.6(c)(ii)(z), 4.6(c)(iii)(z)
and 4.6(c)(iv)(z) for any Business Day with respect to the Amortization Period
shall mean an amount equal to the product of (x) Shared Principal Collections
for all Series for such Business Day and (y) a fraction, the numerator of which
is the Principal Shortfall for the Series 1997-1 Variable
<PAGE>
Funding Certificates for such Business Day and the denominator of which is the
aggregate amount of Principal Shortfalls for all Series for such Business Day.
SECTION 7. ARTICLE V OF THE AGREEMENT. Article V of the Agreement
shall read in its entirety as follows and shall be applicable only to the Series
1997-1 Variable Funding Certificates:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS
SECTION 5.1 DISTRIBUTIONS. (a) On each Distribution Date during the
Revolving Period (other than a Principal Distribution Date), the Paying Agent
shall distribute (in accordance with the Settlement Statement delivered by the
Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c) of
the Agreement) to each Class A Certificateholder of record on the preceding
Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of
the Agreement respecting a final distribution) such Certificateholder's
applicable share (as directed by the Facility Agent) of such amounts on deposit
in the Distribution Account as are payable to the Class A Certificateholders
pursuant to Section 4.8 hereof by wire transfer to each Class A
Certificateholder to an account or accounts designated by such Class A
Certificateholder by written notice given to the Paying Agent not less than five
days prior to the related Distribution Date; PROVIDED, however, that the final
payment in retirement of the Class A VFCs will be made only upon presentation
and surrender of the Class A VFCs at the office or offices specified in the
notice of such final distribution delivered by the Trustee pursuant to Section
12.3 of the Agreement.
(b) On each Distribution Date during the Revolving Period (other
than a Principal Distribution Date), the Paying Agent shall distribute (in
accordance with the Settlement Statement delivered by the Servicer to the
Trustee and the Paying Agent pursuant to subsection 3.4(c) of the Agreement) to
each Class B Certificateholder of record on the preceding Record Date (other
than as provided in subsection 2.4(d) or in Section 12.3 of the Agreement
respecting a final distribution) such Certificateholder's applicable share (as
directed by the Facility Agent) of amounts on deposit in the Distribution
Account as are payable to the Class B Certificateholders pursuant to Section 4.8
hereof by wire transfer to each Class B Certificateholder to an account or
accounts designated by such Class B Certificateholder by written notice given to
the Paying Agent not less than five days prior to the related Distribution Date;
PROVIDED, HOWEVER, that the final payment in retirement of the Class B VFCs will
be made only upon presentation and surrender of the Class B VFCs at the office
or offices specified in the notice of such final distribution delivered by the
Trustee pursuant to Section 12.3 of the Agreement.
(c) On each Distribution Date during the Revolving Period (other
than a Principal Distribution Date), the Paying Agent shall distribute (in
accordance with the
<PAGE>
Settlement Statement delivered by the Servicer to the Trustee and the Paying
Agent pursuant to subsection 3.4(c) of the Agreement) to each Class B-2
Certificateholder of record on the preceding Record Date (other than as provided
in subsection 2.4(d) or in Section 12.3 of the Agreement respecting a final
distribution) such Certificateholder's applicable share (as directed by the
Facility Agent) of amounts on deposit in the Distribution Account as are payable
to the Class B-2 Certificateholders pursuant to Section 4.8 hereof by wire
transfer to each Class B-2 Certificateholder to an account or accounts
designated by such Class B-2 Certificateholder by written notice given to the
Paying Agent not less than five days prior to the related Distribution Date;
PROVIDED, HOWEVER, that the final payment in retirement of the Class B-2 VFCs
will be made only upon presentation and surrender of the Class B-2 VFCs at the
office or offices specified in the notice of such final distribution delivered
by the Trustee pursuant to Section 12.3 of the Agreement.
(d) On each Distribution Date during the Revolving Period (other
than a Principal Distribution Date), the Paying Agent shall distribute (in
accordance with the Settlement Statement delivered by the Servicer to the
Trustee and the Paying Agent pursuant to subsection 3.4(c) of the Agreement) to
each Class C Certificateholder of record on the preceding Record Date (other
than as provided in subsection 2.4(d) or in Section 12.3 of the Agreement
respecting a final distribution) such Certificateholder's PRO RATA share (based
on the aggregate Undivided interests represented by Class C VFCs held by such
Certificateholder) of amounts on deposit in the Distribution Account as are
payable to the Class C Certificateholders pursuant to Section 4.9 hereof by wire
transfer to each Class C Certificateholder to an account or accounts designated
by such Class C Certificateholder by written notice given to the Paying Agent
not less than five days prior to the related Distribution Date; PROVIDED,
HOWEVER, that the final payment in retirement of the Class C VFCs will be made
only upon presentation and surrender of the Class C VFCs at the office or
offices specified in the notice of such final distribution delivered by the
Trustee pursuant to Section 12.3 of the Agreement.
(e) On each Principal Distribution Date and on each Distribution
Date following the Amortization Period Commencement Date, the Paying Agent shall
distribute (in accordance with instructions from the Servicer on behalf of the
Transferor pursuant to subsection 4.9(a) or 4.9(d), as applicable) to each Class
A Certificateholder, Class B Certificateholder and Class B-2 Certificateholder
of record on the preceding Record Date (other than as provided in subsection
2.4(d) or in Section 12.3 of the Agreement respecting a final distribution) such
Certificateholder's PRO RATA share (based on the aggregate Undivided Interests
represented by Class A VFCs, Class B VFCs or Class B-2 VFCs, as the case may be,
held by such Certificateholder) of amounts on deposit in the Distribution
Account as are payable to the Class A Certificateholders, the Class B
Certificateholders and the Class B-2 Certificateholders, as applicable, pursuant
to Section 4.9 hereof by wire transfer to each of such Certificateholders to an
account or accounts designated by the Facility Agent by written notice given to
the Paying Agent not less than five days prior to the related Distribution Date,
subject to the following special provisions:
<PAGE>
(i) no payment in respect of Class A Invested Amount or Class
B Invested Amount for a Bank Rate Tranche shall be made on a date other
than a Monthly Distribution Date;
(ii) if, during the Revolving Period, one or more Bank Rate
Tranches and one or more Cost of Funds Tranches are outstanding with
respect to the Class A Certificates or the Class B Certificates, then
payments to Class A Certificateholders or Class B Certificateholders shall
be made in the priority specified in subsection 2.1(e) of the applicable
Certificate Purchase Agreement;
(iii) if, during the Revolving Period, on such Principal
Distribution Date, one or more Nonextending Class A Purchasers or
Nonextending Class B Purchasers has a remaining Class A Invested Amount or
Class B Invested Amount, as applicable, then the Transferor may elect (as
reflected in the instructions of the Servicer delivered pursuant to
Section 4.9(a) and subject to the requirements of subsection 4.9(b)) to
allocate any or all amounts available for distribution in respect of Class
A Invested Amount to such Nonextending Class A Purchasers (ratably among
all such Nonextending Class A Purchasers) and to allocate any or all
amounts available for distribution in respect of Class B Invested Amount
to such Nonextending Class B Purchasers (ratably among all such
Nonextending Class B Purchasers), so long as the amount allocated to any
such Nonextending Class A Purchasers or Nonextending Class B Purchasers is
not less than the PRO RATA share specified above;
(iv) if, during the Revolving Period, on such Principal
Distribution Date there are one or more Exiting Purchasers in respect of
whom funds have been deposited in the Principal Account pursuant to
Section 4.6(e), then such funds shall be paid, FIRST, to the Exiting Class
A Purchasers, PRO RATA in accordance with their respective Class A
Invested Amounts, until such Exiting Class A Purchasers' respective Class
A Invested Amounts have been reduced to zero, SECOND, to the extent
required by subsection 4.6(e), to Class A Purchasers who are not Exiting
Class A Purchasers, PRO RATA in accordance with their respective Class A
Invested Amounts, and THIRD, to the Exiting Class B Purchasers, PRO RATA
in accordance with their respective Class B Invested Amounts, until such
Exiting Class B Purchasers' respective Class B Invested Amounts have been
reduced to zero; and
(v) the final payment in retirement of the Class A VFCs, Class
B VFCs and Class B-2 VFCs will be made only upon presentation and
surrender of the Class A VFCs, Class B VFCs and Class B-2 VFCs at the
office or offices specified in the notice of such final distribution
delivered by the Trustee pursuant to Section 12.3 of the Agreement.
The provisions of clause (iii) above shall not apply for any Principal
Distribution Date until the Partial Amortization Amount has been reduced
to zero.
<PAGE>
SECTION 5.2 CERTIFICATEHOLDERS' STATEMENT.
(a) On each Distribution Date, the Paying Agent shall forward to
each Certificateholder a statement substantially in the form of Exhibit B
prepared by the Servicer and delivered to the Trustee and the Paying Agent on
the preceding Determination Date setting forth the following information:
(i) the total amount distributed;
(ii) the amount of such distribution allocable to Certificate
Principal;
(iii) the amount of such distribution allocable to Certificate
Interest;
(iv) the amount of the Series 1997-1 Principal Collections
received in the Collection Account during the preceding Monthly Period and
the three preceding Monthly Periods and allocated in respect of the Class
A Certificates, the Class B Certificates, the Class B-2 Certificates and
the Class C Certificates, respectively;
(v) the amount of Finance Charge Collections received during
the three preceding Monthly Periods and allocated in respect of the Class
A Certificates, the Class B Certificates, the Class B-2 Certificates and
the Class C Certificates, respectively;
(vi) the Invested Amount, the Class A Invested Amount, the
Class B Invested Amount, the Class B-2 Invested Amount and the Class C
Invested Amount, the Floating Allocation Percentage and, during the
Amortization Period, the Class A Fixed Allocation Percentage, the Class B
Fixed Allocation Percentage, or the Class B-2 Fixed Allocation Percentage
as applicable, with respect to the Principal Receivables in the Trust as
of the end of the day on the Record Date;
(vii) the aggregate outstanding balance of Accounts which are
current, current/delinquent, 30, 60, 90, 120, 150 and 180 days delinquent
as of the end of the day on the Record Date;
(viii) the aggregate Investor Default Amount and the Default
Amount for the related Monthly Period and the two preceding Monthly
Periods;
(ix) the aggregate amount of Class A Investor Charge-Offs,
Class B Investor Charge-Offs, Class B-2 Investor Charge-Offs and Class C
Investor Charge-Offs for the related Monthly Period and the two preceding
Monthly Periods;
<PAGE>
(x) the aggregate amount of the Servicing Fee and for the
related Monthly Period and the two preceding Monthly Periods;
(xi) the calculation of the Account Cap;
(xii) the Invested Amount of each Series then outstanding;
(xiii) the Transferor Interest;
(xiv) the Aggregate Principal Receivables, the amount on
deposit in the Equalization Account and the Eligible Principal
Receivables; and
(xv) the Partial Amortization Amount, if any for
each of the Class A Certificates, the Class B
Certificates and the Class B-2 Certificates.
(b) 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 report to
Series 1997-1 Certificateholders, as set forth in subclauses (i), (ii) and (iii)
of Section 5.2(a) 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 Certificates as debt) as the Trustee or the Servicer deems necessary or
desirable to enable the Series 1997-1 Certificateholders to prepare their tax
returns. 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 Internal Revenue Code as from time
to time in effect.
SECTION 8. SERIES 1997-1 PAY OUT EVENTS. The Pay Out Events which
can cause the commencement of the Amortization Period with respect to the Series
1997-1 Variable Funding Certificates include the Trust Pay Out Events described
in Section 9.1 of the Agreement and the Series 1997-1 Pay Out Events described
in the following sentence. If any one of the following events shall occur with
respect to the Series 1997-1 Variable Funding Certificates:
(a) failure:
(x) on the part of the Transferor or the Servicer to make any
payment or deposit required to be made by the Transferor or the
Servicer by the terms of (A) the Agreement, or a Certificate
Purchase Agreement, or (B) this Series Supplement, in each case on
or before the date occurring five (5) Business Days after the date
on which written notice of such failure requiring the same to be
remedied, shall have been given to the Transferor or the Servicer,
as applicable, by the Trustee, or to the
<PAGE>
Transferor or the Servicer, as applicable, and to the Trustee by the
Facility Agent,
(y) on the part of the Originator to make any payment or
deposit required to be made by the Originator by the terms of the
Receivables Purchase Agreement (other than any payment or deposit in
respect of any Defaulted Receivable Repurchase) on or before the
date occurring five (5) Business Days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Originator by the Trustee, or to the
Originator and the Trustee by the Facility Agent, or
(z) on the part of the Transferor or the Originator duly to
observe or perform in any material respect any covenants or
agreements of the Transferor set forth in the Agreement, the
Receivables Purchase Agreement or a Certificate Purchase Agreement
or this Series Supplement, which failure has a material adverse
effect on the Series 1997-1 Certificateholders and which continues
unremedied for a period of 60 days after the date on which written
notice of such failure, requiring the same to be remedied, shall
have been given to the Transferor or the Originator, as applicable,
by the Trustee, or to the Transferor or the Originator, as
applicable, and the Trustee by the Facility Agent, and continues to
affect materially and adversely the interests of the Series 1997-1
Certificateholders for such period;
(b) any representation or warranty made by the Transferor in the
Agreement or a Certificate Purchase Agreement, other than as covered by clause
(1) below, or this Series Supplement, or by the Originator in the Receivables
Purchase Agreement, or any information contained in a computer file or
microfiche list required to be delivered by the Transferor pursuant to Section
2.1 or 2.6 of the Agreement, (x) 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 Transferor or the Originator, as applicable, by the Trustee, or to the
Transferor and the Trustee by the Facility Agent, and (y) as a result of which
the interests of the Series 1997-1 Certificateholders are materially and
adversely affected and continue to be materially and adversely affected for such
period; PROVIDED, HOWEVER, that a Series 1997-1 Pay Out Event pursuant to this
subsection 8(b) shall not be deemed to have occurred hereunder (1) with respect
to the representations and warranties made by the Transferor referenced in
Section 2.4 of the Agreement, if the Transferor has assigned a zero balance to
an Ineligible Receivable or has made a deposit to the Equalization Account with
respect thereto as required by subsection 2.4(d) of the Agreement or 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, or (2) with respect to the representations and warranties made by the
Originator referenced in Section
<PAGE>
2.04 of the Receivables Purchase Agreement, if the Originator shall have
performed its obligations under such Section 2.04;
(c) the average of the Trust Portfolio Yields for any three
consecutive Monthly Periods is reduced to a rate which is less than the weighted
average of the Trust Base Rates for such three consecutive Monthly Periods;
(d) the Transferor Interest shall be less than the Minimum
Transferor Interest for five consecutive days;
(e) any Servicer Default shall occur which would have, or would
reasonably be expected to have, a material adverse effect on the Series 1997-1
Certificateholders;
(f) failure on the part of the Servicer to deliver the Daily Report
or Settlement Statement to the Trustee when due, which failure continues for a
period of five Business Days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given by the Trustee
to the Servicer;
(g) failure on the part of the Servicer duly to observe or perform
in any respect any covenants or agreements of the Servicer set forth in the
Agreement or a Certificate Purchase Agreement (other than those set forth in
subsection 10.1(a) thereof), which has a material adverse effect on the Holders
of the Senior Certificates and which continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring the same
to be remedied, has been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Facility Agent and continues to materially
adversely affect the Holders of the Senior Certificates for such period; or the
Servicer shall delegate its duties under the Agreement, except as permitted by
Section 8.7 thereof; or any representation, warranty or certification made by
the Servicer in the Agreement or in any certificate delivered pursuant to the
Agreement shall prove to have been incorrect when made, which has a material
adverse effect on the Holders of the Senior Certificates and which continues to
be incorrect in any material respect for a period of 45 days after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by the Required Class A Purchasers or the Facility Agent and continues
to materially adversely affect such Certificateholders for such period; and
(h) if for any three consecutive Monthly Periods, (A) the sum of (I)
the aggregate daily amount of the Floating Allocation Percentage of Finance
Charge Collections for such day which are available in the Collection Account,
PLUS (II) the aggregate daily amount of Excess Finance Charge Collections of all
other Series which were available during such period to be allocated to the
Series 1997-1 Variable Funding Certificates pursuant to subsection 4.7(c), is
less than (B) the sum for such period of (I) the aggregate amount of Class A
Interest, Class B Interest and Class B-2 Interest accrued on the Series 1997-1
Certificates, PLUS (II) the aggregate Facility Costs accrued or (without
duplication) became payable, PLUS (III) the aggregate Investor Default Amount,
PLUS (IV) the aggregate Servicing Fee Accrual for each Business Day on which
neither
<PAGE>
SRI nor an Affiliate of SRI was the Servicer, PLUS (V) the aggregate Class A
Investor Charge-Offs, Class B Investor Charge-Offs, Class B-2 Investor
Charge-Offs and Class C Investor Charge-Offs (each determined without
duplication of amounts included in clause (III) above);
then, in the case of any event described in subparagraphs (a) through (h) after
the applicable grace period, if any, set forth in such subparagraphs or below,
either the Trustee, the Facility Agent by notice then given in writing to the
Transferor and the Servicer (and to the Trustee if given by the Facility Agent)
may declare that a pay out event (a "SERIES 1997-1 PAY OUT EVENT") has occurred
as of the date of such notice.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in subsection 8(f) or (g) for a period of 60 days (less the
applicable grace periods specified in such subsections), shall not constitute a
Series 1997-1 Pay Out Event if such delay or failure could not be prevented by
the exercise of reasonable diligence by the Servicer and such delay or failure
was caused by an act of God or the public enemy, acts of declared or undeclared
war, public disorder, rebellion, riot or sabotage, epidemics, landslides,
lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or
meltdowns, floods, power outages, computer failure or similar causes; PROVIDED,
HOWEVER, that the Servicer shall not be excused by reason of any of the
foregoing events from causing the Trustee to make timely payment of amounts
required to be paid pursuant to Sections 4.8 and 4.9. The preceding sentence
shall not relieve the Servicer from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of this Agreement
and the Servicer shall provide the Trustee, the Transferor and the Holders of
the Senior Certificates with an Officer's Certificate giving prompt notice of
such failure or delay by it, together with a description of the cause of such
failure or delay and its efforts so to perform its obligations.
SECTION 9. ARTICLE VI OF THE AGREEMENT. Article VI (except for
Sections 6.1 through 6.14 thereof) shall read in its entirety as follows and
shall be applicable only to the Series 1997-1 Variable Funding Certificates:
<PAGE>
SECTION 6.15 ADDITIONAL INVESTED AMOUNTS.
(a) Each Series 1997-1 Certificateholder agrees (or, if such Series
1997-1 Certificateholder is a nominee for Class A Owners, Class B Owners or
Class B-2 Owners, such Class A Owners, Class B Owners or Class B-2 Owners agree
in lieu of such Series 1997-1 Certificateholder), by acceptance of its Series
1997-1 Variable Funding Certificate, that the Transferor may, from time to time
prior to the Termination Date (as defined in the applicable Certificate Purchase
Agreement) for such Certificateholder or Owner, subject to Section 11 hereof,
upon satisfaction of the conditions set forth in Section 3.2 of the Class A
Certificate Purchase Agreement (or Section 3.2 of the Class B Certificate
Purchase Agreement or Section 3.2 of the Class B-2 Purchase Agreement, as the
case may be) request that each Noncommitted Class A Purchaser and Noncommitted
Class B Purchaser acquire, and require that each Committed Class A Purchaser,
Committed Class B Purchaser and Class B-2 Purchaser, acquire, as of any Business
Day additional undivided interests in the Trust in specified amounts (such
amounts, respectively, the "ADDITIONAL CLASS A INVESTED AMOUNT," the "ADDITIONAL
CLASS B INVESTED AMOUNT" and the "ADDITIONAL CLASS B-2 INVESTED AMOUNT") and
require that each Class C Certificateholder acquire, as of any Business Day,
additional undivided interests in the Trust in specified amounts (the
"ADDITIONAL CLASS C INVESTED AMOUNT" and, collectively with the Additional Class
A Invested Amount, the Additional Class B Invested Amount and the Additional
Class B-2 Invested Amount, the "ADDITIONAL INVESTED AMOUNTS"). The VFC
Additional Invested Amounts on any Business Day shall not exceed an amount equal
to the excess of the aggregate amount of Principal Receivables and amounts on
deposit in the Equalization Account (other than investment earnings thereon)
over the greater of (a) the sum of (i) the aggregate Invested Amount of each
Series, including the Series 1997-1 Variable Funding Certificates, then
outstanding after giving effect to the additions of such Additional Invested
Amounts, MINUS amounts on deposit in the principal funding account for any
Series, if any, and (ii) the Minimum Transferor Interest and (b) the Minimum
Aggregate Principal Receivables. The aggregate Additional Class A Invested
Amounts and Additional Class B Invested Amounts to be purchased shall have a
minimum aggregate amount of $1,000,000 or more, and shall be in integral
multiples of $250,000, but in no event shall the aggregate Additional Class A
Invested Amounts exceed the aggregate Available Commitments (prior to such
additions) of all Committed Class A Purchasers or the aggregate Additional Class
B Invested Amounts exceed the aggregate Available Commitments (prior to such
additions) of all Committed Class B Purchasers. The aggregate Additional Class
B-2 Invested Amount to be purchased shall have a minimum amount of $500,000 or
more, and shall be in integral multiples of $100,000, but in no event shall the
aggregate Additional Class B-2 Invested Amounts exceed the aggregate Available
Commitments (prior to such additions) of all Class B-2 Purchasers.
(b) The Transferor shall give to each Facility Agent by no later
than 4:00 p.m. New York City time on the Business Day immediately prior to the
Purchase Date, written notice of the sale of Additional Class A Invested
Amounts, Additional Class B Invested Amounts and Additional Class B-2 Invested
Amounts specifying (i) the
<PAGE>
aggregate amount of requested Additional Class A Invested Amounts, Additional
Class B Invested Amounts and Additional Class B-2 Invested Amounts, (ii) the
applicable Purchase Date (which shall be a Business Day) and (iii) wire transfer
instructions as to the account(s) to which the purchase price therefore should
be delivered. On the Business Day immediately after the Purchase Date, the
Facility Agent shall report to the Transferor, the Servicer and the Trustee (i)
the amount of the Additional Class A Invested Amounts purchased by the
Noncommitted Class A Purchasers, (ii) the amount of the Additional Class B
Invested Amounts purchased by the Noncommitted Class B Purchasers, (iii) the
amount of the Additional Class A Invested Amounts which have been purchased by
the Committed Class A Purchasers, (iv) the amount of the Additional Class B
Invested Amounts which have been purchased by the Committed Class B Purchasers
and (v) the amount of the Additional Class B-2 Invested Amounts which have been
purchased by the Class B-2 Purchasers.
(c) Each Noncommitted Class A Purchaser may, but shall not be
obligated to, purchase its Noncommitted Purchaser Percentage (as defined in the
Class A Certificate Purchase Agreement) of any Additional Class A Invested
Amount offered by the Transferor pursuant to subsection 6.15(b). Each Committed
Class A Purchaser shall purchase its share of the Additional Class A Invested
Amount not so purchased by the Noncommitted Class A Purchasers pursuant to the
immediately previous sentence in accordance with the applicable Certificate
Purchase Agreement. In no event shall any Additional Class A Invested Amount be
purchased if, after giving effect thereto, the Class A Invested Amount on the
applicable Purchase Date (after giving effect to those purchases which are made
on the applicable Purchase Date) exceeds (i) the Class A Purchase Limit or (ii)
the amount which would result in the sum of the Class B Invested Amount, the
Class B-2 Invested Amount and the Class C Invested Amount being less than 25% of
the Invested Amount on such Purchase Date.
(d) The Class C Certificateholder by acceptance of its Class C
Certificate agrees that it shall be deemed to purchase Additional Class C
Invested Amounts at the same time as (x) either Class A Certificateholders, the
Class B Certificateholders or the Class B-2 Certificateholders purchase any
Additional Class A Invested Amount, any Additional Class B Invested Amount or
any the Additional Class B-2 Invested Amount or (y) a Partial Amortization
Amount in respect of the Class B-2 VFCs shall be paid to the Class B-2
Certificateholders. The Class C Certificateholder shall be deemed to purchase
the Additional Class C Interest in an amount that is not less than the amount
which would result in the sum of Class B-2 Invested Amount and Class C Invested
Amount, (calculated after giving effect to any distribution of a Partial
Amortization Amount pursuant to section 4.9(h)), being at least equal to the
greater of 17.5% of the Invested Amount on such Purchase Date or (together with
the Class B-2 Invested Amount) 5% of the highest Invested Amount during the 180
days preceding such Purchase Date, and shall pay the Trust the purchase price
for such Additional Class C Invested Amount, in an amount equal to such
Additional Class C Invested Amount in immediately available funds. In addition,
the Class C Certificateholder may at any time purchase an Additional Class C
Invested Amount, by
<PAGE>
payment to the Trust in immediately available funds of the purchase price
therefore, which shall be an amount equal to such Additional Class C invested
Amount.
(e) Each Noncommitted Class B Purchaser may, but shall not be
obligated to, purchase its Noncommitted Purchaser Percentage (as defined in the
Class B Certificate Purchase Agreement) of any Additional Class B Invested
Amount offered by the Transferor pursuant to subsection 6.15(b). Each Committed
Class B Purchaser shall purchase its share of the Additional Class B Invested
Amount not so purchased by the Noncommitted Class B Purchasers pursuant to the
immediately previous sentence in accordance with the applicable Certificate
Purchase Agreement. In no event shall any Additional Class B Invested Amount be
purchased if, after giving effect thereto, the Class B Invested Amount on the
applicable Purchase Date (after giving effect to those purchases which are made
on the applicable Purchase Date) exceeds (i) the Class B Purchase Limit or (ii)
the amount which would result in the sum of the Class B-2 Invested Amount and
the Class C Invested Amount being less than 17.5% of the Invested Amount on such
Purchase Date.
(f) Each Class B-2 Purchaser shall purchase its share of the
Additional Class B-2 Invested Amount in accordance with the applicable
Certificate Purchase Agreement. In no event shall the Class B-2 Invested Amount
on the applicable Purchase Date (after giving effect to those purchases which
shall be made on the applicable Purchase Date) exceed the lowest of (i) 10.0% of
the Invested Amount, (ii) the Class B-2 Purchase Limit or (iii) the amount which
would result in the Class C Invested Amount being less than 7.5% of the Invested
Amount on such Purchase Date.
(g) If the Class A Certificateholders acquire such additional
interest, then in consideration of such Class A Certificateholders' payments of
the Additional Class A Invested Amount, the Servicer shall appropriately note
such Additional Class A Invested Amount on the related Daily Report and direct
the Trustee to pay to the Transferor such Additional Class A Invested Amounts,
and the Invested Amount of the Class A Certificates will be equal to the
Invested Amount of the Class A Certificates stated in such Daily Report. If the
Class B Certificateholders acquire such additional interest, then in
consideration of such Class B Certificateholders' payments of the Additional
Class B Invested Amount, the Servicer shall appropriately note such Additional
Class B Invested Amount on the related Daily Report and direct the Trustee to
pay to the Transferor such Additional Class B Invested Amounts, and the Invested
Amount of the Class B Certificates will be equal to the Invested Amount of the
Class B Certificates stated in such Daily Report. If the Class B-2
Certificateholders acquire such additional interest, then in consideration of
such Class B-2 Certificateholders' payments of the Additional Class B-2 Invested
Amount, the Servicer shall appropriately note such Additional Class B-2 Invested
Amount on the related Daily Report and direct the Trustee to pay to the
Transferor such Additional Class B-2 Invested Amounts, and the Invested Amount
of the Class B-2 Certificates will be equal to the Invested Amount of the Class
B-2 Certificates stated in such Daily Report. If the Class C Certificateholders
acquire such additional interest, then in consideration of such Class C
Certificateholders' payments of the Additional Class C Invested Amount, the
Servicer shall appropriately note such Additional
<PAGE>
Class C Invested Amount on the related Daily Report and direct the Trustee to
pay to the Transferor such Additional Invested Amounts, and the Invested Amount
of the Class C Certificates will be equal to the Invested Amount of the Class C
Certificates stated in such Daily Report.
(h) Subject to the provisions of subsections 6.15(c) through (f),
the failure of any Holder of the Senior Certificates to purchase any Additional
Class A Invested Amount, any Additional Class B Invested Amount or any
Additional Class B-2 Invested Amount in accordance with Section 6.15 and the
applicable Certificate Purchase Agreement shall not in itself relieve any other
Series 1997-1 Certificateholder of its obligation to purchase any Additional
Invested Amounts. Notwithstanding any provision to the contrary contained in
this Section 6.15, no Senior Certificateholder shall be required to purchase any
Additional Class A Invested Amounts, any Additional Class B Invested Amounts or
any Additional Class B-2 Invested Amount unless the conditions to such purchase
contained in the applicable Certificate Purchase Agreement (including without
limitation Section 3.2 thereof) have been satisfied.
(i) The outstanding amounts of any Additional Class A Invested
Amount purchased by each Class A Certificateholder shall be evidenced by a Class
A Certificate to be issued on the Closing Date substantially in the form of
EXHIBIT A-1 hereto. Each Class A Certificateholder shall and is hereby
authorized to record on the grid attached to its Class A Certificate (or at such
Class A Certificateholder's option, in its internal books and records) the date
and amount of any Additional Class A Invested Amount purchased by it, and each
repayment thereof; PROVIDED that failure to make any such recordation on such
grid or any error in such grid shall not adversely affect such Class A
Certificateholder's rights with respect to its Class A Invested Amount and its
right to receive interest payments in respect of the Class A Invested Amount
held by such Class A Certificateholder.
(j) The outstanding amounts of any Additional Class B Invested
Amount purchased by each Class B Certificateholder shall be evidenced by a Class
B Certificate to be issued on the Closing Date substantially in the form of
EXHIBIT A-2 hereto. Each Class B Certificateholder shall and is hereby
authorized to record on the grid attached to its Class B Certificate (or at such
Class B Certificateholder's option, in its internal books and records) the date
and amount of any Additional Class B Invested Amount purchased by it, and each
repayment thereof; PROVIDED that failure to make any such recordation on such
grid or any error in such grid shall not adversely affect such Class B
Certificateholder's rights with respect to its Class B Invested Amount and its
right to receive interest payments in respect of the Class B Invested Amount
held by such Class B Certificateholder.
(k) The outstanding amounts of any Additional Class B-2 Invested
Amount purchased by each Class B-2 Certificateholder shall be evidenced by a
Class B-2 Certificate to be issued on the Closing Date substantially in the form
of EXHIBIT A-3 hereto. Each Class B-2 Certificateholder shall and is hereby
authorized to record on the grid attached to its Class B-2 Certificate (or at
such Class B-2 Certificateholder's option, in its
<PAGE>
internal books and records) the date and amount of any Additional Class B-2
Invested Amount purchased by it, and each repayment thereof; PROVIDED that
failure to make any such recordation on such grid or any error in such grid
shall not adversely affect such Class B-2 Certificateholder's rights with
respect to its Class B-2 Invested Amount and its right to receive interest
payments in respect of the Class B-2 Invested Amount held by such Class B-2
Certificateholder.
SECTION 6.16 EXTENSION.
(a) If a Series 1997-1 Pay Out Event has not occurred or has
occurred but has been waived or remedied on or before the 30th Business Day
preceding the Extension Date, the Transferor, in its sole discretion, may
deliver to the Trustee on or before such date a notice substantially in the form
of Exhibit C (the "EXTENSION NOTICE") to this Supplement. The Trustee shall
deliver a copy of the Extension Notice and all documents annexed thereto to the
Investor Certificateholders of record on the date of receipt thereof. The
Transferor shall state in the Extension Notice that it intends to extend the
Revolving Period until the later Amortization Period Commencement Date set forth
in the Extension Notice. The Extension Notice shall also set forth the next
Extension Date. The following documents shall be annexed to the Extension
Notice: (i) a form of the Opinion of Counsel addressed to the Transferor and the
Trustee to the effect that despite the Extension the Trust will not be treated
as an association taxable as a corporation (the "EXTENSION TAX OPINION"); (ii) a
form of the Opinion of Counsel addressed to the Transferor and the Trustee (the
"EXTENSION OPINION") to the effect that (A) the Transferor has the corporate
power and authority to effect the Extension, and (B) the Extension has been duly
authorized by the Transferor; and (iii) a form of Investor Certificateholder
Election Notice substantially in the form of Exhibit D (the "ELECTION NOTICE")
to this Supplement. In addition, the Extension Notice shall state that any
Investor Certificateholder electing to approve the Extension must do so on or
before the Election Date (as defined below) by returning the annexed Election
Notice properly executed to the Trustee in the manner described below. The
Extension Notice shall also state that an Investor Certificateholder may
withdraw any such election in whole or in part on or before the Election Date,
and the Transferor, in its sole discretion, may, prior to the Election Date,
withdraw its election to extend the Revolving Period. Any Holder that elects to
approve an Extension hereunder shall deliver a duly executed Election Notice to
the Trustee at the address designated in the Extension Notice on or before 3:00
p.m., New York City time, on or before the fifth Business Day preceding the
Extension Date (such Business Day constituting the "ELECTION DATE").
(b) No Extension shall occur until prior satisfaction of the
following conditions at the close of business on the Election Date: (i) no Pay
Out Event shall have occurred and be continuing, (ii) there shall have been
delivered to the Trustee (A) the Extension Tax Opinion and the Extension
Opinion, each addressed to the Trustee and (B) written confirmation from any
Rating Agency rating that the Extension will not cause such Rating Agency to
lower or withdraw its ratings of either class of Senior Certificates, (iii) at
least one Holder of the Senior Certificates shall have elected to approve the
Extension by returning to the Trustee on or before the Election Date the
executed
<PAGE>
Election Notice annexed to the Extension Notice delivered to such Holder of the
Senior Certificates pursuant to subsection 6.16(a) of the Agreement, (iv) all of
the Holders of the Class C Certificates shall have elected to approve of the
Extension by returning to the Trustee on or before the Election Date the
executed form of Election Notice annexed to the Extension Notice delivered to
such Class C Certificateholders pursuant to subsection 6.16(a) and (v) (1) the
sum of Class B Invested Amount and the Class C Invested Amount will equal or
exceed 25% of the Invested Amount on the Election Date and (2) the Class C
Invested Amount on the Election Date will equal or exceed 17.5% of the Invested
Amount. If not all of the Holders of the Senior Certificates give written notice
of such agreement, then the Transferor shall re-notify the Holders of the Senior
Certificates willing to so extend in writing that one or more Senior
Certificateholders have declined to so extend and such remaining Holders of the
Senior Certificates willing to extend have the option of extending only for such
Holders of the Senior Certificates so consenting to such extension and the
outstanding Invested Amount of such non-extending Holders of the Senior
Certificates shall not be extended. If, by the close of business on the Election
Date, all of the conditions stated in this subsection 6.16(b) have not been
satisfied and all such documents delivered to the Trustee pursuant to this
subsection 6.16(b) are not in form satisfactory to it, or if the Transferor has
notified the Trustee, prior to the Election Date, that the Transferor has
exercised its right to withdraw its election of an Extension, no Extension shall
occur.
(c) The execution by the Holders of the Senior Certificates of the
applicable Election Notice and return thereof to the Trustee by the required
date and time, the continued election by the Transferor to extend the Revolving
Period at the Election Date, and the compliance with all of the provisions of
this Section 6.16, shall evidence an extension or renewal of the obligations
represented by the Investor Certificates delivered in exchange therefor, and not
a novation or extinguishment of such obligations or a substitution with respect
thereto.
SECTION 10. SERIES 1997-1 TERMINATION. The right of the Series
1997-1 Certificateholders to receive payments from the Trust will terminate on
the first Business Day following the Series 1997-1 Termination Date unless such
Series is an Affected Series as specified in Section 12.1(c) of the Agreement
and the sale contemplated therein has not occurred by such date, in which event
the Series 1997-1 Certificateholders shall remain entitled to receive proceeds
of such sale when such sale occurs.
SECTION 11. LIMITATION ON CHANGES IN INVESTED AMOUNT. The Transferor
shall not effect more than two "Invested Amount Changes" and two "B-2 Invested
Amount Changes" in any calendar week. An "INVESTED AMOUNT CHANGE" shall mean a
sale of Class A Additional Invested Amounts or Class B Additional Invested
Amounts pursuant to Section 6.15 or a repayment of any Class A Invested Amount
or Class B Invested Amount pursuant to subsection 5.1(e). A "B-2 INVESTED AMOUNT
CHANGE" shall mean a sale of Class B-2 Additional Invested Amounts pursuant to
Section 6.15 or a repayment of any Class B-2 Invested Amount pursuant to
subsection 5.1(e).
<PAGE>
SECTION 12. LEGENDS; TRANSFER AND EXCHANGE; RESTRICTIONS ON
TRANSFER OF SERIES 1997-1 VARIABLE FUNDING CERTIFICATES; TAX TREATMENT.
(a) Each Series 1997-1 Certificate will bear a legend substantially
in the following form:
THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY
STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW. EACH HOLDER OF
THIS CERTIFICATE AGREES FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO.,
INC. THAT (A) NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (2) IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES OR
"BLUE SKY" LAWS, OR (3) TO THE TRANSFEROR, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE
FROM IT OF THE TRANSFER RESTRICTIONS REFERRED TO ABOVE.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI
RECEIVABLES PURCHASE CO., INC. THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE
BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION
4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (III) AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY.
(b) Upon surrender for registration of transfer of any Series 1997-1
Variable Funding Certificate at the office of the Transfer Agent and Registrar,
accompanied by a certification by the Series 1997-1 Certificateholder
substantially in the form attached as Exhibit E if the new purchaser is a
"qualified institutional buyer" as defined in Rule 144A under the Securities Act
of 1933, or in the form attached as Exhibit F if the new purchaser is not a
"qualified institutional buyer," and by a written instrument of transfer in the
form approved by the Transferor and the Trustee (it being understood that, until
notice to the contrary is given to Series 1997-1 Certificateholders, the
Transferor and the Trustee shall each be deemed to have approved the form of
instrument of transfer, if any printed on any definitive Series 1997-1
Certificate), executed by the
<PAGE>
registered owner, in person or by such Series 1997-1 Certificateholder's
attorney thereunto duly authorized in writing, such Series 1997-1 Certificate
shall be transferred upon the register, and the Transferor shall execute, and
the Trustee shall authenticate and deliver, in the name of the designated
transferees one or more new registered Series 1997-1 Certificate of any
authorized denominations and of a like aggregate principal amount and tenor.
Transfers and exchanges of Series 1997-1 Variable Funding Certificates shall be
subject to such restrictions as shall be set forth in the text of the Series
1997-1 Variable Funding Certificates and such reasonable regulations as may be
prescribed by the Transferor. Successive registrations and registrations of
transfers as aforesaid may be made from time to time as desired, and each such
registration shall be noted on the register.
(c) In no event shall the Class C Certificates or any interest
therein be transferred, sold, exchanged, pledged, participated or otherwise
assigned hereunder, in whole or in part, unless: (i) the Servicer shall have
provided an Officer's Certificate to the Trustee to the effect that such sale,
exchange, pledge, participation and assignment will not materially adversely
affect the interests of the Certificateholders and is permitted by each
Certificate Purchase Agreement, (ii) the Trustee shall have been delivered an
Opinion of Counsel to the effect that (A) any securities or interests issued in
conjunction with such sale, exchange, pledge, participation and assignment and
sold to third parties will be characterized as either indebtedness or
partnership interests (other than interests in a publicly traded partnership)
for Federal and applicable state income tax purposes, (B) such sale, exchange,
pledge, participation and assignment or such issuance will not adversely affect
the Federal and applicable state income tax characterization of any outstanding
Series of Investor Certificates (other than the Class C VFCs, as to the
characterization of which Counsel shall express no opinion), and (C) such sale,
exchange, pledge, participation and assignment or such issuance will not result
in the Trust being subject to tax at the entity level for Federal or applicable
state income tax purposes, (iii) the Servicer shall have provided at least ten
Business Days prior written notice to each Rating Agency and the Trustee of such
sale, exchange, pledge, participation and assignment and shall have received
written confirmation from each Rating Agency to the effect of the original
rating of any Series or any class of any Series will not be reduced or withdrawn
as a result of such sale, exchange, pledge, participation and assignment, and
(iv) the holders of any securities or interests issued in conjunction with such
sale, exchange, pledge, participation and assignment (or any trustee or
collateral agent on their behalf) (A) will have no right to foreclose upon the
Class C VFCs or exercise any voting rights as a Class C Certificateholder unless
and until all outstanding Investor Certificates (other than the Class C VFCs)
and all outstanding investor certificates (other than any Transferor Retained
Certificates) have been paid in full and (B) covenant and agree that, prior to
the date which is one year and one day after the payment in full of all
outstanding investor certificates issued by the Trust, none of them will
institute against, or join any other Person in instituting against, the
Transferor any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the United
States or any state of the United States, and the Trustee shall have received an
Officer's Certificate to that effect.
<PAGE>
(d) Each Certificateholder, by accepting and holding such
Certificate or interest therein, will be deemed to have represented and
warranted that it is not (i) an employee benefit plan (as defined in Section
3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a
plan described in Section 4975(e)(1) of the Code, or (iii) any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity.
(e) Each Class B-2 Certificateholder, by its holding of an interest
in a Class B-2 Certificate, hereby severally represents, warrants and covenants,
and each Class B-2 Certificateholder that acquires an interest in a Class B-2
Certificate shall be deemed to have severally represented, warranted and
covenanted upon such acquisition, that:
(i) such Class B-2 Certificateholder has not acquired and
shall not sell, trade or transfer any interest in the Class
B-2 Certificates, nor cause any interest in the Class B-2
Certificates to be marketed, on or through either
(A) an established securities market within the meaning
of Section 7704(b)(1) of the Code (including, but not
limited to, an interdealer quotation system that
regularly disseminates firm buy or sell quotations by
identified brokers or dealers by electronic means or
otherwise), or
(B) a secondary market (or the substantial equivalent
thereof) within the meaning of Section 7704(b)(2) of the
Code (including, but not limited to, a market wherein
interests in the Class B-2 Certificates are regularly
quoted by any person making a market in such interests
and a market wherein any person regularly makes
available bid or offer quotes with respect to interests
in the Class B-2 Certificates and stands ready to effect
buy or sell transactions at the quoted prices for itself
or on behalf of others); and
(ii) unless the Transferor consents otherwise, such
Class B-2 Certificateholder
(A) is properly classified as, and shall remain
classified as, a "corporation" as defined in Section
7701(a)(3) of the Code and
(B) is not, and shall not become, an "S corporation" as
described in Section 1361 of the Code.
<PAGE>
The consent of the Transferor described in clause (ii) immediately
above shall not be unreasonably withheld, subject to the limitations discussed
below if such transfer would cause the number of Private Holders to exceed 80.
Each Class B-2 Certificateholder represents, warrants and covenants
that it shall cause each of its Participants to make representations, warranties
and covenants similar to those described in (i) and (ii) above for the benefit
of the Transferor and the Trust at the time such Participant becomes a
Participant. In the event of any breach of the representation, warranty and
covenant of a Class B-2 Certificateholder or its Participant that such
Certificateholder or Participant shall remain classified as a corporation other
than an S corporation (unless the Transferor otherwise consents), such Class B-2
Certificateholder shall notify the Transferor promptly upon such Class B-2
Certificateholder's becoming aware thereof, and thereupon such Class B-2
Certificateholder agrees to use reasonable efforts to procure a replacement
investor not so affected in accordance with the Class B-2 Certificate Purchase
Agreement. In any such event, the Transferor shall also have the right to
procure a replacement investor permitted under and otherwise in accordance with
the Class B-2 Certificate Purchase Agreement. Each affected Class B-2
Certificateholder hereby agrees to take all actions reasonably necessary to
permit a replacement investor to succeed to its rights and obligations
hereunder.
Each Class B-2 Certificateholder that has a Participant that has
breached its representation, warranty and covenant that it shall remain
classified as a corporation other than an S corporation (unless the Transferor
otherwise consents) hereby agrees (without limiting the right of the Transferor
to procure a replacement investor for such Class B-2 Certificateholder as
provided above in this paragraph or to pursue other remedies) to notify the
Transferor of such breach promptly upon such Class B-2 Certificateholder's
becoming aware thereof and to use reasonable efforts to procure a replacement
Participant not so affected in accordance with the Class B-2 Certificate
Purchase Agreement.
Any Class B-2 Certificateholder or assignee Class B-2
Certificateholder that is an S corporation described in Code Section 1361 hereby
further agrees that, in the event its owners shall be treated as Private Holders
under Treasury Regulations promulgated under Code Section 7704, it shall take
such reasonable measures as shall be agreed upon with the Transferor as shall
reduce the risk that the Trust would be treated as a publicly traded partnership
pursuant to Code Section 7704. Any such Class B-2 Certificateholder or assignee
Certificateholder which has a Participant which is an S corporation described in
Code Section 1361 additionally agrees that, in the event the owners of such
Participant shall be treated as Private Holders under Treasury Regulations
promulgated under Code Section 7704, it shall take such reasonable measures as
shall be agreed upon with the Transferor as shall reduce the risk that the Trust
would be treated as a publicly traded partnership pursuant to Section 7704 of
the Code.
Each Class B-2 Certificateholder shall notify the Transferor of its
sale, transfer or assignment of any interest in a Class B-2 Certificate to any
Participant, and the
<PAGE>
Transferor shall maintain a register of each Participant and the amount of each
Participation. No Participant shall be entitled to sell, transfer, assign or
otherwise dispose of less than its entire interest in its participation in the
Class B-2 Certificates (including by means of a pledge, hypothecation or
subparticipation thereof), without the prior written consent of the Transferor.
At no time shall the aggregate number of Class B-2
Certificateholders and Participants exceed five (5) Private Holders or such
greater number as to which the Transferor shall consent in writing, which
consent shall not be unreasonably withheld. In the event that, after giving
effect to such consent or after any other transfer, the number of Private
Holders would exceed 80, the Transferor shall not grant such consent and shall
not permit such transfer unless the Transferor has provided to the Trustee an
Opinion of Counsel to the effect that the transfers would not cause the Trust to
be treated as a "publicly traded partnership" taxable as a corporation under
Section 7704 of the Code. Any transfer of an interest in a Class B-2 Certificate
in contravention of this paragraph shall be void AB INITIO.
Notwithstanding any provisions of this subsection 12(e) to the
contrary, each Class B-2 Certificateholder and any of its Participants may
pledge its interest in the Class B-2 Certificates to any Federal Reserve Bank as
collateral in accordance with applicable law.
As used in this subsection 12(e):
"PARTICIPANT" means each Person that has been granted a
participation interest by a Class B-2 Certificateholder in all or part of
its Class B-2 Certificates.
"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),
but excluding any interest in the Trust represented by any Series or Class
of Certificates or any other interest as to which the Transferor has
provided to the Trustee an Opinion of Counsel to the effect that such
Series, Class 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, in each case, provided such interest is not
convertible or exchangeable into an interest in the Trust or the Trust's
income or equivalent value. Notwithstanding the immediately preceding
sentence, "Private Holder" shall also include any other Person that the
Transferor determines
<PAGE>
is, or may be or may become, a "partner" within the meaning of Section
1.7704-1(h)(l)(ii) of the United States Treasury Regulations (including by
reason of Section 1.7704-1(h)(3)). The holders of (i) the Transferor
Interest, (ii) the interest of the Servicer, (iii) any similar interests
in the Trust represented by any other Class of any Series of Certificates,
and (iv) any interest described in Section 12.1(b) of the Pooling and
Servicing Agreement shall be treated as Private Holders. 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, an S corporation or a grantor trust under the Code shall be
treated as a Private Holder unless excepted with the consent of the
Transferor (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" taxable as a
corporation under Section 7704 of the Code).
(f) Each Class B Certificateholder, by its holding of an
interest in a Class B Certificate, hereby severally represents, warrants
and covenants, and each Class B Certificateholder that acquires an
interest in a Class B Certificate shall be deemed to have severally
represented, warranted and covenanted upon such acquisition, that:
(i) such Class B Certificateholder has not acquired and
shall not sell, trade or transfer any interest in the
Class B Certificates, nor cause any interest in the
Class B Certificates to be marketed, on or through
either
(A) an established securities market within the
meaning of Section 7704(b)(1) of the Code
(including, but not limited to, an interdealer
quotation system that regularly disseminates firm
buy or sell quotations by identified brokers or
dealers by electronic means or otherwise), or
(B) a secondary market (or the substantial
equivalent thereof) within the meaning of
Section 7704(b)(2) of the Code (including, but
not limited to, a market wherein interests in
the Class B Certificates are regularly quoted
by any person making a market in such interests
and a market wherein any person regularly makes
available bid or offer quotes with respect to
interests in the Class B Certificates and
stands ready to effect buy or sell transactions
at the quoted prices for itself or on behalf of
others); and
(ii) unless the Transferor consents otherwise, such Class B
Certificateholder
<PAGE>
(A) is properly classified as, and shall remain
classified as, a "corporation" as defined in
Section 7701(a)(3) of the Code and
(B) is not, and shall not become, an "S corporation"
as described in Section 1361 of the Code.
The consent of the Transferor described in clause (ii) immediately
above shall not be unreasonably withheld, subject to the limitations discussed
below if such transfer would cause the number of Private Holders to exceed 80.
Each Class B Certificateholder represents, warrants and covenants
that it shall cause each of its Participants and each of its Support Parties to
make representations, warranties and covenants similar to those described in (i)
and (ii) above for the benefit of the Transferor and the Trust at the time such
Participant becomes a Participant or Support Party, as the case may be. In the
event of any breach of the representation, warranty and covenant of a Class B
Certificateholder or any of its Participants or Support Parties that such
Certificateholder or its Participant or Support Party shall remain classified as
a corporation other than an S corporation (unless the Transferor otherwise
consents), such Class B Certificateholder shall notify the Transferor promptly
upon such Class B Certificateholder's becoming aware thereof, and thereupon such
Class B Certificateholder agrees to use reasonable efforts to procure a
replacement investor not so affected in accordance with the Class B Certificate
Purchase Agreement. In any such event, the Transferor shall also have the right
to procure a replacement investor permitted under and otherwise in accordance
with the Class B Certificate Purchase Agreement. Each affected Class B
Certificateholder hereby agrees to take all actions reasonably necessary to
permit a replacement investor to succeed to its rights and obligations
hereunder.
Each Class B Certificateholder that has a Participant or Support
Party that has breached its representation, warranty and covenant that it shall
remain classified as a corporation other than an S corporation (unless the
Transferor otherwise consents) hereby agrees (without limiting the right of the
Transferor to procure a replacement investor for such Class B Certificateholder
as provided above in this paragraph or to pursue other remedies) to notify the
Transferor of such breach promptly upon such Class B Certificateholder's
becoming aware thereof and to use reasonable efforts to procure a replacement
Participant or Support Party, as the case may be, not so affected in accordance
with the Class B Certificate Purchase Agreement.
Any Class B Certificateholder or assignee Class B Certificateholder
that is an S corporation described in Code Section 1361 hereby further agrees
that, in the event its owners shall be treated as Private Holders under Treasury
Regulations promulgated under Code Section 7704, it shall take such reasonable
measures as shall be agreed upon with the Transferor as shall reduce the risk
that the Trust would be treated as a publicly traded partnership pursuant to
Code Section 7704. Any such Class B Certificateholder or assignee
Certificateholder which has a Participant which is an S corporation described in
Code Section 1361 additionally agrees that, in the event the owners of such
Participant
<PAGE>
shall be treated as Private Holders under Treasury Regulations promulgated under
Code Section 7704, it shall take such reasonable measures as shall be agreed
upon with the Transferor as shall reduce the risk that the Trust would be
treated as a publicly traded partnership pursuant to Section 7704 of the Code.
Each Class B Certificateholder shall notify the Transferor of its
sale, transfer or assignment of any interest in a Class B Certificate to any
Participant, and the Transferor shall maintain a register of each Participant
and the amount of each Participation. No Participant shall be entitled to sell,
transfer, assign or otherwise dispose of less than its entire interest in its
participation in the Class B Certificates (including by means of a pledge,
hypothecation or subparticipation thereof), without the prior written consent of
the Transferor.
At no time shall the aggregate number of Class B Certificateholders,
Participants and Support Parties exceed five (5) Private Holders or such greater
number as to which the Transferor shall consent in writing, which consent shall
not be unreasonably withheld. In the event that, after giving effect to such
consent or after any other transfer, the number of Private Holders would exceed
80, the Transferor shall not grant such consent and shall not permit such
transfer unless the Transferor has provided to the Trustee an Opinion of Counsel
to the effect that the transfers would not cause the Trust to be treated as a
"publicly traded partnership" taxable as a corporation under Section 7704 of the
Code. Any transfer of an interest in a Class B Certificate in contravention of
this paragraph shall be void AB INITIO.
Notwithstanding any provisions of this subsection 12(e) to the
contrary, (i) each Class B Certificateholder and any of its Participants may
pledge its interest in the Class B Certificates to any Federal Reserve Bank as
collateral in accordance with applicable law, and (ii) each Class B
Certificateholder may at any time and from time to time sell, transfer or assign
all or any interest in its Class B Certificates or any portion thereto to any of
its Support Parties.
As used in this subsection 12(f):
"PARTICIPANT" means each Person that has been granted a
participation interest by a Class B Certificateholder in all or part of its
Class B Certificates.
"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),
but excluding any interest in the Trust represented by any Series or Class
of Certificates or any other interest as to which the Transferor has
provided to the Trustee an Opinion of Counsel
<PAGE>
to the effect that such Series, Class 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, in each case, provided such
interest is not convertible or exchangeable into an interest in the Trust
or the Trust's income or equivalent value. Notwithstanding the immediately
preceding sentence, "Private Holder" shall also include any other Person
that the Transferor determines is, or may be or may become, a "partner"
within the meaning of Section 1.7704-1(h)(l)(ii) of the United States
Treasury Regulations (including by reason of Section 1.7704-1(h)(3)). The
holders of (i) the Transferor Interest, (ii) the interest of the Servicer,
(iii) any similar interests in the Trust represented by any other Class of
any Series of Certificates, and (iv) any interest described in Section
12.1(b) of the Pooling and Servicing Agreement shall be treated as Private
Holders. 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, an S corporation or a grantor trust
under the Code shall be treated as a Private Holder unless excepted with
the consent of the Transferor (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"
taxable as a corporation under Section 7704 of the Code).
"SUPPORT PARTY" means any bank or other financial institution
extending or having a commitment to extend funds to or for the account of
a Class B Certificateholder or other owner of an interest in Class B
Certificates (including by agreement to purchase an assignment of or
participation in Class B Certificates) under any liquidity or credit
support agreement which relates to the Class B Certificates.
SECTION 13. SUCCESSOR TRUSTEE. Section 11.7 of the Agreement shall
read in its entirety as provided in the Agreement and, in addition, the
following sentence shall be added to the end of subsection 11.7(c) of the
Agreement and shall be applicable only to the Series 1997-1 Variable Funding
Certificates: "Any successor trustee appointed pursuant to this Section 11.7
shall be subject to the written consent of the Facility Agent, which consent
shall not be unreasonably withheld."
SECTION 14. NOTICE TO FACILITY AGENT. A copy of each notice, demand,
direction, report, Officer's Certificate or other certificate, election and
opinion required to be sent or delivered to the Rating Agency or the Trustee
shall also be sent or delivered and, in the case of opinions or letters of
reliance thereon, shall be addressed to the Facility Agent.
SECTION 15. CHARGE ACCOUNT AGREEMENTS AND CREDIT AND COLLECTION
POLICIES . Section 2.5(c) of the Agreement shall read in its entirety as set
forth below and as so amended and restated shall be applicable only with respect
to the Series 1997-1 Variable Funding Certificates: "The Transferor shall comply
with and perform its obligations and shall cause the Originators to comply with
and perform their obligations under the Charge Account Agreements relating to
the Accounts and the Credit and
<PAGE>
Collection Policy except insofar as any failure to comply or perform would not
materially and adversely affect the rights of the Trust or the
Certificateholders hereunder or under the Certificates. The Transferor may
change the terms and provisions of the Charge Account Agreements or the Credit
and Collection Policy in any respect (including the reduction of the required
minimum monthly payment, the calculation of the amount, or the timing, or charge
offs and the periodic finance charges and other fees to be assessed thereon)
only if such change (i) would not, in the reasonable belief of the Transferor,
cause, immediately or with the passage of time, a Series 1997-1 Pay Out Event to
occur, (ii) it will not make any such change with the intent to materially
benefit the Transferor or any Originator over the Investor Certificateholders,
except as otherwise restricted by an endorsement, sponsorship, or other
agreement between the Transferor and an unrelated third party or by the terms of
the Charge Account Agreements, and (iii) if the Servicer is servicing charge
card accounts owned by an unrelated third party, such change would not result in
the Servicer's applying a materially higher standard of care to the servicing of
such accounts than it applies under this Agreement."
SECTION 16. SUCCESSOR SERVICER. Section 10.2 of the Agreement shall
read in its entirety as provided in the Agreement and, in addition, the
following sentence should be inserted in the fifteenth line of Section 10.2(a)
between the phrase "acceptable to the Trustee." and "If such Successor Servicer
is" and shall be applicable only with respect to the Series 1997-1 Variable
Funding Certificates: "Any Successor Servicer must either (A) be approved by the
Facility Agent or (B) be a Person which (i) has a tangible net worth of at least
$50,000,000, (ii) has serviced an average of at least $1,000,000,000 of credit
or charge card receivables outstanding during the previous 12 months and (iii)
has a senior long-term debt rating, as determined by at least one nationally
recognized statistical rating organization, of at least "BBB" or its equivalent,
provided, that if such Successor Servicer has no long term debt or such debt is
not rated by a nationally recognized statistical rating organization, the long
term debt rating of its parent must be at least "BBB" or its equivalent."
<PAGE>
SECTION 17. SERIES 1997-1 INVESTOR EXCHANGE; CERTIFICATE DEFEASANCE.
(a) Pursuant to subsection 6.9(b), the Class A Certificateholders may
tender their Class of Series 1997-1 Certificates (and with the consent of all
Class A Certificateholders so may the Class B Certificateholders, and with the
consent of all Class A Certificateholders and Class B Certificateholders so may
the Class B-2 Certificateholders, and with the consent of all Senior
Certificateholders so may the Class C Certificateholders), and the Holders of
the Exchangeable Transferor Certificate may tender the Exchangeable Transferor
Certificate, in exchange for (i) one or more newly issued classes of Investor
Certificates and (ii) a reissued Exchangeable Transferor Certificate in
accordance with the terms and conditions contained in a notice of exchange
delivered to the Series 1997-1 Certificateholders. Such notice of exchange will
specify, among other things: (a) the amount and Classes of Series 1997-1
Certificates that may be tendered, (b) the Certificate Rate with respect to the
new Series, (c) the term of the Series, (d) the method of computing the investor
percentage, (e) the manner of Enhancement, if any, with respect to the Series
and (f) the time and the manner at which the tender and cancellation of the
Series 1997-1 Certificates and the issuance of the new class of Certificates
will be effectuated. Upon satisfaction of the conditions contained in
subsections 6.9(b) and 6.9(c), and the receipt by the Trustee of the exchange
notice and the related Supplement, the Trustee shall cancel the existing
Exchangeable Transferor Certificate and the applicable class of Series 1997-1
Certificates, and shall issue such Series of Investor Certificates and a new
Exchangeable Transferor Certificate, each dated the Exchange Date.
(b) The Trustee, for the benefit of the Series 1997-1
Certificateholders, shall establish and maintain with a Qualified Institution in
the name of the Trust, a certain segregated trust account (the "DEFEASANCE
ACCOUNT"). At the option of the Transferor, all amounts received by the Trustee
from the issuance of new Certificates of another Series (or any class within any
such other Series) on the settlement date for such issuance shall be deposited
in the Defeasance Account.
(c) Amounts on deposit in the Defeasance Account shall be applied as
Collections allocable to the Series 1997-1 Variable Funding Certificates in
payment of, the Class A Invested Amount and accrued and unpaid interest thereon,
the Class B Invested Amount and accrued and unpaid interest thereon the Class
B-2 Invested Amount and accrued and unpaid interest thereon, accrued and unpaid
Program Fees and other Facilities Costs and interest on overdue payments of the
foregoing, in accordance with and subject to the priorities set forth in
Sections 4.8 and 4.9 of the Agreement. Any day upon which payments are received
in the Defeasance Account shall be a Distribution Date. Any funds remaining in
the Defeasance Account after all amounts payable to the Senior
Certificateholders pursuant to Section 4.8 and 4.9 have been paid in full shall
be paid to the Transferor.
SECTION 18. RATIFICATION OF AGREEMENT. As supplemented by this Series
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as
<PAGE>
so supplemented by this Series Supplement shall be read, taken, and construed as
one and the same instrument.
SECTION 19. COUNTERPARTS. This Series 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 20. GOVERNING LAW. THIS SERIES 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.
SECTION 21. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the sufficiency of this Series Supplement
or for or in respect of the Preliminary Statement contained herein, all of which
recitals are made solely by the Transferor.
SECTION 22. INSTRUCTIONS IN WRITING. All instructions or other
communications given by the Servicer or any other person to the Trustee pursuant
to this Series Supplement shall be in writing, and, with respect to the
Servicer, may be included in a Daily Report or Settlement Statement.
SECTION 23. AMEMDMENT. The Agreement (including any Supplement)
shall not be amended by the Servicer, the Transferor and the Trustee in reliance
on the second paragraph of Section 13.1(a) without the consent of (i) Holders of
Investor Certificates evidencing Undivided Interests aggregating not less than
66 2/3% of the Invested Amount of the Series 1997-1 Variable Funding
Certificates (ii) the Required Class A Purchasers and the Required Class A
Owners, (iii) the Required Class B Purchasers and the Required Class B Owners
and (iv) the Required Class B-2 Purchasers.
SECTION 24. DISCOUNT OPTION. The Transferor shall not exercise its
option to designate a Discount Percentage under Section 2.8 of the Agreement
unless it has obtained the consent of the Facility Agent, which will not
unreasonably be withheld. The Transferor shall not withdraw such designation of
a Discount Percentage thereafter unless (i) it has obtained the consent of the
Facility Agent, which will not unreasonably be withheld, or (ii) the Excess
Spread Percentage for each of the three most recently completed Monthly Periods
exceeds 3.0%. The Transferor shall not reduce the Discount Percentage more than
once in any twelve month period.
SECTION 25. RATING AGENCY CONDITION. For purposes of any provision
of the Agreement or the Supplement which requires that any Rating Agency confirm
that an action or condition would not result in a reduction or withdrawal of its
rating of Series 1997-1 Certificates or any class thereof (if such Series were
rated by such Rating Agency), such requirement shall mean for purposes of Series
1997-1 that (a) for each class of Series 1997-1 Certificates then rated by such
Rating Agency, if any, that such
<PAGE>
action or condition would not result in a reduction or withdrawal of its rating
of such class of Series 1997-1 Certificates, and (b) that each of Moody's and
Standard & Poor's has confirmed in writing to the Facility Agent that such
action or condition would not result in a reduction or withdrawal of such Rating
Agency's then applicable rating of the CP Notes issued by any Noncommitted Class
A Purchaser or Noncommitted Class B Purchaser, without giving effect to any
increase in any letter of credit or other enhancement provided to such
Noncommitted Class A Purchaser or Noncommitted Class B Purchaser (other than, in
the case of a purchase of Additional Class A Invested Amounts or Additional
Class B Invested Amounts, as applicable, an increase in liquidity support
provided to such Noncommitted Class A Purchaser, Noncommitted Class B Purchaser
by Liquidity Providers (as defined in the applicable Certificate Purchase
Agreement).
<PAGE>
IN WITNESS WHEREOF, the Transferor, 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.
SRI RECEIVABLES PURCHASE CO., INC.
Transferor
By: /S/ MARK A. HESS
Mark A. Hess
Treasurer
THE FOREGOING SPECIALTY RETAILERS, INC.
AMENDED AND RESTATED Servicer
SERIES 1997-1 SUPPLEMENT
IS HEREBY CONSENTED TO:
By: /S/ JAMES A. MARCUM
SRI RECEIVABLES PURCHASE CO., James A. Marcum
INC., as Class C Certificateholders Vice Chairman and Chief
Financial Officer (principal
financial and
By: /S/ MARK A. HESS accounting officer)
Name: Mark A. Hess
Title: Treasurer BANKERS TRUST (DELAWARE)
Trustee
CREDIT SUISSE FIRST BOSTON
New York Branch, as Class A Agent
and Class B Agent, acting as Class A By: /S/ JAMES H. STALLKAMP
Certificateholder and Class B James H. Stallkamp
Certificateholder President
By: /S/ DENNIS J. KNITOWSKI
Name: Dennis J. Knitowski
Title: Associate
By: /S/ ALBERTO ZONCA
Name: Alberto Zonca
Title: Associate
EXHIBIT 4.3
CLASS B-2 CERTIFICATE PURCHASE AGREEMENT
Dated as of October 16, 1998
among
SRI RECEIVABLES PURCHASE CO., INC.,
individually and as Transferor,
SPECIALTY RETAILERS, INC.,
individually and as Originator and Servicer,
THE CLASS B-2 PURCHASERS PARTIES HERETO,
and
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
Class B-2 Agent and Facility Agent
--------------------
Relating to
SRI Receivables Master Trust
Series 1997-1
--------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS 2
1.1 Definitions 2
1.2 Other Definitional Provisions 6
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 6
2.1 Purchases 7
2.2 Termination of Commitments 8
2.3 Fees, Expenses, Payments, Etc 8
2.4 Requirements of Law 9
2.5 Taxes 10
2.6 Indemnification 13
SECTION 3. CONDITIONS PRECEDENT 15
3.1 Condition to Effectiveness 15
3.2 Condition to Additional Purchase 17
SECTION 4. REPRESENTATIONS AND WARRANTIES 18
4.1 Representations and Warranties of SRPC 18
4.2 Representations and Warranties of SRI 20
4.3 Representations and Warranties of the Class B-2 Agent, the
Facility Agent and the Class B-2 Purchasers 22
SECTION 5. COVENANTS 22
5.1 Covenants of SRPC 22
SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY 25
6.1 Covenants of SRPC, Etc. 25
6.2 Covenants of Class B-2 Purchasers 26
SECTION 7. THE AGENTS 26
7.1 Appointment 26
7.2 Delegation of Duties 27
7.3 Exculpatory Provisions 27
7.4 Reliance by Agent 27
<PAGE>
7.5 Notices 28
7.6 Non-Reliance on Agent and Other Class B-2 Purchasers 28
7.7 Indemnification 28
7.8 Agents in Their Individual Capacities 29
7.9 Successor Agent 29
SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT 30
8.1 Transfers of Class B-2 Certificates 30
8.2 Tax Characterization 33
SECTION 9. MISCELLANEOUS 33
9.1 Amendments and Waivers 33
9.2 Notices 34
9.3 No Waiver; Cumulative Remedies 35
9.4 Successors and Assigns 35
9.5 Successors to Servicer 35
9.6 Counterparts 36
9.7 Severability 37
9.8 Integration 37
9.9 Governing Law 37
9.10 Termination 37
9.11 Limited Recourse; No Proceedings 37
9.12 Survival of Representations and Warranties 38
9.13 Submission to Jurisdiction; Waivers 38
9.14 WAIVERS OF JURY TRIAL 39
LIST OF EXHIBITS
EXHIBIT A Form of Investment Letter
EXHIBIT B Form of Transfer Supplement
<PAGE>
CLASS B-2 CERTIFICATE PURCHASE AGREEMENT, dated as of October 16,
1998, by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation
("SRPC"), individually and as Transferor (as defined in the Master Pooling and
Servicing Agreement referred to below), SPECIALTY RETAILERS, INC., a Texas
corporation ("SRI"), individually and as Servicer (as defined in the Master
Pooling and Servicing Agreement referred to below), the CLASS B-2 PURCHASERS
from time to time parties hereto (collectively, the "CLASS B-2 PURCHASERS") and
CREDIT SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New
York Branch, as agent for the Class B-2 Purchasers (together with its successors
in such capacity, the "CLASS B-2 AGENT") and as facility agent for the Class B-2
Purchasers, the Class A Purchasers and the Class B Purchasers, each as defined
below (together with its successors in such capacity, the "FACILITY AGENT").
W I T N E S S E T H:
WHEREAS, SRPC, as Transferor, SRI, as Servicer, and Bankers Trust
(Delaware), a Delaware banking corporation, as trustee (together with its
successors in such capacity, the "TRUSTEE"), are parties to a certain Amended
and Restated Pooling and Servicing Agreement dated as of August 11, 1995, and
amended as of May 30, 1996 and as of August 1, 1998 (as the same may from time
to time be further amended or otherwise modified, the "MASTER POOLING AND
SERVICING AGREEMENT"), pursuant to which the Transferor has created the SRI
Receivables Master Trust (the "TRUST"), and to a Series 1997-1 Supplement
thereto, dated as of December 3, 1997, as amended as of September 28, 1998 and
as further amended and restated as set forth in the Amended and Restated Series
1997-1 Supplement, dated as of October 16, 1998 (the "RESTATED SUPPLEMENT"; such
Series 1997-1 Supplement, as so amended and restated and as the same may from
time to time be further amended or otherwise modified, the "SUPPLEMENT" and,
together with the Master Pooling and Servicing Agreement, the "POOLING AND
SERVICING AGREEMENT");
WHEREAS, the Trust has issued its Class A-1 Variable Funding
Certificates, Series 1997-1 (the "CLASS A CERTIFICATES"), its Class B-1 Variable
Funding Certificates, Series 1997-1 (the "CLASS B CERTIFICATES") and its Class
C-1 Variable Funding Certificates, Series 1997-1 (the "CLASS C CERTIFICATES")
pursuant to the Pooling and Servicing Agreement;
WHEREAS, the Trust proposes to issue its Class B-2 Variable Funding
Certificates, Series 1997-1 (the "CLASS B-2 CERTIFICATES" and, together with the
Class A Certificates, the Class B Certificates and the Class C Certificates, the
"SERIES 1997-1 CERTIFICATES"); and
WHEREAS, the Class B-2 Purchasers are willing to purchase the Class
B-2 Certificates on the Closing Date and from time to time thereafter to
purchase Additional Class B-2 Invested Amounts (as defined in the Supplement)
thereunder on the terms and conditions provided for herein;
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<PAGE>
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby expressly acknowledged, the parties hereto agree as follows:
I. SECTION DEFINITIONS
A. DEFINITIONS. All capitalized terms used herein as defined terms and not
defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement. Each capitalized term defined herein shall relate only to
the Series 1997-1 and to no other Series of Investor Certificates issued by the
Trust.
"ADJUSTED BASE RATE" shall mean, for any day, a rate per annum equal
to the sum of (i) the CSFB Corporate Base Rate in effect for such day, plus (ii)
the Class B-2 Margin.
"AGREEMENT" shall mean this Class B-2 Certificate Purchase
Agreement, as amended, supplemented or otherwise modified from time to time.
"ASSIGNEE" and "ASSIGNMENT" have the respective meanings specified
in subsection 8.1(e) of this Agreement.
"AVAILABLE COMMITMENT" shall mean, on any day for a Class B-2
Purchaser, such Class B-2 Purchaser's Commitment in effect on such day MINUS
such Class B-2 Purchaser's Percentage Interest of the Class B-2 Principal
Balance on such day.
"CLASS A CERTIFICATES" has the meaning specified in the recitals
to this Agreement.
"CLASS A PURCHASE AGREEMENT" shall mean the Class A Certificate
Purchase Agreement, dated as of December 3, 1997, among SRPC, individually and
as Transferor, SRI, individually and as Servicer, the Class A Purchasers parties
thereto, the Class A Agent referred to therein and the Facility Agent, as
modified as of September 28, 1998 and amended as of the date hereof, and as
further amended, modified or otherwise supplemented from time to time.
"CLASS A PURCHASERS" has the meaning specified in the Class A
Purchase Agreement.
"CLASS B PURCHASE AGREEMENT" shall mean the Class B Certificate
Purchase Agreement, dated as of December 3, 1997, among SRPC, individually and
as Transferor, SRI, individually and as Servicer, the Class B Purchasers parties
thereto, the Class B Agent referred to therein and the Facility Agent, as
modified as of September 28, 1998 and amended as of the date hereof, and as
further amended, modified or otherwise supplemented from time to time.
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<PAGE>
"CLASS B PURCHASERS" has the meaning specified in the Class B
Purchase Agreement.
"CLASS B-2 AGENT" has the meaning specified in the preamble to
this Agreement.
"CLASS B-2 CERTIFICATE RATE" has the meaning specified in
subsection 2.1(f) of this Agreement.
"CLASS B-2 CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"CLASS B-2 COMMITMENT FEE" shall mean the ongoing commitment fees
payable to the Class B-2 Agent or the Class B-2 Purchasers in the amounts and on
the dates set forth in the Class B-2 Fee Letter.
"CLASS B-2 FEE LETTER" shall mean that certain letter agreement,
designated therein as the Series 1997-1 Class B-2 Fee Letter and dated as of the
date hereof, among the Class B-2 Agent, SRPC and SRI, as such letter agreement
may be amended or otherwise modified from time to time.
"CLASS B-2 MARGIN" has the meaning specified in the Class B-2 Fee
Letter.
"CLASS B-2 OWNERS" shall mean the Class B-2 Purchasers that are
owners of record of the Class B-2 Certificates or, with respect to any Class B-2
Certificate held by the Class B-2 Agent hereunder as nominee on behalf of Class
B-2 Purchasers, the Class B-2 Purchasers that are owners of the Class B-2
Invested Amount represented by such Class B-2 Certificate as reflected on the
books of the Class B-2 Agent in accordance with this Agreement.
"CLASS B-2 PURCHASE LIMIT" shall mean $10,000,000.
"CLASS B-2 PURCHASER" has the meaning specified in the preamble
to this Agreement.
"CLASS B-2 REPAYMENT AMOUNT" shall mean the sum of all amounts
payable with respect to (i) the Class B-2 Invested Amount, (ii) Class B-2
Interest and (iii) all amounts payable pursuant to Section 2.4 or 2.5 hereof.
"CLASS C CERTIFICATES" has the meaning specified in the recitals
to this Agreement.
"CLOSING DATE" shall mean October 16, 1998.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
-3-
<PAGE>
"COMMITMENT" shall mean, for any Class B-2 Purchaser, the maximum
amount of such Class B-2 Purchaser's commitment to purchase a portion of the
Class B-2 Invested Amount, as set forth opposite such Class B-2 Purchaser's
signature to this Agreement or the Transfer Supplement by which such Class B-2
Purchaser became a party to this Agreement or assumed the Commitment (or a
portion thereof) of another Class B-2 Purchaser, as such amount may be adjusted
from time to time pursuant to Transfer Supplement(s) executed by such Class B-2
Purchaser and its Assignee(s) and delivered pursuant to Section 8.1 of this
Agreement or pursuant to Section 2.2 of this Agreement..
"COMMITMENT EXPIRATION DATE" shall mean December 24, 1998.
"COMMITMENT PERCENTAGE" shall mean, for a Class B-2 Purchaser, such
Class B-2 Purchaser's Commitment as a percentage of the aggregate Commitments of
all Class B-2 Purchasers.
"EXCLUDED TAXES" has the meaning specified in subsection 2.5(a)
of this Agreement.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GRANITE" shall mean Granite National Bank, N.A., a national banking
association, which is a subsidiary of Stage.
"INDEMNITEE" has the meaning specified in subsection 2.6(a) of
this Agreement.
"INDEMNITOR" has the meaning specified in subsection 2.6(a) of
this Agreement.
"INVESTING OFFICE" shall mean initially, the office of any Class B-2
Purchaser (if any) designated as such, in the case of the initial Class B-2
Purchaser, as set forth opposite its signature to this Agreement or, in the case
of an Assignee, in the related Transfer Supplement, and thereafter, such other
office of such Class B-2 Purchaser or such Assignee as may be designated in
writing to the Class B-2 Agent, the Transferor, the Servicer and the Trustee by
such Class B-2 Purchaser or Assignee.
"INVESTMENT LETTER" has the meaning specified in subsection
8.1(a) of this Agreement.
"MASTER POOLING AND SERVICING AGREEMENT" has the meaning
specified in the recitals to this Agreement.
-4-
<PAGE>
"PARTICIPANT" has the meaning specified in subsection 8.1(d) of
this Agreement.
"PARTICIPATION" has the meaning specified in subsection 8.1(d) of
the Agreement.
"PERCENTAGE INTEREST" shall mean, for a Class B-2 Purchaser on any
day, the percentage equivalent of (a) the sum of (i) the portion of the Class
B-2 Initial Invested Amount (if any) purchased by such Class B-2 Purchaser, PLUS
(ii) the aggregate Additional Class B-2 Invested Amounts (if any) purchased by
such Class B-2 Purchaser prior to such day pursuant to Section 6.15 of the
Pooling and Servicing Agreement, PLUS (iii) any portion of the Class B-2
Principal Balance acquired by such Class B-2 Purchaser as an Assignee from
another Class B-2 Purchaser pursuant to a Transfer Supplement executed and
delivered pursuant to Section 8.1 of this Agreement, MINUS (iv) the aggregate
amount of principal payments made to such Class B-2 Purchaser prior to such day,
MINUS (v) any portion of the Class B-2 Principal Balance assigned by such Class
B-2 Purchaser to an Assignee pursuant to a Transfer Supplement executed and
delivered pursuant to Section 8.1 of this Agreement, DIVIDED BY (b) the
aggregate Class B-2 Principal Balance on such day.
"POOLING AND SERVICING AGREEMENT" has the meaning specified in
the recitals to this Agreement.
"PURCHASE DATE" shall mean the Closing Date and each Business Day on
which the purchase of an Additional Class B-2 Invested Amount is to occur in
accordance with Section 6.15 of the Pooling and Servicing Agreement and Section
2.1 hereof.
"RECEIVABLES TRANSFER AGREEMENT" shall mean the Receivables Transfer
Agreement, dated as of August 1, 1998, between SRI, as purchaser, and Granite,
as transferor, as the same may from time to time be amended or otherwise
modified.
"REGULATORY CHANGE" shall mean, as to each Class B-2 Purchaser, any
change occurring after the date of the execution and delivery of this Agreement
or, in the case of an Assignee, of the Transfer Supplement by which it became
party to this Agreement and, as to each Participant, any change occurring after
the date on which its Participation became effective, in any (or the adoption
after such date of any new):
(i) United States Federal or state law or foreign law applicable to
such Class B-2 Purchaser or Participant; or
(ii) regulation, interpretation, directive, guideline or request
(whether or not having the force of law) applicable to such Class B-2
Purchaser or Participant of any court or other judicial authority or any
Governmental Authority charged with the interpretation or administration
of any law referred to in clause (i) or of any fiscal, monetary or other
Governmental Authority or central bank having jurisdiction over such Class
B-2 Purchaser or Participant.
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<PAGE>
"RELATED DOCUMENTS" shall mean, collectively, this Agreement
(including the Class B-2 Fee Letter and all Transfer Supplements), the Class A
Purchase Agreement, the Class B Purchase Agreement, the Master Pooling and
Servicing Agreement, the Supplement, the Series 1997-1 Certificates, the
Receivables Purchase Agreement and the Receivables Transfer Agreement.
"REQUIRED CLASS B-2 PURCHASERS" shall mean, at any time, Class B-2
Purchasers having Commitments aggregating greater than 66-2/3% of the aggregate
Commitments of all Class B-2 Purchasers or, if the Commitments have terminated,
having Percentage Interests aggregating greater than 66-2/3%.
"REQUIREMENT OF LAW" shall mean, as to any Person, any law, treaty,
rule or regulation, or determination of an arbitrator or Governmental Authority,
in each case applicable to or binding upon such Person or to which such Person
is subject, whether federal, state or local (including usury laws, the Federal
Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors
of the Federal Reserve System).
"RESTATED SUPPLEMENT" has the meaning specified in the recitals
to this Agreement.
"RISK RATE" shall mean, for any day, a rate per annum equal to the
sum of (i) the Adjusted Base Rate in effect for such day, plus (ii) 2.00%.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SERIES 1997-1 CERTIFICATES" has the meaning specified in the
recitals to this Agreement.
"SRI" has the meaning specified in the preamble to this Agreement
and, as used herein (except to the extent that the context otherwise requires),
shall mean SRI in its individual capacity (including its capacity as
Originator).
"STAGE" shall mean Stage Stores, Inc., a Delaware corporation which
is the parent of SRI.
"TAXES" has the meaning specified in subsection 2.5(a) of this
Agreement.
"TERMINATION DATE" shall mean the first to occur of (i) the
Commitment Expiration Date or (ii) the Amortization Period Commencement Date.
"TERMINATION EVENT" shall mean the occurrence of a Trust Pay Out
Event, a Series 1997-1 Pay Out Event or a Servicer Default, or the occurrence of
an event or condition which would be a Trust Pay Out Event, a Series 1997-1 Pay
Out Event or a
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<PAGE>
Servicer Default but for a waiver of or failure to declare or determine such
event by the Certificateholders or the Trustee.
"TRANSFER" has the meaning specified in subsection 8.1(c) of this
Agreement.
"TRANSFEREE" has the meaning specified in subsection 8.1(c) of
this Agreement.
"TRANSFER SUPPLEMENT" has the meaning specified in subsection
8.1(e) of this Agreement.
"TRUST" has the meaning specified in the recitals to this
Agreement.
"TRUSTEE" has the meaning specified in the recitals to this
Agreement.
"UTILIZATION FEE" has the meaning specified in the Class B-2 Fee
Letter.
"WRITTEN" or "IN WRITING" (and other variations thereof) shall mean
any form of written communication or a communication by means of telex,
telecopier device, telegraph or cable.
A. OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto.
(b) The words "hereof", "herein", and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and Section,
subsection and Exhibit references are to this Agreement, unless otherwise
specified. The words "including" and "include" shall be deemed to be followed by
the words "without limitation".
I. SECTION AMOUNT AND TERMS OF COMMITMENTS
A. PURCHASES. (a) On and subject to the terms and conditions of this Agreement,
and in consideration of the Commitment of the Class B-2 Purchasers set forth
herein, the Transferor agrees to sell to the Class B-2 Purchasers, and each
Class B-2 Purchaser, severally, agrees to purchase its Commitment Percentage of,
the Class B-2 Certificates on the Closing Date. The Class B-2 Initial Invested
Amount shall be $0. The Class B-2 Purchasers hereby direct that the Class B-2
Certificates be registered in the name of the Class B-2 Agent, as nominee on
behalf of the Class B-2 Purchasers from time to time hereunder.
(b) On and subject to the terms and conditions of this Agreement and
prior to the Termination Date, each Class B-2 Purchaser, severally, agrees to
purchase its Commitment Percentage of any Additional Class B-2 Invested Amount
offered for
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purchase pursuant to Section 6.15 of the Pooling and Servicing Agreement, in
each case for a purchase price equal to the Additional Class B-2 Invested Amount
so purchased; PROVIDED that in no event shall a Class B-2 Purchaser be required
on any date to purchase an Additional Class B-2 Invested Amount exceeding its
Available Commitment, determined prior to giving effect to such purchase. Such
purchase price shall be made available to the Transferor, subject to the
satisfaction of the conditions specified in Section 3.2 hereof, at or prior to
11:00 a.m. New York City time on the applicable Purchase Date by deposit of
immediately available funds to an account or accounts specified in writing by
the Transferor to the Class B-2 Agent.
(c) Each purchase of any Additional Class B-2 Invested Amount on the
applicable Purchase Date shall be made on prior notice from the Transferor
received by the Class B-2 Agent not later than 2:00 p.m. New York City time on
the Business Day immediately preceding such Purchase Date. Each such notice
shall be irrevocable and shall specify (i) the aggregate Additional Class B-2
Invested Amount to be purchased (which shall be an amount equal to $500,000 or
an integral multiple of $100,000 in excess of such amount), (ii) the applicable
Purchase Date (which shall be a Business Day), and (iii) instructions as to the
deposit of the proceeds of the purchase. The Class B-2 Agent shall promptly
forward a copy of such notice to each Class B-2 Purchaser. Unless the Required
Class B-2 Purchasers and the Class B-2 Agent shall otherwise consent, there may
not be more than two (2) Purchase Dates in any calendar week.
(d) In no event may any Additional Class B-2 Invested Amount be
offered for purchase hereunder or under Section 6.15 of the Pooling and
Servicing Agreement, nor shall any Class B-2 Purchaser be obligated to purchase
any Additional Class B-2 Invested Amount, to the extent that such Additional
Class B-2 Invested Amount would exceed the aggregate Available Commitments.
(e) The Class B-2 Certificates shall be paid as provided in the
Pooling and Servicing Agreement, and the Class B-2 Agent shall allocate to the
Class B-2 Owners each payment in respect of the Class B-2 Certificates received
by the Class B-2 Agent in its capacity as Class B-2 Certificateholder as
provided therein. Payments in reduction of the Class B-2 Principal Balance shall
be applied to Class B-2 Owners pro rata based on their respective Percentage
Interests of the Class B-2 Principal Balance, or in any such case in such other
proportions as each affected Class B-2 Purchaser may agree upon in writing from
time to time with the Facility Agent, the Class B-2 Agent, SRPC and SRI.
(f) For purposes of the Supplement, a portion of the Class B-2
Principal Balance equal to the Class B-2 Invested Amount shall bear interest on
each day at a rate per annum equal to the Adjusted Base Rate for such day, and
the remaining portion of the Class B-2 Principal Balance shall bear interest on
each such day at a rate per annum equal to the Risk Rate for such day. For
purposes of the Supplement, the "CLASS B-2 CERTIFICATE RATE" shall mean, for
each day, the weighted average of the Adjusted Base Rate and the Risk Rate for
such day (based on said respective portions of the Class B-2 Principal Balance),
and, for each Interest Accrual Period, the average of the Class B-2 Certificate
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<PAGE>
Rates for each day during such Interest Accrual Period. Such calculations of
interest shall be based on the actual number of days elapsed in a year having
365 or 366 days (as the case may be).
A. TERMINATION OF COMMITMENTS. On the Termination Date, all
Commitments shall be reduced to zero and terminate.
A. FEES, EXPENSES, PAYMENTS, ETC. (a) SRPC agrees to pay to
the Class B-2 Agent for the account of the Class B-2 Purchasers the Class B-2
Commitment Fee and other amounts set forth in the Class B-2 Fee Letter at the
times specified therein.
(b) SRPC further agrees to pay within 30 days following receipt of
an invoice therefor to the Class B-2 Agent, the Facility Agent and the initial
Class B-2 Purchasers all reasonable costs and expenses in connection with the
preparation, execution, delivery, initial syndication, administration (including
any requested amendments, waivers or consents of any of the Related Documents)
of this Agreement, and the other documents to be delivered hereunder or in
connection herewith, including the reasonable fees and out-of-pocket expenses of
counsel for the Class B-2 Agent, the Facility Agent and each of the initial
Class B-2 Purchasers with respect thereto.
(c) SRI agrees to pay to the Class B-2 Agent, the Facility Agent and
each Class B-2 Purchaser, promptly following presentation of an invoice
therefor, all reasonable costs and expenses (including reasonable fees and
expenses of counsel), if any, in connection with the enforcement of any of the
Related Documents, and the other documents delivered thereunder or in connection
therewith.
(d) SRI further agrees to pay on demand any and all stamp, transfer
and other taxes (other than Taxes covered by Section 2.5) and governmental fees
payable in connection with the execution, delivery, filing and recording of any
of the Related Documents or the other documents and agreements to be delivered
hereunder and thereunder or otherwise in connection with the issuance of Series
1997-1, and agrees to save each Class B-2 Purchaser and the Class B-2 Agent and
the Facility Agent harmless from and against any liabilities with respect to or
resulting from any delay in paying or any omission to pay such taxes and fees.
(e) Periodic fees or other periodic amounts payable hereunder shall
be calculated, unless otherwise specified in the Class B-2 Fee Letter, on the
basis of a 360-day year and for the actual days elapsed.
(f) All payments to be made hereunder or under the Supplement,
whether on account of principal, interest, fees or otherwise, shall be made
without setoff or counterclaim and shall be made prior to 2:30 p.m., New York
City time, on the due date thereof to the Class B-2 Agent's account specified in
subsection 9.2(b) hereof, in United States dollars and in immediately available
funds. Payments received by the Class B-2 Agent after 2:30 p.m. New York City
time shall be deemed to have been made on the next Business Day. Notwithstanding
anything herein to the contrary, if any payment due hereunder becomes due and
payable on a day other than a Business Day, the payment
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<PAGE>
date thereof shall be extended to the next succeeding Business Day and interest
shall accrue thereon at the applicable rate during such extension. To the extent
that (i) the Trustee, SRPC, SRI, the Transferor or the Servicer makes a payment
to the Class B-2 Agent, the Facility Agent or a Class B-2 Purchaser or (ii) the
Class B-2 Agent, the Facility Agent or a Class B-2 Purchaser receives or is
deemed to have received any payment or proceeds for application to an
obligation, which payment or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy or
insolvency law, state or Federal law, common law, or for equitable cause, then,
to the extent such payment or proceeds are set aside, the obligation or part
thereof intended to be satisfied shall be revived and continue in full force and
effect, as if such payment or proceeds had not been received or deemed received
by the Class B-2 Agent, the Facility Agent or the Class B-2 Purchaser, as the
case may be.
(g) The obligations of SRPC under this Section 2.3 are subject to
subsection 9.11(a) hereof.
1. REQUIREMENTS OF LAW. In the event that any Class B-2 Purchaser shall have
reasonably determined that any Regulatory Change shall:
(i) subject such Class B-2 Purchaser to any tax of any kind
whatsoever with respect to this Agreement, its Commitment or its
beneficial interest in the Class B-2 Certificates, or change the basis of
taxation of payments in respect thereof (except for Taxes covered by
Section 2.5 and taxes included in the definition of Excluded Taxes in
subsection 2.5(a) and changes in the rate of tax on the overall net income
of such Class B-2 Purchaser); or
(ii) impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, such
Class B-2 Purchaser;
and the result of any of the foregoing is to increase the cost to such Class B-2
Purchaser, by an amount which such Class B-2 Purchaser deems to be material, of
maintaining its Commitment or its interest in the Class B-2 Certificates or to
reduce any amount receivable in respect thereof, THEN, in any such case, after
submission by such Class B-2 Purchaser to the Class B-2 Agent of a written
request therefor and the submission by the Class B-2 Agent to the Transferor and
the Servicer of such written request therefor, the Transferor (subject to
subsection 9.11(a) hereof) shall pay to the Class B-2 Agent for the account of
such Class B-2 Purchaser any additional amounts necessary to compensate such
Class B-2 Purchaser for such increased cost or reduced amount receivable,
together with interest on each such amount from the Distribution Date following
receipt by the Transferor of such request for compensation under this subsection
2.4(a), if such request is received by the Transferor at least five Business
Days prior to the Determination Date related to such Distribution Date, and
otherwise from the following Distribution Date,
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<PAGE>
until payment in full thereof (after as well as before judgment) at the Risk
Rate in effect from time to time.
1. In the event that any Class B-2 Purchaser shall have determined that any
Regulatory Change regarding capital adequacy has the effect of reducing the rate
of return on such Class B-2 Purchaser's capital or on the capital of any
corporation controlling such Class B-2 Purchaser as a consequence of its
obligations hereunder or its maintenance of its Commitment or its interest in
the Class B-2 Certificates to a level below that which such Class B-2 Purchaser
or such corporation could have achieved but for such Regulatory Change (taking
into consideration such Class B-2 Purchaser's or such corporation's policies
with respect to capital adequacy) by an amount deemed by such Class B-2
Purchaser to be material, THEN, from time to time, after submission by such
Class B-2 Purchaser to the Class B-2 Agent of a written request therefor and
submission by the Class B-2 Agent to the Transferor and the Servicer of such
written request therefor, the Transferor (subject to subsection 9.11(a) hereof)
shall pay to the Class B-2 Agent for the account of such Class B-2 Purchaser
such additional amount or amounts as will compensate such Class B-2 Purchaser
for such reduction, together with interest on each such amount from the
Distribution Date following receipt by the Transferor of such request for
compensation under this subsection 2.4(b), if such request is received by the
Transferor at least five Business Days prior to the Determination Date related
to such Distribution Date, and otherwise from the following Distribution Date,
until payment in full thereof (after as well as before judgment) at the Risk
Rate in effect from time to time.
1. Each Class B-2 Purchaser agrees that it shall use its reasonable efforts to
reduce or eliminate any claim for compensation pursuant to subsections 2.4(a)
and 2.4(b), including but not limited to designating a different Investing
Office for its Class B-2 Certificates (or any interest therein) if such
designation will avoid the need for, or reduce the amount of, any increased
amounts referred to in subsection 2.4(a) or 2.4(b) and will not, in the
reasonable opinion of such Class B-2 Purchaser, be unlawful or otherwise
disadvantageous to such Class B-2 Purchaser or inconsistent with its policies or
result in an unreimbursed cost or expense to such Class B-2 Purchaser or in an
increase in the aggregate amount payable under both subsections 2.4(a) and
2.4(b).
1. Each Class B-2 Purchaser claiming increased amounts described in subsection
2.4(a) or 2.4(b) will furnish to the Class B-2 Agent (together with its request
for compensation) a certificate prepared in good faith setting forth the basis
and the calculation of the amount (in reasonable detail) of each request by such
Class B-2 Purchaser for any such increased amounts referred to in subsection
2.4(a) or 2.4(b). Any such certificate shall be conclusive absent manifest
error, and the Class B-2 Agent shall deliver a copy thereof to the Transferor
and the Servicer. Failure on the part of any Class B-2 Purchaser to demand
compensation for any amount pursuant to subsection 2.4(a) or 2.4(b) with respect
to any period shall not constitute a waiver of such Class B-2 Purchaser's right
to demand compensation with respect to such period.
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<PAGE>
(a) TAXES. All payments made to the Class B-2 Purchasers, the Facility Agent or
the Class B-2 Agent under this Agreement and the Pooling and Servicing Agreement
(including all amounts payable with respect to the Class B-2 Certificates)
shall, to the extent allowed by law, be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority (collectively, "TAXES"), excluding (i) income
taxes (including branch profit taxes, minimum taxes and taxes computed under
alternative methods, at least one of which is based on or measured by net
income), franchise taxes (imposed in lieu of income taxes), or any other taxes
based on or measured by the net income of the Class B-2 Purchaser, the Facility
Agent or the Class B-2 Agent (as the case may be) or the gross receipts or
income of the Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent (as
the case may be); (ii) any Taxes that would not have been imposed but for the
failure of such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent,
as applicable, to provide and keep current (to the extent legally able) any
certification or other documentation required to qualify for an exemption from,
or reduced rate of, any such Taxes or required by this Agreement to be furnished
by such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent, as
applicable; and (iii) any Taxes imposed as a result of a change by any Class B-2
Purchaser of the Investing Office (other than changes mandated by this
Agreement, including subsection 2.4(c) hereof, or required by law) (all such
excluded taxes being hereinafter called "EXCLUDED TAXES"). If any Taxes, other
than Excluded Taxes, are required to be withheld from any amounts payable to a
Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent hereunder or
under the Pooling and Servicing Agreement, THEN after submission by any Class
B-2 Purchaser to the Class B-2 Agent (in the case of an amount payable to a
Class B-2 Purchaser) and by the Facility Agent or the Class B-2 Agent to the
Transferor and the Servicer of a written request therefor, the amounts so
payable to such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent,
as applicable, shall be increased and the Transferor shall be liable to pay to
the Class B-2 Agent for the account of the Facility Agent or such Class B-2
Purchaser or for its own account, as applicable, the amount of such increase) to
the extent necessary to yield to such Class B-2 Purchaser, the Facility Agent or
the Class B-2 Agent, as applicable (after payment of all such Taxes) interest or
any such other amounts payable hereunder or thereunder at the rates or in the
amounts specified in this Agreement and the Pooling and Servicing Agreement;
provided, HOWEVER, that the amounts so payable to such Class B-2 Purchaser, the
Facility Agent or the Class B-2 Agent shall not be increased pursuant to this
subsection 2.5(a) if such requirement to withhold results from the failure of
such Person to comply with subsection 2.5(c) hereof. Whenever any Taxes are
payable on or with respect to amounts distributed to a Class B-2 Purchaser, the
Facility Agent or the Class B-2 Agent, as promptly as possible thereafter the
Servicer shall send to the Class B-2 Agent, on behalf of such Class B-2
Purchaser (if applicable), a certified copy of an original official receipt
showing payment thereof. If the Trustee, upon the direction of the Servicer,
fails to pay any Taxes when due to the appropriate taxing authority or fails to
remit to the Class B-2 Agent, on behalf of itself or the Facility Agent or such
Class B-2 Purchaser (as applicable), the required receipts or other required
documentary evidence, subject to subsection 9.11(a), the Transferor shall pay to
the
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Class B-2 Agent on behalf of such Class B-2 Purchaser or the Facility Agent or
for its own account, as applicable, any incremental taxes, interest or penalties
that may become payable by such Class B-2 Purchaser, the Facility Agent or the
Class B-2 Agent, as applicable, as a result of any such failure.
(a) A Class B-2 Purchaser or the Facility Agent claiming increased amounts under
subsection 2.5(a) for Taxes paid or payable by such Class B-2 Purchaser or the
Facility Agent, as applicable, will furnish to the Class B-2 Agent a certificate
prepared in good faith setting forth the basis and amount of each request by
such Class B-2 Purchaser or the Facility Agent, as applicable, for such Taxes,
and the Class B-2 Agent shall deliver a copy thereof to the Transferor and the
Servicer. The Class B-2 Agent claiming increased amounts under subsection 2.5(a)
for its own account for Taxes paid or payable by the Class B-2 Agent will
furnish to the Transferor and the Servicer a certificate prepared in good faith
setting forth the basis and amount of each request by the Class B-2 Agent for
such Taxes. Any such certificate of a Class B-2 Purchaser, the Facility Agent or
the Class B-2 Agent shall be conclusive absent manifest error. Failure on the
part of any Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent to
demand additional amounts pursuant to subsection 2.5(a) with respect to any
period shall not constitute a waiver of the right of such Class B-2 Purchaser,
the Facility Agent or the Class B-2 Agent, as the case may be, to demand
compensation with respect to such period. All such amounts shall be due and
payable to the Class B-2 Agent on behalf of the Facility Agent or such Class B-2
Purchaser or for its own account, as the case may be, on the Distribution Date
following receipt by the Transferor of such certificate, if such certificate is
received by the Transferor at least five Business Days prior to the
Determination Date related to such Distribution Date and otherwise shall be due
and payable on the following Distribution Date (or, if earlier, on the Series
1997-1 Termination Date).
(a) Each Class B-2 Purchaser and each Participant holding an interest in Class
B-2 Certificates agrees that prior to the date on which the first interest or
fee payment hereunder is due thereto, it will deliver to the Transferor, the
Servicer, the Trustee and the Class B-2 Agent (i) if such Class B-2 Purchaser or
Participant is not incorporated under the laws of the United States or any State
thereof, two duly completed copies of the U.S. Internal Revenue Service Form
4224 or successor applicable forms required to evidence that the Class B-2
Purchaser's or Participant's income from this Agreement or the Class B-2
Certificates is "effectively connected" with the conduct of a trade or business
in the United States, and (ii) a duly completed U.S. Internal Revenue Service
Form W-8 or W-9 or successor applicable or required forms. Each Class B-2
Purchaser or Participant holding an interest in Class B-2 Certificates also
agrees to deliver to the Transferor, the Servicer, the Trustee and the Class B-2
Agent two further copies of such Form 4224 and Form W-8 or W-9, or such
successor applicable forms or other manner of certification, as the case may be,
on or before the date that any such form expires or becomes obsolete or after
the occurrence of any event requiring a change in the most recent form
previously delivered by it hereunder, and such extensions or renewals thereof as
may reasonably be requested by the Servicer or the Class B-2 Agent, unless in
any such case, solely as a result of a change in treaty, law or regulation
occurring prior to
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the date on which any such delivery would otherwise be required, and assuming
that Section 1446 of the Code does not apply, the Class B-2 Purchaser is no
longer eligible to deliver the then-applicable form set forth above and so
advises the Servicer and the Class B-2 Agent. Each initial Class B-2 Purchaser
certifies, represents and warrants as of the effective date of this Agreement,
and each Assignee and each Participant shall certify, represent and warrant as a
condition of acquiring its Assignment or Participation as of the effect date of
the Transfer Supplement to which it is a party or of such Participation, as the
case may be, that (x) in the case of Form 4224 (if applicable), its income from
this Agreement or the Class B-2 Certificates is effectively connected with a
United States trade or business and (y) that it is entitled to an exemption from
United States backup withholding tax. Further, each Class B-2 Purchaser and each
Participant acquiring an interest in a Class B-2 Certificate covenants that for
so long as it shall own Class B-2 Certificates or such Participation, such Class
B-2 Certificates or Participation shall be held in such manner that the income
therefrom shall be effectively connected with the conduct of a United States
trade or business.
1. INDEMNIFICATION. SRI and SRPC (each such Person being referred to as an
"INDEMNITOR"), jointly and severally, agree to indemnify and hold harmless the
Class B-2 Agent, the Facility Agent and each Class B-2 Purchaser and any
directors, officers, employees, agents, attorneys, auditors or accountants of
the Class B-2 Agent, the Facility Agent or Class B-2 Purchaser (each such Person
being referred to as an "INDEMNITEE") from and against any and all claims,
damages, losses, liabilities, costs or expenses whatsoever (including reasonable
fees and expenses of legal counsel) which such Indemnitee may incur (or which
may be claimed against such Indemnitee) arising out of, by reason of or in
connection with the execution and delivery of, or payment or other performance
under, or the failure to make payments or perform under, any Related Document or
the issuance of the Series 1997-1 Certificates (including in connection with the
preparation for defense of any investigation, litigation or proceeding arising
out of, related to or in connection with such execution, delivery, payment,
performance or issuance), except (i) to the extent that any such claim, damage,
loss, liability, cost or expense is shall be caused by the willful misconduct,
bad faith, recklessness or gross negligence of such Indemnitee, (ii) to the
extent that any such claim, damage, loss, liability, cost or expense is covered
by subsection 2.3(c) or Section 2.4 or 2.5 hereof or relates to any Excluded
Taxes, (iii) to the extent that any such claim, damage, loss, liability, cost or
expense relates to disclosure made by the Class B-2 Agent or a Class B-2
Purchaser in connection with an Assignment or Participation pursuant to Section
8.1 of this Agreement which disclosure is not based on information given to the
Class B-2 Agent or such Class B-2 Purchaser by or on behalf of SRPC, SRI, the
Transferor or the Servicer or any affiliate thereof or by or on behalf of the
Trustee or (iv) to the extent that such claim, damage, loss, liability, cost or
expense shall be caused by a charge off of Receivables. The foregoing indemnity
shall include any claims, damages, losses, liabilities, costs or expenses to
which any such Indemnitee may become subject under Securities Act, the
Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940,
as amended, or other federal or state law or regulation arising out of or based
upon any untrue statement or alleged untrue statement of a material fact in any
disclosure document relating to the Series 1997-1 Certificates or any amendments
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thereof or supplements thereto (other than statements provided by the Indemnitee
expressly for inclusion therein) or arising out of, or based upon, the omission
or the alleged omission to state a material fact necessary to make the
statements therein or any amendment thereof or supplement thereto, in light of
the circumstances in which they were made, not misleading (other than with
respect to statements provided by the Indemnitee expressly for inclusion
therein).
1. Promptly after the receipt by an Indemnitee of a notice of the commencement
of any action against an Indemnitee, such Indemnitee will notify the Class B-2
Agent and the Class B-2 Agent will, if a claim in respect thereof is to be made
against an Indemnitor pursuant to subsection 2.6(a), notify such Indemnitor in
writing of the commencement thereof; but the omission so to notify such party
will not relieve such party from any liability which it may have to such
Indemnitee pursuant to the preceding paragraph. If any such action is brought
against an Indemnitee and it notifies an Indemnitor of its commencement, such
Indemnitor will be entitled to participate in and, to the extent that it so
elects by delivering written notice to the Indemnitee promptly after receiving
notice of the commencement of the action from the Indemnitee to assume the
defense of any such action, with counsel mutually satisfactory to such
Indemnitor and each affected Indemnitee. After receipt of such notice by an
Indemnitor from an Indemnitee, such Indemnitor will not be liable to such
Indemnitee for any legal or other expenses except as provided below and except
for the reasonable costs of investigation subsequently incurred by the
Indemnitee in connection with the defense of such action. Each Indemnitee will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
Indemnitee unless (i) the employment of such counsel by such Indemnitee has been
authorized in writing by such Indemnitor, (ii) such Indemnitor shall have failed
to assume the defense and employ counsel, (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both such
Indemnitee and either an Indemnitor or another person or entity that may be
entitled to indemnification from an Indemnitor (by virtue of this Section 2.6 or
otherwise) and such Indemnitee shall have been advised by counsel that there may
be one or more legal defenses available to such Indemnitee which are different
from or additional to those available to an Indemnitor or such other party or
shall otherwise have reasonably determined that the co-representation would
present such counsel with a conflict of interest (in which case the Indemnitor
will not have the right to direct the defense of such action on behalf of the
Indemnitee). In any such case, the reasonable fees, disbursements and other
charges of counsel will be at the expense of the Indemnitor; it being understood
that in no event shall the Companies be liable for the fees, disbursements and
other charges of more than two counsel (in addition to any local counsel) for
all Indemnitees in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. An Indemnitor shall not be liable for any
settlement of any such action, suit or proceeding effected without its written
consent, which shall not be unreasonably withheld, but if settled with the
written consent of an Indemnitor or if there shall be a final judgment for the
plaintiff in any such action, suit or proceeding, such Indemnitor agrees to
indemnify and hold harmless any Indemnitee to the extent set forth in this
letter from and against any loss, claim, damage, liability or expense by reason
of
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such settlement or judgement. Notwithstanding the immediately preceding
sentence, if in any case where the fees and expenses of counsel are at the
expense of an Indemnitor and an Indemnitee shall have requested such Indemnitor
to reimburse such Indemnitee for such fees and expenses of counsel as incurred,
such Indemnitor agrees that it shall be liable for any settlement of any action
effected without its written consent if (i) such settlement is entered into more
than ten business days after the receipt by such Indemnitor of the aforesaid
request and (ii) such Indemnitor shall have failed to reimburse the Indemnitee
in accordance with such request for reimbursement prior to the date of such
settlement. No Indemnitor shall, without the prior written consent of an
Indemnitee, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder, if such settlement, compromise or
consent includes an admission of culpability or wrong-doing on the part of such
Indemnitee or the entry or an order, injunction or other equitable or
nonmonetary relief (including any administrative or other sanctions or
disqualifications) against such Indemnitee or if such settlement, compromise or
consent does not includes an unconditional release of such Indemnitee from all
liability arising out of such claim, action, suit or proceeding.
1. Subject to the limitations on liability set forth in Section 8.3 of the
Pooling and Servicing Agreement, the Servicer shall indemnify and hold harmless
each Indemnitee from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which such Indemnitee may incur (or
which may be claimed against such Indemnitee) by reason of any acts or omissions
or alleged acts or omissions of the Servicer hereunder or with respect to
activities of the Trust or the Trustee for which the Servicer is responsible
under the Pooling and Servicing Agreement or hereunder, subject, with respect to
the obligations of the Servicer in respect of activities of the Trust or the
Trustee for which the Servicer is responsible under the Pooling and Servicing
Agreement, to the provisos set forth in Section 8.4 of the Pooling and Servicing
Agreement. Subject to Section 9.5, any Successor Servicer, by accepting its
appointment pursuant to the Pooling and Servicing Agreement, (i) shall agree to
be bound by the terms, covenants and conditions contained herein applicable to
the Servicer and to be subject to the duties and obligations of the Servicer
hereunder, (ii) as of the date of its acceptance, shall be deemed to have made
with respect to itself the representations and warranties made by the SRI in
subsections 4.2(a) through (f) (in the case of subsection 4.2(a), with
appropriate factual changes) and (iii) shall agree to indemnify and hold
harmless any Indemnitee from and against any and all claims, damages, losses,
liabilities, costs or expenses (including reasonable fees and expenses of
counsel) whatsoever which any such Indemnitee may incur (or which may be claimed
against such Indemnitee) by reason of any acts or omissions or alleged acts or
omissions of the Servicer hereunder or with respect to activities of the Trust
or the Trustee for which the Servicer is responsible under the Pooling and
Servicing Agreement or hereunder.
1. Subject to the subsection 9.11(a) hereof in the case of the Transferor, the
obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement
shall be absolute, unconditional and irrevocable and shall be performed strictly
in accordance with the terms of this Agreement. Without limiting the foregoing,
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neither the lack of validity or enforceability of, or any modification to, any
Related Document nor the existence of any claim, setoff, defense or other right
which SRPC, SRI, the Trust, the Trustee, on behalf of the Trust, the Transferor
and the Servicer may have at any time against each other, the Class B-2 Agent,
the Facility Agent, any Class B-2 Purchaser or any other Person, whether in
connection with any Related Document or any unrelated transactions, shall
constitute a defense to such obligations.
I. SECTION CONDITIONS PRECEDENT
A. CONDITION TO EFFECTIVENESS. The following shall be
conditions precedent to the effectiveness of the Commitment of each Class B-2
Purchaser hereunder:
1. the representations and warranties of SRPC and SRI set forth or referred to
in Section 4.1 and 4.2 hereof shall be true and correct in all material respects
on the Closing Date as though made on and as of the Closing Date, and no event
which of itself or with the giving of notice or lapse of time, or both, would
constitute a Termination Event shall have occurred and be continuing on the
Closing Date;
2. the Restated Supplement shall have been duly executed and delivered by all
parties thereto and shall be in form and substance satisfactory to the Class B-2
Purchasers;
1. the Master Pooling and Servicing Agreement, the Receivables Purchase
Agreement and the Receivables Transfer Agreement shall not have been amended or
otherwise modified, other than as disclosed to the Class B-2 Purchasers in
writing prior to the Closing Date;
1. the sum of the Class B Invested Amount and the Class C Invested Amount shall
be at least equal to 25% of the Invested Amount, and the Class C Invested Amount
shall be at least equal to the higher of 17.5% of the Invested Amount and 5% of
the highest Invested Amount during the immediately preceding 180 days;
1. [reserved];
1. arrangements satisfactory to the initial Class B-2 Purchasers and the Class
B-2 Agent shall have been made for the payment of amounts required to be paid by
SRPC pursuant to Section 2.3(b) with respect to the preparation, execution,
delivery and initial syndication of this Agreement and the other documents to be
delivered hereunder or in connection herewith;
1. [reserved]; and
1. the Class B-2 Agent on behalf of the Class B-2 Purchasers shall have received
on the Closing Date the following items, each of which shall be in form and
substance satisfactory to the Class B-2 Agent:
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a) an Officer's Certificate of SRPC or SRI, as applicable,
confirming the satisfaction of the conditions set forth in clause (a), (c)
and (d), above;
a) a copy of (A) the certificates of incorporation and by-laws of, and an
incumbency certificate with respect to its officers executing any of the Related
Documents on the Closing Date on behalf of, part of SRPC and SRI certified by
its authorized officer, (B) good standing certificates from the appropriate
Governmental Authority as of a recent date with respect to each of SRPC and SRI
and (C) resolutions of the Board of Directors (or an authorized committee
thereof) of each of SRPC and SRI with respect to the Related Documents to which
it is party, certified by its authorized officer;
a) the favorable written opinions of counsel for SRPC and SRI addressed to the
Class B-2 Agent, the Facility Agent and the Class B-2 Purchasers, or accompanied
by a letter providing that the Class B-2 Agent, the Facility Agent and the Class
B-2 Purchasers may rely on such opinions as if they were addressed to them, and
dated the Closing Date, covering general corporate matters, the due execution
and delivery of, and the enforceability of, each of the Related Documents to
which SRPC or SRI (individually or as Transferor or Servicer) is party,
sale/security interest matters, tax matters and such other matters as the Class
B-2 Agent may request;
a) [reserved];
a) evidence of the due execution and delivery by the Trustee
of the Related Documents to which it is party;
a) an executed copy of the Restated Supplement and a
conformed copy of the Master Pooling and Servicing Agreement, the Receivables
Purchase Agreement and the Receivables Transfer Agreement;
a) executed copies of all opinions required by Article VI of the Pooling and
Servicing Agreement or by any Rating Agency in connection with the issuance or
sale of the Class B-2 Certificates or the amendments to the Supplement contained
in the Restated Supplement (each such opinion, unless otherwise agreed to by the
Class B-2 Agent, to be addressed to the Class B-2 Agent on behalf of the Class
B-2 Purchasers and the Facility Agent or accompanied by a letter providing that
the Class B-2 Agent on behalf of the Class B-2 Purchasers and the Facility Agent
may rely on such opinion as if it were addressed to it), and such additional
documents, instruments, certificates or letters as the Class B-2 Agent may
reasonably request; and
a) the duly executed Class B-2 Certificate(s) registered in
the name of the Class B-2 Agent as nominee on behalf of the Class B-2 Owners.
A. CONDITION TO ADDITIONAL PURCHASES. The following shall
be conditions precedent to each purchase by any Class B-2 Purchasers of
Additional Class B-2 Invested Amounts hereunder:
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1. the Transferor shall have timely delivered a notice of
purchase pursuant to subsection 2.1(c) of this Agreement;
1. the representations and warranties of SRPC and SRI set forth or referred to
in Section 4.1 and 4.2 hereof shall be true and correct in all material respects
on the date of such purchase as though made on and as of such date; no event
which of itself or with the giving of notice or lapse of time, or both, would
constitute a Termination Event shall have occurred and be continuing on such
date, and there shall exist no unreimbursed Class C Investor Charge-Offs;
1. after giving effect to such purchase of Additional Class B-2 Invested Amount,
the aggregate Class B-2 Principal Balance shall not exceed the lesser of the
aggregate Commitments of the Class B-2 Purchasers or the Class B-2 Purchase
Limit;
(d) after giving effect to such purchase,(i) the Class B-2 Invested
Amount will be equal to or less than the lower of the Class B-2 Purchase Limit
and 10% of the Invested Amount, (ii) the sum of the Class B Invested Amount,
Class B-2 Invested Amount and the Class C Invested Amount shall be at least
equal to 25% of the Invested Amount, and (iii) the sum of the Class B-2 Invested
Amount and the Class C Invested Amount shall be at least equal to the higher of
17.5% of the Invested Amount and 5% of the highest Invested Amount during the
immediately preceding 180 days, and (iv) the Class C Invested Amount shall be at
least equal to 7.5% of the Invested Amount;
(e) after giving effect to such purchase and the application of the
proceeds thereof as provided herein and in subsection 4.2(h) of the Pooling and
Servicing Agreement, the amount on deposit in the Spread Account, expressed as a
percentage of the Invested Amount, after giving effect to such purchase and the
application of the proceeds thereof as provided herein as in subsection 4.2(h)
of the Pooling and Servicing Agreement, shall be not less than such percentage
determined prior to giving effect to such purchase and application;
(f) the applicable Utilization Fee (if any) specified in the Class A
Fee Letter shall have been paid by the Transferor to the Class B-2 Agent for the
account of the Class B-2 Purchasers; and
(g) the conditions set forth in Section 6.15 of the Pooling and
Servicing Agreement to the issuance of such Additional Class B-2 Invested Amount
shall have been satisfied.
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I. SECTION REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF SRPC. SRPC repeats and reaffirms to the
Class B-2 Purchasers and the Class B-2 Agent the representations and warranties
of the Transferor set forth in Sections 2.3 of the Pooling and Servicing
Agreement, and represents and warrants that such representations and warranties
are true and correct as of the date hereof. SRPC further represents and warrants
to, and agrees with, the Class B-2 Agent and each Class B-2 Purchaser that, as
of the date hereof:
1. SRPC is a duly organized and validly existing corporation in good standing
under the laws of the State of Delaware, with corporate power and authority to
own its properties and to transact the business in which it is now engaged. SRPC
is duly qualified to do business (or is exempt from such qualification) and is
in good standing in each State of the United States where the nature of its
business requires it to be so qualified.
1. SRPC has the full corporate power, authority and legal right to make,
execute, deliver and perform the Related Documents to which it is party
(individually or as Transferor) and all of the transactions contemplated thereby
and to issue the Series 1997-1 Certificates from the Trust and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Related Documents to which it is party and such issuance. Each of the
Related Documents to which SRPC is party (individually or as Transferor)
constitutes its legal, valid and binding agreement enforceable in accordance
with its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of the rights of
creditors generally and except as such enforceability may be limited by general
principles of equity, whether considered in a proceeding at law or in equity).
1. SRPC is not required to obtain the consent of any other party or any consent,
license, approval or authorization of, or registration with, any Governmental
Authority in connection with the execution, delivery or performance of each of
the Related Documents to which it is party (individually or as Transferor) that
has not been duly obtained and which is not and will not be in full force and
effect on the Closing Date.
2. SRPC's execution, delivery and performance of the Related Documents to which
it is party (individually or as Transferor) do not violate or conflict with any
provision of any existing law or regulation applicable to SRPC or any order or
decree of any court to which SRPC is subject or the Certificate of Incorporation
or Bylaws of SRPC, or any mortgage, security agreement, indenture, contract or
other agreement to which SRPC is a party or by which SRPC or any significant
portion of its properties is bound.
1. There is no litigation, investigation or administrative proceeding before any
court, tribunal, regulatory body or governmental body presently pending, or, to
the knowledge of SRPC, threatened, with respect to any of the Related
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Documents, the transactions contemplated thereby, or the issuance of the Series
1997-1 Certificates and there is no such litigation or proceeding against SRPC
or any significant portion of its properties which would, individually or in the
aggregate, have a material adverse effect on the transactions contemplated by
any of the Related Documents or the ability of SRPC to perform its obligations
thereunder.
1. SRPC is not insolvent or the subject of any insolvency or liquidation
proceeding. The financial statements of SRPC delivered to the Class B-2 Agent
are complete and correct in all material respects and fairly present the
financial condition of SRPC as of date of such statements and the results of
operations of SRPC for the period then ended, all in accordance with United
States generally accepted accounting principles consistently applied. Since the
date of the most recent audited financial statements of SRPC delivered to the
Class B-2 Agent, there has not been any material adverse change in the condition
(financial or otherwise) of SRPC.
1. There are no outstanding comments from the most recent report prepared by the
independent public accountants for SRPC (individually or in its capacity as
Transferor) in connection with its credit card receivables.
1. No Trust Pay Out Event, Series 1997-1 Pay Out Event, Servicer Default or
Termination Event has occurred and is continuing, and no event, act or omission
has occurred and is continuing which, with the lapse of time, the giving of
notice, or both, would constitute such an event or default.
1. The Pooling and Servicing Agreement is not required to be qualified under the
Trust Indenture Act of 1939, as amended, and neither the Trust nor SRPC is
required to be registered under the Investment Company Act of 1940, as amended.
1. The Receivables conveyed by SRPC to the Trust under the Pooling and Servicing
Agreement are in an aggregate amount, determined as of October 9, 1998, of
$308,790,012.76, consisting of $297,153,016.48 of Principal Receivables and
$11,636,996.28 of Finance Charge Receivables. The Receivables Purchase Agreement
is in full force and effect on the date hereof and no material default by any
party exists thereunder.
1. The Trust is duly created and existing under the laws of the State of New
York. Simultaneous with the closing hereunder, all conditions to the issuance
and sale of the Class B-2 Certificates set forth in the Pooling and Servicing
Agreement have been satisfied and the Class B-2 Certificates have been duly
issued by the Trust.
1. Neither SRPC nor any of its Affiliates has directly, or through any agent,
(i) sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any "security" (as defined in the Securities Act) that is or will be
integrated with the sale of the any Series 1997-1 Certificates in a manner that
would
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require the registration under the Securities Act of the offering of the Series
1997-1 Certificates or (ii) engaged in any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) in connection with the offering of the Series 1997-1
Certificates or in any manner involving a public offering thereof within the
meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the
representations and warranties of each Class B-2 Purchaser in its Investment
Letter and of each purchaser of Class A Certificates and Class B Certificates in
their respective investment letters, the offer and sale of the Series 1997-1
Certificates are transactions which are exempt from the registration
requirements of the Securities Act.
1. All written factual information heretofore furnished by SRPC to, or for
delivery to, the Class B-2 Agent for purposes of or in connection with this
Agreement, including information relating to the Accounts, the Receivables, and
SRI's credit card business, was true and correct in all material respects on the
date as of which such information was stated or certified and remains true and
correct in all material respects (unless such information specifically relates
to an earlier date in which case such information shall have been true and
correct in all material respects on such earlier date).
A. REPRESENTATIONS AND WARRANTIES OF SRI. SRI repeats and reaffirms to the Class
B-2 Purchasers and the Class B-2 Agent the representations and warranties of the
Servicer set forth in Sections 3.3 of the Pooling and Servicing Agreement, and
represents and warrants that such representations and warranties are true and
correct as of the date hereof. SRI further represents and warrants to, and agree
with, the Class B-2 Agent and each Class B-2 Purchaser that, as of the date
hereof:
1. SRI is a duly organized and validly existing corporation in good standing
under the laws of the State of Texas, with corporate power and authority to own
its properties and to transact the business in which it is now engaged. SRI is
duly qualified to do business (or is exempt from such qualification) and is in
good standing in each State of the United States where the nature of its
business requires it to be so qualified.
1. SRI has the full corporate power, authority and legal right to make, execute,
deliver and perform the Related Documents to which it is party (individually or
as Servicer) and all of the transactions contemplated thereby and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Related Documents to which it is party and such issuance. Each of the
Related Documents to which SRI is party (individually or as Servicer)
constitutes its legal, valid and binding agreement enforceable in accordance
with its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of the rights of
creditors of national banking associations generally and except as such
enforceability may be limited by general principles of equity, whether
considered in a proceeding at law or in equity).
1. SRI is not required to obtain the consent of any other party or any consent,
license, approval or authorization of, or registration with, any
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Governmental Authority in connection with the execution, delivery or performance
of each of the Related Documents to which it is party (individually or as
Servicer) that has not been duly obtained and which is not and will not be in
full force and effect on the Closing Date.
1. The execution, delivery and performance by SRI of the Related Documents to
which it is party (individually or as Servicer) do not violate or conflict with
any provision of any existing law or regulation applicable to SRI or any order
or decree of any court to which SRI is subject or the Certificate of
Incorporation or Bylaws of SRI, or any mortgage, security agreement, indenture,
contract or other agreement to which SRI is a party or by which SRI or any
significant portion of its properties is bound.
1. There is no litigation, investigation or administrative proceeding before any
court, tribunal, regulatory body or governmental body presently pending, or, to
the knowledge of SRI, threatened, with respect to any of the Related Documents,
the transactions contemplated thereby, or the issuance of the Series 1997-1
Certificates, and there is no such litigation or proceeding against SRI or any
significant portion of its properties which would, individually or in the
aggregate, have a material adverse effect on the transactions contemplated by
any of the Related Documents or the ability of SRI to perform its obligations
thereunder.
1. SRI is not insolvent or the subject of any insolvency or liquidation
proceeding. The financial statements of SRI delivered to the Class B-2 Agent are
complete and correct in all material respects and fairly present the financial
condition of SRI as of date of such statements and its results of operations for
the period then ended, all in accordance with United States generally accepted
accounting principles consistently applied. Since the date of the most recent
audited financial statements of SRI delivered to the Class B-2 Agent through the
Closing Date, there has not been any material adverse change in the condition
(financial or otherwise) of SRI.
1. There are no outstanding comments from the most recent report prepared by the
independent public accountants for SRI (individually or in its capacity as
Servicer) in connection with its credit card receivables.
1. No Trust Pay Out Event, Series 1997-1 Pay Out Event, Servicer Default,
Termination Event has occurred and is continuing, and no event, act or omission
has occurred and is continuing which, with the lapse of time, the giving of
notice, or both, would constitute such an event or default.
1. The Pooling and Servicing Agreement is not required to be qualified under the
Trust Indenture Act of 1939, as amended, and neither the Trust, SRPC nor SRI is
required to be registered under the Investment Company Act of 1940, as amended.
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1. The Receivables Purchase Agreement is in full force and effect on the date
hereof and no material default by any party exists thereunder.
1. The Trust is duly created and existing under the laws of the State of New
York. Simultaneous with the closing hereunder, all conditions to the issuance
and sale of the Series 1997-1 Certificates set forth in the Pooling and
Servicing Agreement have been satisfied and the Series 1997-1 Certificates have
been duly issued by the Trust.
1. To the knowledge of SRI, the representations and warranties of SRPC set forth
in Section 4.1 above are true and correct in all material respects.
1. The representations and warranties of Granite set forth in Section 4.02 and
4.03 of the Receivables Transfer Agreement are true and correct in all material
respects.
1. All written factual information heretofore furnished by SRPC, SRI, Granite or
Stage to, or for delivery to, the Class B-2 Agent for purposes of or in
connection with this Agreement, including information relating to the Accounts,
the Receivables and the credit card business of SRPC, SRI or Granite, was true
and correct in all material respects on the date as of which such information
was stated or certified and remains true and correct in all material respects
(unless such information specifically relates to an earlier date in which case
such information shall have been true and correct in all material respects on
such earlier date).
A. REPRESENTATIONS AND WARRANTIES OF THE CLASS B-2 AGENT, THE FACILITY AGENT AND
THE CLASS B-2 PURCHASERS. Each of the Class B-2 Agent, the Facility Agent and
the Class B-2 Purchasers severally (each with respect to itself only) represents
and warrants to, and agrees with, the Transferor and the Servicer, that:
1. It is duly authorized to enter into and perform this Agreement and, in the
case of the Class B-2 Purchasers, to purchase its Commitment Percentage (if any)
of the Class B-2 Certificates, and has duly executed and delivered this
Agreement; and the person signing this Agreement on behalf of the Class B-2
Agent, the Facility Agent or such Class B-2 Purchaser, as the case may be, has
been duly authorized to do so.
1. This Agreement constitutes the legal, valid and binding obligation of the
Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, conservatorship
or other similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general, and except as such enforceability may be limited
by general principles of equity (whether considered in a proceeding at law or in
equity).
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1. No registration with or consent or approval of or other action by any state
or local governmental authority or regulatory body having jurisdiction over the
Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser is required in
connection with its execution, delivery or performance of this Agreement, other
than as may be required under the blue sky laws of any state.
1. The execution, delivery or performance by the Class B-2 Agent, the Facility
Agent or such Class B-2 Purchaser of this Agreement do not violate or conflict
with any provision of any existing law or regulation applicable to it or any
order or decree of any court to which it is subject, its charter or bylaws, or
any mortgage, security agreement, indenture, contract or other agreement to
which such it is a party or by which it or any significant portion of its
properties is bound, in any such case if such violation or conflict would have
an adverse affect on its right or ability to execute, deliver or perform its
obligations under this Agreement.
I. SECTION COVENANTS
A. COVENANTS OF SRPC. SRPC (individually or, as set forth below, as the
Transferor) and SRI (individually and, as set forth below, as the Servicer),
each as to itself in such capacity or capacities, and subject to subsection
9.11(a) in the case of the Transferor, covenants and agrees, through the
Termination Date for all Class B-2 Purchasers and thereafter so long as any
amount of the Class B-2 Principal Balance shall remain outstanding or any
monetary obligation arising hereunder shall remain unpaid, unless the Required
Class B-2 Purchasers shall otherwise consent in writing, that:
1. each of SRPC, SRI, the Transferor and the Servicer shall perform in all
material respects each of the respective agreements, warranties and indemnities
applicable to it and comply in all material respects with each of the respective
terms and provisions applicable to it under the other Related Documents to which
it is party, which agreements, warranties and indemnities are hereby
incorporated by reference into this Agreement as if set forth herein in full;
and each of SRPC, SRI, the Transferor and the Servicer shall take all reasonable
action to enforce the obligations of each of the other parties to such Related
Documents which are contained therein;
a) the Transferor and the Servicer shall furnish to the Class B-2 Agent a copy
of each opinion, certificate, report, statement, notice or other communication
(other than investment instructions) relating to the Series 1997-1 Certificates
which is furnished by or on behalf of either of them to Certificateholders, to
any Rating Agency or to the Trustee and furnish to the Class B-2 Agent after
receipt thereof, a copy of each notice, demand or other communication relating
to the Series 1997-1 Certificates, this Agreement or the Pooling and Servicing
Agreement received by the Transferor or the Servicer from the Trustee, any
Rating Agency or 10% or more of the Series 1997-1 Certificateholders (to the
extent such notice, demand or communication relates to the Accounts, the
Receivables, any Servicer Default, any Trust Pay Out Event or any Series 1997-1
Pay Out Event); and (ii) such other information, documents records or reports
respecting the Trust, the Accounts, the Receivables, the Transferor or the
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Servicer as the Class B-2 Agent may from time to time reasonably request without
unreasonable expense to the Transferor or the Servicer;
1. the Servicer shall furnish to the Class B-2 Agent on or before the date such
reports are due under the Pooling and Servicing Agreement copies of each of the
reports and certificates required by subsection 3.4(c) or Section 3.5 or 3.6 of
the Pooling and Servicing Agreement;
1. the Servicer shall promptly furnish to the Class B-2 Agent a copy, addressed
to the Class B-2 Agent, of each opinion of counsel delivered to the Trustee
pursuant to subsection 13.2(d) of the Pooling and Servicing Agreement;
1. SRI shall furnish to the Class B-2 Agent (i) promptly when publicly
available, the annual (audited) and quarterly (unaudited) consolidated and
consolidating financial statements of each of Stage and SRPC, the publicly
available portions of Granite's quarterly and annual consolidated reports of
condition and income and such other publicly available financial information, if
any, as to Stage, SRI, Granite or SRPC as the Class B-2 Agent may request, and
(ii) promptly after known to SRI, information with respect to any action, suit
or proceeding involving SRI or any of its Affiliates by or before any court or
any Governmental Authority which, if adversely determined, would materially
adversely affect the business, results of operation or financial condition of
SRPC, SRI or Granite;
1. the Servicer shall furnish to the Class B-2 Agent a certificate concurrently
with its delivery of its annual certificate pursuant to Section 3.5 of the
Pooling and Servicing Agreement stating that no Termination Event or event or
condition which with the passage of time or the giving of notice, or both, would
constitute a Termination Event has occurred or, if such a Termination Event,
event or condition has occurred, identifying the same in reasonable detail;
1. the Transferor shall not exercise its right to accept optional reassignment
of the Receivables or repurchase the Series 1997-1 Certificates pursuant to
Section 12.2 of the Pooling and Servicing Agreement, unless the Class B-2
Purchasers and the Class B-2 Agent have been paid, or will be paid upon such
repurchase or in connection with such optional reassignment, the Class B-2
Principal Balance, all interest thereon and all other amounts owing hereunder in
full;
1. the Transferor and the Servicer shall at any time from time to time during
regular business hours, on reasonable notice to the Transferor or the Servicer,
as the case may be, permit the Class B-2 Agent, or its agents or representatives
to:
a) examine all books, records and documents (including
computer tapes and disks) in its possession or under its control relating to
the Receivables, and
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a) visit its offices and property for the purpose of
examining such materials described in clause (i) above.
The information obtained by the Class B-2 Agent or any Class B-2 Purchaser
pursuant to this subsection shall be held in confidence in accordance with
Section 6.2 hereof;
1. the Transferor and the Servicer shall use reasonable efforts to cooperate
with the Class B-2 Agent (including affording reasonable inspection rights,
assisting in the preparation of syndication material, attending investor
meetings and providing access to its officers) in its effort to syndicate the
Commitments;
1. the Servicer shall furnish to the Class B-2 Agent, promptly after the
occurrence of any Servicer Default, Termination Event, Trust Pay Out Event or
Series 1997-1 Pay Out Event, a certificate of an appropriate officer of the
Servicer setting forth the circumstances of such Servicer Default, Termination
Event, Trust Pay Out Event or Series 1997-1 Pay Out Event and any action taken
or proposed to be taken by the Servicer or the Transferor with respect thereto;
1. the Transferor and the Servicer shall timely make all payments, deposits or
transfers and give all instructions to transfer required by this Agreement, the
Pooling and Servicing Agreement, the Receivables Purchase Agreement and the
Receivables Transfer Agreement;
1. neither Transferor, the Servicer nor the Originator shall terminate (except
in accordance with the terms thereof), amend, waive or otherwise modify the
Master Pooling and Servicing Agreement or the Supplement, unless (i) such
amendment, waiver or modification shall not, as evidenced by an Officer's
Certificate of the Transferor delivered to the Class B-2 Agent, adversely affect
in any material respect the interests of the Class B-2 Agent, the Facility Agent
or the Class B-2 Purchasers under any Related Document; and (ii) all of the
applicable provisions of Section 13.1 of the Pooling and Servicing Agreement
have been complied with;
1. the Transferor and the Servicer shall execute and deliver to the Class B-2
Agent, the Facility Agent or the Trustee all such documents and instruments and
do all such other acts and things as may be necessary or reasonably required by
the Class B-2 Agent, the Facility Agent or the Trustee to enable any of them to
exercise and enforce their respective rights under the Related Documents and to
realize thereon, and record and file and rerecord and refile all such documents
and instruments, at such time or times, in such manner and at such place or
places, all as may be necessary or required by the Trustee, the Facility Agent
or the Class B-2 Agent to validate, preserve, perfect and protect the position
of the Trustee under the Pooling and Servicing Agreement;
1. neither the Transferor nor the Servicer will consolidate with or merge into
any other Person or convey or transfer its properties and assets substantially
as an entirety to any Person, except (i) in accordance with Section 7.2 or 8.2
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of the Pooling and Servicing Agreement, and (ii) with the prior written consent
of the Required Class B-2 Purchasers; PROVIDED that such consent shall not be
required in the case of the Servicer if, after giving effect to such
consolidation, merger, conveyance or transfer, the Class B Certificates are
rated at least "BBB" by Standard & Poor's or at least "Baa3" by Moody's
Investors Services, Inc.;
1. SRI will not (i) resign as Servicer, unless (A) the performance of its duties
under the Pooling and Servicing Agreement is no longer permissible pursuant to
Requirements of Law and there is no reasonable action which it could take to
make the performance of such duties permissible under such Requirements of Law,
or (B) the Required Class B-2 Purchasers shall have consented thereto, or (ii)
assign the Pooling and Servicing Agreement (unless such assignment is permitted
pursuant to Section 8.2 of the Pooling and Servicing Agreement and subsection
5.1(n) hereof), (iii) delegate any of its material duties under the Pooling and
Servicing Agreement except as permitted by Section 8.7 of the Pooling and
Servicing Agreement and unless the Person to which such delegation is made is a
wholly owned subsidiary (directly or indirectly) of Stage, is legally qualified
and licensed (to the extent required) to perform the duties delegated to it,
owns or holds under valid leases or (in the case of software) licenses all
computer equipment and software and other equipment and rights which are
required for such Person to perform such duties, and employs sufficient and
adequately trained personnel to perform such duties, or (iv) appoint or permit
the appointment of a Successor Servicer other than the Trustee under the
provisions of the Pooling and Servicing Agreement without consultation with the
Facility Agent; and
1. the Transferor will not incur, permit or suffer to exist any lien, charge or
other adverse claim on any Class C Certificate.
I. SECTION MUTUAL COVENANTS REGARDING CONFIDENTIALITY
A. COVENANTS OF SRPC, ETC. SRPC, SRI, the Transferor and the Servicer shall hold
in confidence, and not disclose to any Person, the terms of any fees payable in
connection with this Agreement except they may disclose such information (i) to
their officers, directors, employees, agents, counsel, accountants, auditors,
advisors or representatives, (ii) with the consent of the Required Class B-2
Purchasers and Class B-2 Agent, or (iii) to the extent SRPC, SRI, Granite, the
Transferor or the Servicer or any Affiliate of either of them should be required
by any law or regulation applicable to it or requested by any Governmental
Authority to disclose such information; PROVIDED, that, in the case of clause
(iii), SRPC, the Transferor, SRI, Granite or the Servicer, as the case may be,
will use all reasonable efforts to maintain confidentiality and will (unless
otherwise prohibited by law) notify the Class B-2 Agent of its intention to make
any such disclosure prior to making such disclosure.
A. COVENANTS OF CLASS B-2 PURCHASERS. The Class B-2 Agent, the Facility Agent
and each Class B-2 Purchaser, severally and with respect to itself only,
covenants and agrees that any information obtained by the Class B-2 Agent, the
Facility
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Agent or such Class B-2 Purchaser pursuant to this Agreement shall be held in
confidence (it being understood that documents provided to the Class B-2 Agent
hereunder may in all cases be distributed by the Class B-2 Agent or the Facility
Agent to the Class B-2 Purchasers) except that the Class B-2 Agent, the Facility
Agent or such Class B-2 Purchaser may disclose such information (i) to its
officers, directors, employees, agents, counsel, accountants, auditors, advisors
or representatives, (ii) to the extent such information has become available to
the public other than as a result of a disclosure by or through the Class B-2
Agent, the Facility Agent or such Class B-2 Purchaser, (iii) to the extent such
information was available to the Class B-2 Agent, the Facility Agent or such
Class B-2 Purchaser on a nonconfidential basis prior to its disclosure to the
Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser hereunder, (iv)
with the consent of the Transferor, (v) to the extent permitted by Section 8.1,
or (vi) to the extent the Class B-2 Agent, the Facility Agent or such Class B-2
Purchaser should be (A) required in connection with any legal or regulatory
proceeding or (B) requested by any Governmental Authority to disclose such
information; PROVIDED, that, in the case of clause (vi) above, the Class B-2
Agent, the Facility Agent or such Class B-2 Purchaser, as applicable, will use
all reasonable efforts to maintain confidentiality and, in the case of clause
(vi)(A) above, will (unless otherwise prohibited by law) notify the Transferor
of its intention to make any such disclosure prior to making any such
disclosure.
I. SECTION THE AGENTS
A. APPOINTMENT. (a) Each Class B-2 Purchaser hereby irrevocably designates and
appoints the Class B-2 Agent as the agent of such Class B-2 Purchaser under this
Agreement, and each such Class B-2 Purchaser irrevocably authorizes the Class
B-2 Agent, as the agent for such Class B-2 Purchaser, to take such action on its
behalf under the provisions of the Related Documents and to exercise such powers
and perform such duties thereunder as are expressly delegated to the Class B-2
Agent by the terms of the Related Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Class B-2 Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Class B-2 Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Class B-2 Agent.
(b) Each Class B-2 Purchaser hereby irrevocably designates and
appoints the Facility Agent as the agent of such Class B-2 Purchaser under the
Pooling and Servicing Agreement, and each such Class B-2 Purchaser irrevocably
authorizes the Facility Agent, as the agent for such Class B-2 Purchaser, to
take such action on its behalf under the provisions of the Pooling and Servicing
Agreement and to exercise such powers and perform such duties thereunder as are
expressly granted to the Facility Agent by the terms of the Pooling and
Servicing Agreement, subject to the terms and conditions of this Agreement,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Facility Agent shall not have any duties or responsibilities, except those
expressly set forth herein or in the Pooling and Servicing Agreement, or any
fiduciary relationship with any
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Class B-2 Purchaser, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or
otherwise exist against the Facility Agent.
A. DELEGATION OF DUTIES. The Class B-2 Agent and the Facility Agent may execute
any of its duties under any of the Related Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Neither the Class B-2 Agent nor the Facility
Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
A. EXCULPATORY PROVISIONS. Neither the Class B-2 Agent nor the Facility Agent
nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable to any of the Class B-2
Purchasers for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with any of the other Related Documents (except
for its or such Person's own gross negligence or willful misconduct) or (b)
responsible in any manner to any of the Class B-2 Purchasers for any recitals,
statements, representations or warranties made by SRPC, SRI, Granite, Stage, the
Transferor, the Servicer or the Trustee or any officer thereof contained in any
of the other Related Documents or in any certificate, report, statement or other
document referred to or provided for in, or received by the Class B-2 Agent or
the Facility Agent under or in connection with, any of the other Related
Documents or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any of the other Related Documents or for
any failure of SRPC, SRI, Granite, Stage, the Transferor, the Servicer or the
Trustee to perform its obligations thereunder. Neither the Class B-2 Agent nor
the Facility Agent shall be under any obligation to any Class B-2 Purchaser to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, any of the other Related Documents,
or to inspect the properties, books or records of SRPC, SRI, Stage, the
Transferor, the Servicer, the Trustee or the Trust.
A. RELIANCE BY AGENT. The Class B-2 Agent and the Facility Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, written statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to the Class B-2 Agent or the
Facility Agent), independent accountants and other experts selected by the Class
B-2 Agent or the Facility Agent. The Class B-2 Agent and the Facility Agent
shall be fully justified in failing or refusing to take any action under any of
the Related Documents unless it shall first receive such advice or concurrence
of the Required Class B-2 Purchasers as it deems appropriate or it shall first
be indemnified to its satisfaction by the Class B-2 Purchasers or by the Class
B-2 Purchasers against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action. The Class B-2
Agent and the Facility Agent shall in all cases be fully protected in acting, or
in refraining from acting, under any of the
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Related Documents in accordance with a request of the Required Class B-2
Purchasers and such request and any action taken or failure to act pursuant
thereto shall be binding upon all present and future Class B-2 Purchasers.
A. NOTICES. The Class B-2 Agent shall not be deemed to have knowledge or notice
of the occurrence of any breach of this Agreement or the occurrence of any Pay
Out Event or any Termination Event unless the Class B-2 Agent has received
notice from the Transferor, the Servicer, the Trustee or any Class B-2 Purchaser
referring to this Agreement, describing such event. In the event that the Class
B-2 Agent receives such a notice, the Class B-2 Agent promptly shall give notice
thereof to the Class B-2 Purchasers. The Class B-2 Agent shall take such action
with respect to such event as shall be reasonably directed by the Required Class
B-2 Purchasers; PROVIDED that unless and until the Class B-2 Agent shall have
received such directions, the Class B-2 Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
event as it shall deem advisable in the best interests of the Class B-2
Purchasers.
A. NON-RELIANCE ON AGENT AND OTHER CLASS B-2 PURCHASERS. Each Class B-2
Purchaser expressly acknowledges that neither the Class B-2 Agent nor the
Facility Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by the Class B-2 Agent or the Facility Agent
hereafter taken, including any review of the affairs of SRPC, SRI, Granite,
Stage, the Transferor, the Servicer, the Trustee or the Trust shall be deemed to
constitute any representation or warranty by the Class B-2 Agent or the Facility
Agent to any Class B-2 Purchaser. Each Class B-2 Purchaser represents to the
Class B-2 Agent and the Facility Agent that it has, independently and without
reliance upon the Class B-2 Agent, the Facility Agent or any other Class B-2
Purchaser, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Trust, the Trustee, SRPC, SRI, Granite, Stage, the Transferor and the Servicer
and made its own decision to purchase its interest in the Class B-2 Certificates
hereunder and enter into this Agreement. Each Class B-2 Purchaser also
represents that it will, independently and without reliance upon the Class B-2
Agent or the Facility Agent or any other Class B-2 Purchaser, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis, appraisals and decisions in taking or not taking action
under any of the Related Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI,
Granite, Stage, the Transferor and the Servicer. Except, in the case of the
Class B-2 Agent, for notices, reports and other documents received by the Class
B-2 Agent under Section 5 hereof, neither the Class B-2 Agent nor the Facility
Agent shall have any duty or responsibility to provide any Class B-2 Purchaser
with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Trust, the Trustee, SRPC, SRI, Granite, Stage, the Transferor or the
Servicer which may come
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into the possession of the Class B-2 Agent or the Facility Agent or any of its
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
A. INDEMNIFICATION. The Class B-2 Purchasers agree to indemnify the Class B-2
Agent and the Facility Agent in its capacity as such (without limiting the
obligation (if any) of SRPC, SRI, Granite, the Transferor, the Trust or the
Servicer to reimburse the Class B-2 Agent or the Facility Agent for any such
amounts), ratably according to their respective Commitment Percentages (or, if
the Commitments have terminated, Percentage Interests), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including at any time following the payment of the obligations under this
Agreement, including the Class B-2 Principal Balance) be imposed on, incurred by
or asserted against the Class B-2 Agent or the Facility Agent in any way
relating to or arising out of this Agreement, or any documents contemplated by
or referred to herein or the transactions contemplated hereby or any action
taken or omitted by the Class B-2 Agent or the Facility Agent under or in
connection with any of the foregoing; PROVIDED that no Class B-2 Purchaser shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of the Class B-2 Agent or the Facility Agent resulting from its
own gross negligence or willful misconduct. The agreements in this subsection
shall survive the payment of the obligations under this Agreement, including the
Class B-2 Principal Balance.
A. AGENTS IN THEIR INDIVIDUAL CAPACITIES. The Class B-2 Agent, the Facility
Agent and their Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Trust, the Trustee, SRPC, SRI, Granite,
Stage, the Servicer and the Transferor as though the Class B-2 Agent and the
Facility Agent were not the agents hereunder. Each Class B-2 Purchaser
acknowledges that Credit Suisse First Boston may act (i) as administrator and
agent for one or more purchasers under Related Documents and in such capacity
acts and may continue to act on behalf of each such purchaser in connection with
its business, (ii) as the agent for certain financial institutions under the
liquidity and credit enhancement agreements relating to certain Related
Documents to which any such purchaser is party and in various other capacities
relating to the business of any such purchasers under various agreements, and
(iii) as agent for other Classes of Series 1997-1 Certificates. Credit Suisse
First Boston in its capacity as the Class B-2 Agent or the Facility Agent shall
not, by virtue of its acting in any such other capacities, be deemed to have
duties or responsibilities hereunder or be held to a standard of care in
connection with the performance of its duties as the Class B-2 Agent or the
Facility Agent other than as expressly provided in this Agreement. Credit Suisse
First Boston may act as the Class B-2 Agent and the Facility Agent without
regard to and without additional duties or liabilities arising from its role as
such administrator or agent or arising from its acting in any such other
capacity.
A. SUCCESSOR AGENT. (a) The Class B-2 Agent may resign as Class B-2 Agent upon
ten days' notice to the Class B-2 Purchasers, the Trustee, the Transferor and
the Servicer with such resignation becoming effective upon a successor
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agent succeeding to the rights, powers and duties of the Class B-2 Agent
pursuant to this subsection 7.9(a). If the Class B-2 Agent shall resign as Class
B-2 Agent under this Agreement, then the Required Class B-2 Purchasers shall
appoint from among the Class B-2 Purchasers a successor agent for the Class B-2
Purchasers. The successor agent shall succeed to the rights, powers and duties
of the Class B-2 Agent, and the term "Class B-2 Agent" shall mean such successor
agent effective upon its appointment, and the former Class B-2 Agent's rights,
powers and duties as Class B-2 Agent shall be terminated, without any other or
further act or deed on the part of such former Class B-2 Agent or any of the
parties to this Agreement. After the retiring Class B-2 Agent's resignation as
Class B-2 Agent, the provisions of this Section 7 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Class B-2 Agent
under this Agreement.
(b) The Facility Agent may resign as Facility Agent upon ten days'
notice to the Class B-2 Purchasers, the Class A Purchasers (as defined in the
Class A Certificate Purchase Agreement), the Trustee, the Transferor and the
Servicer with such resignation becoming effective upon a successor agent
succeeding to the rights, powers and duties of the Facility Agent pursuant to
this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent
under this Agreement, then the Required Class B-2 Purchasers shall appoint from
among the Committed Class A Purchasers under the Class A Certificate Purchase
Agreement or the Committed Class B Purchasers under the Class B Certificate
Purchase Agreement a successor Facility Agent of the Class B-2
Certificateholders, the Class B Certificateholders and the Class A
Certificateholders as provided in the Supplement; PROVIDED that no such
appointment shall be effective unless such successor is also appointed as
successor Facility Agent under the Class A Certificate Purchase Agreement and
the Class B Certificate Purchase Agreement. The successor agent shall succeed to
the rights, powers and duties of the Facility Agent, and the term "Facility
Agent" shall mean such successor agent effective upon its appointment, and the
former Facility Agent's rights, powers and duties as Facility Agent shall be
terminated, without any other or further act or deed on the part of such former
Facility Agent or any of the parties to this Agreement. After the retiring
Facility Agent's resignation as Facility Agent, the provisions of this Section 7
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Facility Agent under this Agreement.
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I. SECTION SECURITIES LAWS; TRANSFERS; TAX TREATMENT
1. TRANSFERS OF CLASS B-2 CERTIFICATES. Each Class B-2 Purchaser agrees that the
beneficial interest in the Class B-2 Certificates purchased by it will be
acquired for investment only and not with a view to any public distribution
thereof, and that such Class B-2 Purchaser will not offer to sell or otherwise
dispose of any Class B-2 Certificate acquired by it (or any interest therein) in
violation of any of the registration requirements of the Securities Act or any
applicable state or other securities laws. Each Class B-2 Purchaser acknowledges
that it has no right to require the Transferor to register, under the Securities
Act or any other securities law, the Class B-2 Certificates (or the beneficial
interest therein) acquired by it pursuant to this Agreement or any Transfer
Supplement. Each Class B-2 Purchaser hereby confirms and agrees that in
connection with any transfer or syndication by it of an interest in the Class
B-2 Certificates, such Class B-2 Purchaser has not engaged and will not engage
in a general solicitation or general advertising including advertisements,
articles, notices or other communications published in any newspaper, magazine
or similar media or broadcast over radio or television, or any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. Each initial Class B-2 Purchaser agrees that it will execute and
deliver to the Transferor, the Servicer, the Trustee and the Class B-2 Agent on
or before the Closing Date a letter in the form attached hereto as EXHIBIT A (an
"INVESTMENT LETTER") with respect to the purchase by such Class B-2 Purchaser of
an interest in the Class B-2 Certificates.
1. Each initial purchaser of a Class B-2 Certificate or any interest therein and
any Assignee thereof or Participant therein shall certify to the Transferor, the
Servicer, the Trustee and the Class B-2 Agent that it is either (A)(i) a citizen
or resident of the United States, (ii) a corporation or other entity organized
in or under the laws of the United States or any political subdivision thereof
which, if such entity is a tax-exempt entity, recognizes that payments with
respect to the Class B-2 Certificates may constitute unrelated business taxable
income or (iii) a person not described in (i) or (ii) whose income from the
Class B-2 Certificates is and will be effectively connected with the conduct of
a trade or business within the United States (within the meaning of the Code)
and whose ownership of any interest in a Class B-2 Certificate will not result
in any withholding obligation with respect to any payments with respect to the
Class B-2 Certificates by any Person (other than withholding, if any, under
Section 1446 of the Code) and who will furnish to the Class B-2 Agent, the
Servicer and the Trustee, and to the Class B-2 Owner making the Transfer a
properly executed U.S. Internal Revenue Service Form 4224 (and to agree (to the
extent legally able) to provide a new Form 4224 upon the expiration or
obsolescence of any previously delivered form and comparable statements in
accordance with applicable United States laws) or (B) an estate or trust the
income of which is includible in gross income for United States federal income
tax purposes.
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1. Any sale, transfer, assignment, participation, pledge, hypothecation or other
disposition (a "TRANSFER") of a Class B-2 Certificate or any interest therein
may be made only in accordance with this Section 8.1. Any Transfer of an
interest in a Class B-2 Certificate or a Commitment shall be in respect of at
least $2,000,000 in the aggregate, which may be composed of (i) Class B-2
Principal Balance or (ii) to the extent in excess of the Class B-2 Principal
Balance subject to such Transfer, Commitment hereunder. Any Transfer of an
interest in a Class B-2 Certificate otherwise permitted by this Section 8.1 will
be permitted only if it consists of a PRO RATA percentage interest in all
payments made with respect to the Class B-2 Purchaser's beneficial interest in
such Class B-2 Certificate. No Class B-2 Certificate or any interest therein may
be Transferred by Assignment or Participation to any Person (each, a
"TRANSFEREE") unless prior to the transfer the Transferee shall have executed
and delivered to the Class B-2 Agent and the Transferor an Investment Letter.
Each of SRPC and SRI authorizes each Class B-2 Purchaser to
disclose to any Transferee or prospective Transferee any and all financial
information in the Class B-2 Purchaser's possession concerning the Trust, SRPC,
SRI, Granite and Stage which has been delivered to the Class B-2 Agent, the
Facility Agent or such Class B-2 Purchaser pursuant to the Related Documents
(including information obtained pursuant to rights of inspection granted
hereunder) or which has been delivered to such Class B-2 Purchaser by or on
behalf of the Trust, SRPC, SRI, Granite Stage, the Transferor or the Servicer in
connection with such Class B-2 Purchaser's credit evaluation of the Trust, SRPC,
SRI, Granite, Stage, the Transferor or the Servicer prior to becoming a party
to, or purchasing an interest in this Agreement or the Class B-2 Certificates;
PROVIDED that prior to any such disclosure, such Transferee or prospective
Transferee shall have executed an agreement agreeing to be bound by the
provisions of Section 6.2 hereof.
1. Each Class B-2 Purchaser may, in accordance with applicable law, at any time
grant participations in all or part of its Commitment or its interest in the
Class B-2 Certificates, including the payments due to it under this Agreement
and the Pooling and Servicing Agreement (each, a "PARTICIPATION"), to any Person
(each, a "PARTICIPANT"); PROVIDED, HOWEVER, that no Participation shall be
granted to any Person unless and until the Class B-2 Agent shall have consented
thereto and the conditions to Transfer specified in this Agreement, including in
subsection 8.1(c) hereof, shall have been satisfied and that such Participation
consists of a PRO RATA percentage interest in all payments made with respect to
such Class B-2 Purchaser's beneficial interest (if any) in the Class B-2
Certificates. In connection with any such Participation, the Class B-2 Agent
shall maintain a register of each Participant and the amount of each
Participation. Each Class B-2 Purchaser hereby acknowledges and agrees that (A)
any such Participation will not alter or affect such Class B-2 Purchaser's
direct obligations hereunder, and (B) neither the Trustee, the Transferor nor
the Servicer shall have any obligation to have any communication or relationship
with any Participant. Each Class B-2 Purchaser and each Participant shall comply
with the provisions of subsection 2.5(c). No Participant shall be entitled to
Transfer all or any portion of its Participation, without the prior written
consent of the Class B-2 Agent. Each Participant shall be entitled to receive
additional amounts and indemnification pursuant to Sections 2.4, 2.5
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and 2.6 as if such Participant were a Class B-2 Purchaser and such Sections
applied to its Participation; PROVIDED, in the case of Section 2.5, that such
Participant has complied with the provisions of subsection 2.5(c) as if it were
a Class B-2 Purchaser. Each Class B-2 Purchaser shall give the Class B-2 Agent
notice of the consummation of any sale by it of a Participation and the Class
B-2 Agent (upon receipt of notice from the related Class B-2 Purchaser) shall
promptly notify the Transferor, the Servicer and the Trustee.
1. Each Class B-2 Purchaser may, with the consent of the Class B-2 Agent and
SRPC and in accordance with applicable law, sell or assign (each, an
"ASSIGNMENT"), to any Person (each, an "ASSIGNEE") all or any part of its
Commitment or its interest in the Class B-2 Certificates and its rights and
obligations under this Agreement and the Pooling and Servicing Agreement
pursuant to an agreement substantially in the form attached hereto as EXHIBIT B
hereto (a "TRANSFER SUPPLEMENT"), executed by such Assignee and the Class B-2
Purchaser and delivered to the Class B-2 Agent for its acceptance and consent;
PROVIDED, HOWEVER, that no such assignment or sale shall be effective unless and
until the conditions to Transfer specified in this Agreement, including in
subsection 8.1(c) hereof, shall have been satisfied. From and after the
effective date determined pursuant to such Transfer Supplement, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such Transfer
Supplement, have the rights and obligations of a Class B-2 Purchaser hereunder
as set forth therein and (y) the transferor Class B-2 Purchaser shall, to the
extent provided in such Transfer Supplement, be released from its Commitment and
other obligations under this Agreement; PROVIDED, HOWEVER, that after giving
effect to each such Assignment, the obligations released by any such Class B-2
Purchaser shall have been assumed by an Assignee or Assignees. Such Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Assignee and the resulting
adjustment of Percentage Interests or Commitment Percentages arising from the
Assignment. Upon its receipt and acceptance of a duly executed Transfer
Supplement, the Class B-2 Agent shall on the effective date determined pursuant
thereto give notice of such acceptance to the Transferor, the Servicer and the
Trustee and the Servicer will provide notice thereof to each Rating Agency (if
required).
Upon instruction to register a transfer of a Class B-2
Purchaser's beneficial interest in the Class B-2 Certificates (or portion
thereof) and surrender for registration of transfer such Class B-2 Purchaser's
Class B-2 Certificate(s) (if applicable) and delivery to the Transferor and the
Trustee of an Investment Letter, executed by the registered owner (and the
beneficial owner if it is a Person other than the registered owner), and receipt
by the Trustee of a copy of the duly executed related Transfer Supplement and
such other documents as may be required under this Agreement, such beneficial
interest in the Class B-2 Certificates (or portion thereof) shall be transferred
in the records of the Trustee and the Class B-2 Agent and, if requested by the
Assignee, new Class B-2 Certificates shall be issued to the Assignee and, if
applicable, the transferor Class B-2 Purchaser in amounts reflecting such
Transfer as provided in the Pooling and Servicing Agreement. Such Transfers of
Class B-2 Certificates (and interests therein) shall be subject to this Section
8.1 in lieu of any regulations which may be prescribed
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under Section 6.3 of the Pooling and Servicing Agreement. Successive
registrations of Transfers as aforesaid may be made from time to time as
desired, and each such registration of a transfer to a new registered owner
shall be noted on the Certificate Register.
1. Each Class B-2 Purchaser may pledge its interest in the Class B-2
Certificates to any Federal Reserve Bank as collateral in accordance with
applicable law.
1. Any Class B-2 Purchaser shall have the option to change its Investing Office,
PROVIDED that such Class B-2 Purchaser shall have prior to such change in office
complied with the provisions of subsection 2.5(c) and PROVIDED FURTHER that such
Class B-2 Purchaser shall not be entitled to any amounts otherwise payable under
Section 2.4 or 2.5 resulting solely from such change in office unless such
change in office was mandated by applicable law or by such Class B-2 Purchaser's
compliance with the provisions of this Agreement.
A. TAX CHARACTERIZATION. It is the intention of the parties
hereto that the Class B-2 Certificates be treated for tax purposes as
indebtedness.
I. SECTION MISCELLANEOUS
A. AMENDMENTS AND WAIVERS. This Agreement may not be amended, supplemented or
modified nor may any provision hereof be waived except in accordance with the
provisions of this Section 9.1. With the written consent of the Required Class
B-2 Purchasers, the Class B-2 Agent, the Facility Agent, SRPC and SRI may, from
time to time, enter into written amendments, supplements, waivers or
modifications hereto for the purpose of adding any provisions to this Agreement
or changing in any manner the rights of any party hereto or waiving, on such
terms and conditions as may be specified in such instrument, any of the
requirements of this Agreement; PROVIDED, HOWEVER, that no such amendment,
supplement, waiver or modification shall (i) reduce the amount of or extend the
maturity of any Class B-2 Certificate or reduce the rate or extend the time of
payment of interest thereon, or reduce or alter the timing of any other amount
payable to any Class B-2 Purchaser hereunder or under the Supplement, in each
case without the consent of the Class B-2 Purchaser affected thereby, (ii)
amend, modify or waive any provision of this Section 9.1, or, if such amendment
would have a material adverse effect on the Class B-2 Purchasers, the definition
of "Class B-2 Invested Amount" or "Class B-2 Principal Balance", or reduce the
percentage specified in the definition of Required Class B-2 Purchasers, in each
case without the written consent of all Class B-2 Purchasers or (iii) amend,
modify or waive any provision of Section 7 of this Agreement without the written
consent of the Class B-2 Agent, the Facility Agent and Required Class B-2
Purchasers. Any waiver of any provision of this Agreement shall be limited to
the provisions specifically set forth therein for the period of time set forth
therein and shall not be construed to be a waiver of any other provision of this
Agreement.
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The Facility Agent may cast any vote or give any direction under the
Pooling and Servicing Agreement on behalf of the Class B-2 Certificateholders if
it has been directed to do so by (i) the Required Class B-2 Purchasers, (ii) the
Class B Purchasers (as defined in the Class B Purchase Agreement) required under
the terms of Section 9.1 of the Class B Certificate Purchase Agreement, and
(iii) by the Class A Purchasers (as defined in the Class A Certificate Purchase
Agreement) required under the terms of Section 9.1 of the Class A Certificate
Purchase Agreement.
A. NOTICES. (a) All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by telecopy), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or, in the case of mail or telecopy
notice, when received, addressed as follows or, with respect to a Class B-2
Purchaser, as set forth opposite its signature to this Agreement or in the
Transfer Supplement, or to such other address as may be hereafter notified by
the respective parties hereto:
SRPC: SRI Receivables Purchase Co., Inc.
10201 Main Street
Houston, Texas 77025
Attention: Treasurer
Telephone: (713) 669-2601
Telecopy: (713) 669-2621
SRI: Specialty Retailers, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Treasurer
Telephone: (713) 669-2601
Telecopy: (713) 669-2621
The Trustee: Bankers Trust (Delaware)
1011 Centre Road, Suite 200
Wilmington, Delaware 19805-1266
Attention: Corporate Trust and Agency Group
Telephone: (302) 636-3300
Telefax: (302) 636-3222
Mailing Address:
P.O. Box 8795
Wilmington, Delaware 19899-8795
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The Class B-2 Credit Suisse First Boston, New York Branch
Agent or the Eleven Madison Avenue
Facility New York, New York 10010
Agent: Attention: Asset Finance Department
Telephone: (212) 325-9076
Telefax: (212) 325-6677
Moody's: Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: ABS Monitoring Department, 4th Floor
Telephone: (212) 553-3607
Telefax: (212) 553-4773
Standard Standard & Poor's Ratings Services
& Poor's: 26 Broadway, 15th Floor
New York, New York 10004
Attention: Asset-Backed Surveillance Department
Telephone: (212) 208-1892
Telefax: (212) 412-0323
(b) All payments to be made to the Class B-2 Agent or any Class B-2
Purchaser hereunder shall be made in United States dollars and in immediately
available funds not later than 2:30 p.m. New York City time on the date payment
is due, and, unless otherwise specifically provided herein, shall be made to the
Class B-2 Agent, for the account of one or more of the Class B-2 Purchasers or
for its own account, as the case may be. Unless otherwise directed by the Class
B-2 Agent, all payments to it shall be made by federal wire (ABA #0260-0917-9)
and telegraph name (CR SUISSE NY), to account number 904996-02, reference SRI
Receivables Master Trust, Series 1997-1, with telephone notice (including
federal wire number) to the Asset Finance Department of Credit Suisse First
Boston (212-325-9081).
(c) Any notices permitted or required hereunder to be given by SRPC
shall be effective if given on behalf of SRPC by the Servicer.
A. No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Class B-2 Agent, the Facility Agent or any Class
B-2 Purchaser, any right, remedy, power or privilege under any of the Related
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under any of the Related
Documents preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges provided in the Related Documents are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
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A. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of SRPC, SRI, the Transferor, the Servicer, the Class B-2 Agent, the
Facility Agent, the Class B-2 Purchasers, any Assignee and their respective
successors and assigns, except that SRPC, SRI, the Transferor and the Servicer
may not assign or transfer any of their respective rights or obligations under
this Agreement except as provided herein and in the Pooling and Servicing
Agreement, without the prior written consent of the Required Class B-2
Purchasers.
A. Successors to Servicer. (a) In the event that a transfer of servicing occurs
under Article VIII or Article X of the Pooling and Servicing Agreement, (i) from
and after the effective date of such transfer, the Successor Servicer shall be
the successor in all respects to the Servicer and shall be responsible for the
performance of all functions to be performed by the Servicer from and after such
date, except as provided in the Pooling and Servicing Agreement, and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, and all references in
this Agreement to the Servicer shall be deemed to refer to the Successor
Servicer, and (ii) as of the date of such transfer, the Successor Servicer shall
be deemed to have made with respect to itself the representations and warranties
made in Section 4.2 (in the case of subsection 4.2(a) with appropriate factual
changes); PROVIDED, HOWEVER, that the references to the Servicer contained in
Section 5.1 of this Agreement shall be deemed to refer to the Servicer with
respect to responsibilities, duties and liabilities arising out of an act or
acts, or omission, or an event or events giving rise to such responsibilities,
duties and liabilities and occurring during such time that the Servicer was
Servicer under this Agreement and shall be deemed to refer to the Successor
Servicer with respect to responsibilities, duties and liabilities arising out of
an act or acts, or omission, or an event or events giving rise to such
responsibilities, duties and liabilities and occurring during such time that the
Successor Servicer acts as Servicer under this Agreement; PROVIDED, HOWEVER, to
the extent that an obligation to indemnify the Class B-2 Purchasers under
Section 2.6 arises as a result of any act or failure to act of any Successor
Servicer in the performance of servicing obligations under the Pooling and
Servicing Agreement or the Supplement, such indemnification obligation shall be
of the Successor Servicer and not its predecessor. Upon the transfer of
servicing to a Successor Servicer, such Successor Servicer shall furnish to the
Class B-2 Agent copies of its audited annual financial statements for each of
the three preceding fiscal years or if the Trustee or any other banking
institution becomes the Successor Servicer, such Successor Servicer shall
provide, in lieu of the audited financial statements required in the immediately
preceding clause, complete and correct copies of the publicly available portions
of its Consolidated Reports of Condition and Income as submitted to the FDIC for
the two most recent year end periods.
(b) In the event that any Person becomes the successor to the
Transferor pursuant to Article VII of the Pooling and Servicing Agreement, from
and after the effective date of such transfer, such successor to the Transferor
shall be the successor in all respects to the Transferor and shall be
responsible for the performance of all functions to be performed by the
Transferor from and after such date, except as
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provided in the Pooling and Servicing Agreement, and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Transferor by the terms and provisions hereof, and all references in this
Agreement to the Transferor shall be deemed to refer to the successor to the
Transferor; PROVIDED, however, that the references to the Transferor contained
in Sections 2.5, 2.6 and 5.1 of this Agreement shall be deemed to refer to SRPC
with respect to responsibilities, duties and liabilities arising out of an act
or acts, or omission, or an event or events giving rise to such
responsibilities, duties and liabilities and occurring during such time that
SRPC was Transferor under this Agreement and shall be deemed to refer to the
successor to SRPC as Transferor with respect to responsibilities, duties and
liabilities arising out of an act or acts, or omission, or an event or events
giving rise to such responsibilities, duties and liabilities and occurring
during such time that the successor to SRPC acts as Transferor under this
Agreement.
A. Counterparts. This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
A. Severability. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.
B. Integration. This Agreement and the Class B-2 Fee Letter represent the
agreement of the Class B-2 Agent, the Facility Agent, SRPC, SRI, the Transferor,
the Servicer and the Class B-2 Purchasers with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Class B-2 Purchasers, the Class B-2 Agent or the Facility Agent relative
to subject matter hereof not expressly set forth or referred to herein or
therein.
A. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
A. Termination. This Agreement shall remain in full force and effect until the
earlier to occur of (a) payment in full of the Class B-2 Repayment Amount and
all other amounts payable to the Class B-2 Purchasers, the Class B-2 Agent and
the Facility Agent hereunder and the termination of all Commitments and (b) the
Series Termination Date; PROVIDED, HOWEVER, that if the Class B-2 Repayment
Amount and all other amounts payable to the Class B-2 Purchasers hereunder are
paid in full and all Commitments have terminated prior to the Series Termination
Date, the Class B-2 Agent shall notify the Trustee that thereafter all amounts
otherwise payable to the Class B-2 Purchasers hereunder shall be payable to the
Transferor or any Person designated thereby; and PROVIDED, FURTHER, that the
provisions of Sections 2.4, 2.5, 2.6, 6.1, 6.2, 7.7, 8.2, 9.11, 9.13 and 9.14
shall survive termination of this Agreement and any amounts payable to the
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Facility Agent, the Class B-2 Agent or Class B-2 Purchasers thereunder shall
remain payable thereto.
A. Limited Recourse; No Proceedings. The obligations of SRPC, SRI, the
Transferor and the Servicer under this Agreement are several (except as
specifically provided herein) and are solely the corporate obligations of SRPC,
SRI, the Transferor or the Servicer, as applicable. No recourse shall be had for
the payment of any fee or other obligation or claim arising out of or relating
to this Agreement or any other agreement, instrument, document or certificate
executed and delivered or issued by SRPC, SRI, the Transferor and the Servicer
or any officer of any of them in connection therewith, against any stockholder,
employee, officer, director or incorporator of SRPC, SRI, the Transferor or the
Servicer. With respect to obligations of the Transferor, neither the Class B-2
Agent, the Facility Agent nor any Class B-2 Purchaser shall look to any property
or assets of the Transferor, other than to (a) amounts payable to the Class B-2
Agent, the Facility Agent or a Class B-2 Purchaser or to the Transferor under
the Receivables Purchase Agreement, any Supplement or the Pooling and Servicing
Agreement and (b) any other assets of the Transferor not pledged to third
parties or otherwise encumbered in any manner permitted by the Transferor's
Certificate of Incorporation. Each Class B-2 Purchaser, the Facility Agent and
the Class B-2 Agent hereby agrees that to the extent such funds are insufficient
or unavailable to pay any amounts owing to it by the Transferor pursuant to this
Agreement, prior to the earlier of the Trust Termination Date or the
commencement of a bankruptcy or insolvency proceeding by or against the
Transferor, it shall not constitute a claim against the Transferor. Nothing in
this paragraph shall limit or otherwise affect the liability of the Servicer
with respect to any amounts owing by it hereunder or the right of the Class B-2
Agent, the Facility Agent or any Class B-2 Purchaser to enforce such liability
against the Servicer or any of its assets.
A. Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement, the purchase of the Class B-2 Certificates
hereunder and the termination of this Agreement.
A. SUBMISSION TO JURISDICTION; WAIVERS. EACH OF SRPC, SRI, THE TRANSFEROR, THE
SERVICER, THE FACILITY AGENT, THE CLASS B-2 AGENT AND EACH CLASS B-2 PURCHASER
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY, OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO
THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF
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THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY
THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID,
TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 9.2 OR AT SUCH
OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT
THERETO; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO
SUE IN ANY OTHER JURISDICTION.
A. WAIVERS OF JURY TRIAL. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE
FACILITY AGENT, THE CLASS B-2 AGENT AND THE CLASS B-2 PURCHASERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR
INSTRUMENT RELATED HERETO AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Certificate
Purchase Agreement to be duly executed by their respective officers as of the
day and year first above written.
SRI RECEIVABLES PURCHASE CO., INC.,
individually and as Transferor
By: /S/ MARK A. HESS
Name: Mark A. Hess
Title: Treasurer
SPECIALTY RETAILERS, INC.,
individually and as Servicer
By: /S/ JAMES A. MARCUM
Name: James A. Marcum
Title: Vice Chairman and Chief Financial
Officer (principal financial and
accounting officer)
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CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH, as Class B-2 Agent and as Facility
Agent
By: /S/ DENNIS J. KNITOWSKI
Name: Dennis J. Knitowski
Title: Associate
By: /S/ ALBERTO ZONCA
Name: Alberto Zonca
Title: Associate
COMMITMENT: $10,000,000 CREDIT SUISSE FIRST BOSTON,
ADDRESS FOR NOTICES: NEW YORK BRANCH, as Class B-2 Purchaser
Eleven Madison Avenue
New York, New York 10010-3629
Attention:Asset Finance
Department By: /S/ DENNIS J. KNITOWSKI
Telephone: (212) 325-9086 Name: Dennis J. Knitowski
Telecopy: (212) 325-6677 Title: Associate
INVESTING OFFICE:
Eleven Madison Avenue By: /S/ ALBERTO ZONCA
New York, New York 10010-3629 Name: Alberto Zonca
Title: Associate
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EXHIBIT A
FORM OF INVESTMENT LETTER
[Date]
SRI Receivables Purchase Co., Inc.
10201 Main Street
Houston, Texas 77025
Attention: Treasurer
Re SRI Receivables Master Trust Class B-2
FLOATING RATE VARIABLE FUNDING CERTIFICATES, SERIES 1997-1
Ladies and Gentlemen:
This letter (the "Investment Letter") is delivered by the
undersigned (the "Purchaser") pursuant to subsection 8.1(a) of the Class B-2
Certificate Purchase Agreement dated as of October 16, 1998 (as in effect, the
"Certificate Purchase Agreement"), among SRI Receivables Purchase Co., Inc., as
Transferor, Specialty Retailers, Inc., as Servicer, the Class B-2 Purchasers
parties thereto and Credit Suisse First Boston, New York Branch, as Agent and
Facility Agent. Capitalized terms used herein without definition shall have the
meanings set forth in the Certificate Purchase Agreement. The Purchaser
represents to and agrees with the Transferor as follows:
(a) The Purchaser is authorized [to enter into the Certificate
Purchase Agreement and to perform its obligations thereunder and to
consummate the transactions contemplated thereby] [to purchase a
participation in obligations under the Certificate Purchase Agreement].
(b) The Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
its investment in the Class B-2 Certificates and is able to bear the
economic risk of such investment. The Purchaser has been afforded the
opportunity to ask such questions as it deems necessary to make an
investment decision, and has received all information it has requested in
connection with making such investment decision. The Purchaser has,
independently and without reliance upon the Agent, the Facility Agent or
any other Class B-2 Purchaser, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation
into the business, operations, property, financial and other condition and
creditworthiness of the Trust, SRPC, SRI, Granite, Stage, the Transferor
and the Servicer and made its own decision to purchase its interest in the
Class B-2 Certificates, and will, independently and without reliance upon
the Agent, the Facility Agent or any other Class B-2 Purchaser, and based
on such
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documents and information as it shall deem appropriate at the time,
continue to make its own analysis, appraisals and decisions in taking or
not taking action under the Certificate Purchase Agreement, and to make
such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Trust, SRPC, SRI, Granite, Stage, the Transferor
and the Servicer.
(c) The Purchaser is an "accredited investor", as defined in Rule
501, promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), or is a sophisticated institutional investor. The
Purchaser understands that the offering and sale of the Class B-2
Certificates has not been and will not be registered under the Securities
Act and has not and will not be registered or qualified under any
applicable "Blue Sky" law, and that the offering and sale of the Class B-2
Certificate has not been reviewed by, passed on or submitted to any
federal or state agency or commission, securities exchange or other
regulatory body.
(d) The Purchaser is acquiring an interest in Class B-2 Certificates
without a view to any distribution, resale or other transfer thereof
except, with respect to any Class B-2 Purchaser Interest or any interest
or participation therein, as contemplated in the following sentence. The
Purchaser will not resell or otherwise transfer any interest or
participation in the Class B-2 Purchaser Interest, except in accordance
with Section 8.1 of the Certificate Purchase Agreement and (i) in a
transaction exempt from the registration requirements of the Securities
Act of 1933, as amended, and applicable state securities or "blue sky"
laws; (ii) to the Transferor or any affiliate of the Transferor; or (iii)
to a person who the Purchaser reasonably believes is a qualified
institutional buyer (within the meaning thereof in Rule 144A under the
Securities Act) that is aware that the resale or other transfer is being
made in reliance upon Rule 144A. In connection therewith, the Purchaser
hereby agrees that it will not resell or otherwise transfer the Class B-2
Certificates or any interest therein unless the purchaser thereof provides
to the addressee hereof a letter substantially in the form hereof.
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(e) This Investment Letter has been duly executed and delivered and
constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
affecting the enforcement of creditors' rights generally and general
principles of equity.
Very truly yours,
[NAME OF PURCHASER]
By:___________________________
Name:
Title:
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EXHIBIT B
FORM OF TRANSFER SUPPLEMENT
TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of
Schedule I hereto, among the Transferor Class B-2 Purchaser set forth in Item 2
of Schedule I hereto (the "TRANSFEROR CLASS B-2 PURCHASER"), the Purchasing
Class B-2 Purchaser set forth in Item 3 of Schedule I hereto (the "PURCHASING
CLASS B-2 PURCHASER"), and Credit Suisse First Boston, New York Branch, as Class
B-2 Agent for the Class B-2 Purchasers under, and as defined in, the Certificate
Purchase Agreement described below (in such capacity, the "CLASS B-2 AGENT").
W I T N E S S E T H:
WHEREAS, this Supplement is being executed and delivered in
accordance with subsection 8.1(e) of the Class B-2 Certificate Purchase
Agreement, dated as of October 16, 1998, among SRI Receivables Purchase Co.,
Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B-2
Purchasers parties thereto, the Class B-2 Agent and Credit Suisse First Boston,
New York Branch, as Facility Agent (as from time to time amended, supplemented
or otherwise modified in accordance with the terms thereof, the "CERTIFICATE
PURCHASE AGREEMENT"; unless otherwise defined herein, terms defined in the
Certificate Purchase Agreement are used herein as therein defined);
WHEREAS, the Purchasing Class B-2 Purchaser (if it is not already a
Class B-2 Purchaser party to the Certificate Purchase Agreement) wishes to
become a Class B-2 Purchaser party to the Certificate Purchase Agreement and the
Purchasing Class B-2 Purchaser wishes to acquire and assume from the Transferor
Class B-2 Purchaser, certain of the rights, obligations and commitments under
the Certificate Purchase Agreement; and
WHEREAS, the Transferor Class B-2 Purchaser wishes to sell and
assign to the Purchasing Class B-2 Purchaser, certain of its rights, obligations
and commitments under the Certificate Purchase Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
(a) Upon receipt by the Class B-2 Agent of five counterparts of this
Supplement, to each of which is attached a fully completed Schedule I and
Schedule II, each of which has been executed by the Transferor Class B-2
Purchaser, the Purchasing Class B-2 Purchaser and the Class B-2 Agent, the Class
B-2 Agent will transmit to the Servicer, the Transferor, the Trustee, the
Transferor Class B-2 Purchaser and the Purchasing Class B-2 Purchaser a Transfer
Effective Notice, substantially in the form of Schedule III to this Supplement
(a "TRANSFER
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EFFECTIVE NOTICE"). Such Transfer Effective Notice shall be executed by the
Class B-2 Agent and shall set forth, INTER ALIA, the date on which the transfer
effected by this Supplement shall become effective (the "TRANSFER EFFECTIVE
DATE"). From and after the Transfer Effective Date the Purchasing Class B-2
Purchaser shall be a Class B-2 Purchaser party to the Certificate Purchase
Agreement for all purposes thereof.
(b) At or before 12:00 Noon, local time of the Transferor Class B-2
Purchaser, on the Transfer Effective Date, the Purchasing Class B-2 Purchaser
shall pay to the Transferor Class B-2 Purchaser, in immediately available funds,
an amount equal to the purchase price, as agreed between the Transferor Class
B-2 Purchaser and such Purchasing Class B-2 Purchaser (the "PURCHASE PRICE"), of
the portion set forth on Schedule II hereto being purchased by such Purchasing
Class B-2 Purchaser of the outstanding Class B-2 Invested Amount under the Class
B-2 Certificate owned by the Transferor Class B-2 Purchaser (such Purchasing
Class B-2 Purchaser's "PURCHASE Percentage") and other amounts owing to the
Transferor Class B-2 Purchaser under the Certificate Purchase Agreement or
otherwise in respect of the Class B-2 Certificates. Effective upon receipt by
the Transferor Class B-2 Purchaser of the Purchase Price from the Purchasing
Class B-2 Purchaser, the Transferor Class B-2 Purchaser hereby irrevocably
sells, assigns and transfers to the Purchasing Class B-2 Purchaser, without
recourse, representation or warranty, and the Purchasing Class B-2 Purchaser
hereby irrevocably purchases, takes and assumes from the Transferor Class B-2
Purchaser, the Purchasing Class B-2 Purchaser's Purchase Percentage of (i) the
presently outstanding Class B-2 Invested Amount under the Class B-2 Certificates
owned by the Transferor Class B-2 Purchaser and other amounts owing to the
Transferor Class B-2 Purchaser in respect of the Class B-2 Certificates,
together with all instruments, documents and collateral security pertaining
thereto, and (ii) the Purchasing Class B-2 Purchaser's Purchase Percentage of
the Commitment Percentage and the Commitment of the Transferor Class B-2
Purchaser and other rights, duties and obligations of the Transferor Class B-2
Purchaser under the Certificate Purchase Agreement. This Supplement is intended
by the parties hereto to effect a purchase by the Purchasing Class B-2 Purchaser
and sale by the Transferor Class B-2 Purchaser of interests in the Class B-2
Certificates, and it is not to be construed as a loan or a commitment to make a
loan by the Purchasing Class B-2 Purchaser to the Transferor Class B-2
Purchaser. The Transferor Class B-2 Purchaser hereby confirms that the amount of
the Class B-2 Invested Amount is $ and its Percentage Interest thereof is ___%,
which equals $ as of , 199_. Upon and after the Transfer Effective Date (until
further modified in accordance with the Certificate Purchase Agreement), the
Commitment Percentage and Commitment of the Transferor Class B-2 Purchaser and
the Purchasing Class B-2 Purchaser shall be as set forth in Schedule II to this
Supplement.
(c) The Transferor Class B-2 Purchaser has made arrangements with
the Purchasing Class B-2 Purchaser with respect to (i) the portion, if any, to
be paid, and the date or dates for payment, by the Transferor Class B-2
Purchaser to the Purchasing Class B-2 Purchaser of any fees heretofore received
by the Transferor Class B-2 Purchaser pursuant to the Certificate Purchase
Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to
be paid, and the date or dates for payment, by the Purchasing Class B-2
Purchaser to the Transferor Class B-2 Purchaser of fees or interest received by
the Purchasing Class B-2 Purchaser pursuant to the Certificate Purchase
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Agreement or otherwise in respect of the Class B-2 Certificates from and after
the Transfer Effective Date.
(d) (i) All principal payments that would otherwise be payable from
and after the Transfer Effective Date to or for the account of the Transferor
Class B-2 Purchaser in respect of the Class B-2 Certificates shall, instead, be
payable to or for the account of the Transferor Class B-2 Purchaser and the
Purchasing Class B-2 Purchaser, as the case may be, in accordance with their
respective interests as reflected in this Supplement.
(ii) All interest, fees and other amounts that would otherwise
accrue for the account of the Transferor Class B-2 Purchaser from and after the
Transfer Effective Date pursuant to the Certificate Purchase Agreement or in
respect of the Class B-2 Certificates shall, instead, accrue for the account of,
and be payable to or for the account of, the Transferor Class B-2 Purchaser and
the Purchasing Class B-2 Purchaser, as the case may be, in accordance with their
respective interests as reflected in this Supplement. In the event that any
amount of interest, fees or other amounts accruing prior to the Transfer
Effective Date was included in the Purchase Price paid by the Purchasing Class
B-2 Purchaser, the Transferor Class B-2 Purchaser and the Purchasing Class B-2
Purchaser will make appropriate arrangements for payment by the Transferor Class
B-2 Purchaser to the Purchasing Class B-2 Purchaser of such amount upon receipt
thereof from the Class B-2 Agent.
(e) Concurrently with the execution and delivery hereof, the
Purchasing Class B-2 Purchaser will deliver to Class B-2 Agent, the Transferor
and the Trustee an executed Investment Letter in the form of Exhibit A to the
Certificate Purchase Agreement and the forms, if any, required by subsection
2.5(c) of the Certificate Purchase Agreement.
(f) Each of the parties to this Supplement agrees and acknowledges
that (i) at any time and from time to time upon the written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Supplement, and (ii) the Class B-2 Agent shall apply each
payment made to it under the Certificate Purchase Agreement, whether in its
individual capacity or as Class B-2 Agent, in accordance with the provisions of
the Certificate Purchase Agreement, as appropriate.
(g) By executing and delivering this Supplement, the Transferor
Class B-2 Purchaser and the Purchasing Class B-2 Purchaser confirm to and agree
with each other, the Facility Agent and the Class B-2 Agent and the Class B-2
Purchasers as follows: (i) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned hereby free and
clear of any adverse claim, the Transferor Class B-2 Purchaser makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Certificate Purchase Agreement or the Pooling and Servicing Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Certificate Purchase Agreement or any other instrument or document
-51-
<PAGE>
furnished pursuant thereto; (ii) the Transferor Class B-2 Purchaser makes no
representation or warranty and assumes no responsibility with respect to the
Trust, the financial condition of SRPC, SRI, Granite, Stage, the Servicer, the
Transferor or the Trustee, or the performance or observance by SRPC, SRI,
Granite, Stage, the Servicer, the Transferor or the Trustee of any of their
respective obligations under the Certificate Purchase Agreement, the Pooling and
Servicing Agreement or any other instrument or document furnished pursuant
hereto; (iii) each Purchasing Class B-2 Purchaser confirms that it has received
a copy of such documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Supplement; (iv) each
Purchasing Class B-2 Purchaser will, independently and without reliance upon the
Class B-2 Agent, the Transferor Class B-2 Purchaser or any other Class B-2
Purchaser 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 the Certificate Purchase Agreement or the Pooling and
Servicing Agreement; (v) each Purchasing Class B-2 Purchaser appoints and
authorizes the Class B-2 Agent and the Facility Agent to take such action as
agent on its behalf and to exercise such powers under the Certificate Purchase
Agreement and the Pooling and Servicing Agreement as are delegated to the Class
B-2 Agent or the Facility Agent, as the case may be, by the terms thereof,
together with such powers as are reasonably incidental thereto, all in
accordance with Section 7 of the Certificate Purchase Agreement; and (vi) each
Purchasing Class B-2 Purchaser agrees (for the benefit of the Transferor Class
B-2 Purchaser, the Class B-2 Agent, the Facility Agent, the Class B-2
Purchasers, the Trustee, the Servicer and the Transferor) that it will perform
in accordance with their terms all of the obligations which by the terms of the
Certificate Purchase Agreement are required to be performed by it as a Class B-2
Purchaser.
(h) Schedule II hereto sets forth the revised Commitment Percentage
and Commitment of the Transferor Class B-2 Purchaser, the Commitment Percentage
and the Purchasing Class B-2 Purchaser and the initial Investing Office of the
Purchasing Class B-2 Purchaser, as well as administrative information with
respect to the Purchasing Class B-2 Purchaser.
(i) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement
to be executed by their respective duly authorized officers on Schedule I hereto
as of the date set forth in Item 1 of Schedule I hereto.
-52-
<PAGE>
SCHEDULE I TO
TRANSFER SUPPLEMENT
COMPLETION OF INFORMATION AND
SIGNATURES FOR TRANSFER SUPPLEMENT
Re: Class B-2 Certificate Purchase Agreement, dated as of October 16,
1998, among SRI Receivables Purchase Co., Inc., as Transferor,
Specialty Retailers, Inc., as Servicer, the Class B-2 Purchasers
party thereto and Credit Suisse First Boston, New York Branch, as
Class B-2 Agent and as Facility Agent.
Item 1: Date of Transfer Supplement:
Item 2: Transferor Class B-2 Purchaser:
Item 3: Purchasing Class B-2 Purchaser:
Item 4: Signatures of Parties to Agreement:
as Transferor Class B-2 Purchaser
BY:
Name:
Title:
BY:
Name:
Title:
-53-
<PAGE>
as Purchasing Class B-2 Purchaser
BY:
Name:
Title:
BY:
Name:
Title:
CONSENTED TO AND ACCEPTED BY:
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Class B-2 Agent
By:
Name:
Title:
By:
Name:
Title:
-54-
<PAGE>
SCHEDULE II TO
TRANSFER SUPPLEMENT
LIST OF INVESTING OFFICES, ADDRESSES
FOR NOTICES, ASSIGNED INTERESTS
AND COMMITMENT PERCENTAGES
[TRANSFEROR CLASS B-2 PURCHASER]
A. COMMITMENT PERCENTAGE:
Transferor Commitment Percentage
Prior to Sale: _____%
Commitment Percentage Sold: _____%
Commitment Percentage Retained: _____%
B. COMMITMENT:
Transferor Class B-2 Purchaser Commitment
Prior to Sale: $________
Commitment Sold: $________
Commitment Retained: $________
C. CLASS B-2 PRINCIPAL BALANCE:
Transferor Class B-2 Purchaser
Class B-2 Principal Balance Prior to Sale: $________
Class B-2 Principal Balance Sold: $________
Class B-2 Principal Balance Retained: $________
[PURCHASING CLASS B-2 PURCHASER]
A. Commitment Percentage: _____%
B. Commitment: $________
C. Class B-2 Principal Balance Owned Immediately
After Sale: $________
-55-
<PAGE>
ADDRESS FOR NOTICES:
INVESTING OFFICE:
-56-
<PAGE>
SCHEDULE III TO
TRANSFER SUPPLEMENT
Form of
TRANSFER EFFECTIVE NOTICE
To: [Name and address of
Transferor, Servicer, Trustee, the Transferor Class B-2
Purchaser and the Purchasing Class B-2 Purchaser]
The undersigned, as Class B-2 Agent under the Class B-2 Certificate
Purchase Agreement, dated as of October 16, 1998, among SRI Receivables Purchase
Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B-2
Purchasers parties thereto and Credit Suisse First Boston, New York Branch, as
Class B-2 Agent for the Class B-2 Purchasers and as Facility Agent thereunder,
acknowledges receipt of five executed counterparts of a completed Transfer
Supplement. [Note: attach copies of Schedules I and II from such Agreement.]
Terms defined in such Supplement are used herein as therein defined.
Pursuant to such Supplement, you are advised that the Transfer
Effective Date will be _____________, 199_.
Very truly yours,
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as
Class B-2 Agent
By:_______________________
Name:
Title:
By:_______________________
Name:
Title:
-57-
EXHIBIT 4.4
AMENDMENT NO. 1 TO
CLASS A CERTIFICATE PURCHASE AGREEMENT
THIS AMENDMENT NO. 1, dated as of October 16, 1998 by and among SRI
RECEIVABLES PURCHASE CO., INC., a Delaware corporation ("SRPC"), individually
and as Transferor (as defined below), SPECIALTY RETAILERS, INC., a Texas
corporation ("SRI"), individually and as Servicer (as defined below), the CLASS
A PURCHASERS parties hereto (collectively, the "CLASS A PURCHASERS") and CREDIT
SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York
Branch ("CSFB"), as Class A Agent and as Facility Agent (each as defined below).
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to the Class A Certificate Purchase
Agreement, dated as of December 3, 1997, as modified by the increase and
extension of commitment thereunder dated as of September 28, 1998 (as so
modified, the "CERTIFICATE PURCHASE AGREEMENT"; terms used in this Amendment and
not otherwise defined herein being used as defined in, or for purposes of, the
Certificate Purchase Agreement), relating to the purchase by the Class A
Purchasers of the Class A Initial Invested Amount and from time to time of
Additional Class A Invested Amounts in respect of the Class A Variable Funding
Certificates, Series 1997-1 issued by the SRI Receivables Master Trust; and
WHEREAS, the Transferor has requested that the Class B Purchasers consent
to a proposed Amended and Restated Supplement to be dated as of October 16,
1998, which would amend and, as so amended, restate the Supplement (as so
amended and restated, the "RESTATED SUPPLEMENT"); and
WHEREAS, pursuant to the Restated Supplement, the Trust proposes to issue
its Class B-2 Variable Funding Certificates, Series 1997-1 (the "CLASS B-2
CERTIFICATES"), which would be sold to certain purchasers (the "CLASS B-2
PURCHASERS") pursuant to a Class B-2 Certificate Purchase Agreement, dated as of
October 16, 1998, among SRPC, individually and as Transferor, SRI, individually
and as Servicer, the Class B-2 Purchasers, CSFB, as Class B-2 Agent (in such
capacity, the "CLASS B-2 AGENT"), and the Facility Agent; and
WHEREAS, in connection with the Restated Supplement and the issuance of the
Class B-2 Certificates, the Transferor has requested that the other parties
hereto amend the Certificate Purchase Agreement in certain respects and that the
Class A Purchasers, the Class A Agent and the Facility Agent consent to the
amendments to and restatement of the Supplement set forth in the Restated
Supplement; and
<PAGE>
WHEREAS, the other parties hereto are willing to consent to such amendments
and to such restatement on the terms and conditions provided for herein;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration, the receipt and adequacy of which are
hereby expressly acknowledged, the parties hereto agree as follows:
I. SECTION AMENDMENTS TO SECTION 1.1.
A. The definition of "Related Documents" contained in Section 1.1 is hereby
amended and restated to read in its entirety as follows:
"RELATED DOCUMENTS" shall mean, collectively, this Agreement
(including the Class A Fee Letter and all Joinder Supplements and Transfer
Supplements), the Class B Purchase Agreement, the Class B-2 Purchase
Agreement, the Master Pooling and Servicing Agreement, the Supplement, the
Series 1997-1 Certificates, the Receivables Purchase Agreement and the
Receivables Transfer Agreement.
A. The following definitions are hereby added to Section 1.1 of the Certificate
Purchase Agreement in their appropriate alphabetical order:
"CLASS B-2 CERTIFICATE PURCHASE AGREEMENT" shall mean the Class B-2
Certificate Purchase Agreement, dated as of October 16, 1998 among SRPC,
individually and as Transferor, SRI, individually and as Servicer, the
Class B-2 Purchasers parties thereto, the Class B-2 Agent referred to
therein and the Facility Agent, as amended, modified or otherwise
supplemented from time to time.
"CLASS B-2 CERTIFICATES" shall mean the Trust's Class B-2 Variable
Funding Certificates, Series 1997-1.
"GRANITE" shall mean Granite National Bank, N.A., a national banking
association, which is a subsidiary of Stage.
"RECEIVABLES TRANSFER AGREEMENT" shall mean the Receivables Transfer
Agreement, dated as of August 1, 1998, between SRI, as purchaser, and
Granite, as transferor, as the same may from time to time be amended or
otherwise modified.
<PAGE>
I. SECTION AMENDMENT TO SUBSECTION 3.2. Subsection 3.2(d) of the Certificate
Purchase Agreement is hereby amended and restated to read in its entirety as
follows:
(d) after giving effect to such purchase, (i) the sum of the Class B
Invested Amount, the Class B-2 Invested Amount and the Class C Invested
Amount shall equal not less than 25% of the Invested Amount on the
applicable Purchase Date and (ii) the sum of the Class B-2 Invested Amount
and the Class C Invested Amount shall not be less than 5% of the highest
Invested Amount during the 180 days preceding such Purchase Date;
I. SECTION AMENDMENT TO SECTION 4.2. Subsection (m) of Section 4.2 of the
Certificate Purchase Agreement is hereby replaced by the following new
subsections (m) and (n):
(m) The representations and warranties of Granite set forth in Section
4.02 and 4.03 of the Receivables Transfer Agreement are true and correct in
all material respects.
(n) All written factual information heretofore furnished by SRPC, SRI,
Granite or Stage to, or for delivery to, the Class A Agent for purposes of
or in connection with this Agreement, including information relating to the
Accounts, the Receivables and the credit card business of SRPC, SRI or
Granite, was true and correct in all material respects on the date as of
which such information was stated or certified and remains true and correct
in all material respects (unless such information specifically relates to
an earlier date in which case such information shall have been true and
correct in all material respects on such earlier date).
I. SECTION AMENDMENTS TO SECTION 5.1.
A. Subsection 5.1(e) of the Certificate Purchase Agreement is hereby amended and
restated to read as follows:
(e) SRI shall furnish to the Class A Agent (i) promptly when publicly
available, the annual (audited) and quarterly (unaudited) consolidated and
consolidating financial statements of each of Stage and SRPC, the publicly
available portions of Granite's quarterly and annual consolidated reports
of condition and income and such other publicly available financial
information, if any, as to Stage, SRI, Granite or SRPC as the Class A Agent
may request, and (ii) promptly after known to SRI, information with respect
to any action, suit or proceeding involving SRI or any of its Affiliates by
or before any court or any
<PAGE>
Governmental Authority which, if adversely determined, would materially
adversely affect the business, results of operation or financial condition
of SRPC, SRI or Granite;
A. Subsection 5.1(k) of the Certificate Purchase Agreement is hereby amended and
restated to read as follows:
(k) the Transferor and the Servicer shall timely make all payments,
deposits or transfers and give all instructions to transfer required by
this Agreement, the Pooling and Servicing Agreement, the Receivables
Purchase Agreement and the Receivables Transfer Agreement;
I. SECTION AMENDMENT TO SECTION 6.1. Section 6.1 of the Certificate Purchase
Agreement is hereby amended and restated to read as follows:
6.1 COVENANTS OF SRPC, ETC. SRPC, SRI, the Transferor and the Servicer
shall hold in confidence, and not disclose to any Person, the terms of any
fees payable in connection with this Agreement except they may disclose
such information (i) to their officers, directors, employees, agents,
counsel, accountants, auditors, advisors or representatives, (ii) with the
consent of the Required Class B-2 Purchasers and Class B-2 Agent, or (iii)
to the extent SRPC, SRI, Granite, the Transferor or the Servicer or any
Affiliate of either of them should be required by any law or regulation
applicable to it or requested by any Governmental Authority to disclose
such information; PROVIDED, that, in the case of clause (iii), SRPC, the
Transferor, SRI, Granite or the Servicer, as the case may be, will use all
reasonable efforts to maintain confidentiality and will (unless otherwise
prohibited by law) notify the Class A Agent of its intention to make any
such disclosure prior to making such disclosure.
I. SECTION AMENDMENTS TO ARTICLE 7.
A. Sections 7.3, 7.6 and 7.7 of the Certificate Purchase Agreement are hereby
amended to add "Granite," after "SRI," each time such word appears therein.
A. Subsection 7.9(b) of the Certificate Purchase Agreement is hereby amended and
restated to read as follows:
(b) The Facility Agent may resign as Facility Agent upon ten days'
notice to the Class A Purchasers, the Class B Purchasers (as defined in the
Class B Certificate Purchase Agreement), the Class B-2 Purchasers (as
defined in the Class B-2 Certificate Purchase Agreement), the Trustee, the
Transferor and
<PAGE>
the Servicer with such resignation becoming effective upon a successor
agent succeeding to the rights, powers and duties of the Facility Agent
pursuant to this subsection 7.9(b). If the Facility Agent shall resign as
Facility Agent under this Agreement, then the Required Class A Purchasers
and the Required Class A Owners shall appoint from among the Committed
Class A Purchasers hereunder or the Committed Class B Purchasers under the
Class B Certificate Purchase Agreement a successor Facility Agent of the
Class A Certificateholders and the Class B Certificateholders as provided
in the Supplement; PROVIDED that no such appointment shall be effective
unless such successor is also appointed as successor Facility Agent under
the Class B Certificate Purchase Agreement and the Class B-2 Certificate
Purchase Agreement. The successor agent shall succeed to the rights, powers
and duties of the Facility Agent, and the term "Facility Agent" shall mean
such successor agent effective upon its appointment, and the former
Facility Agent's rights, powers and duties as Facility Agent shall be
terminated, without any other or further act or deed on the part of such
former Facility Agent or any of the parties to this Agreement. After the
retiring Facility Agent's resignation as Facility Agent, the provisions of
this Section 7 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Facility Agent under this Agreement.
I. SECTION CONSENT. Each Class A Purchaser, Alpine Securitization Corp., as the
Class A Owner and the Class A Agent hereby consent to the Restated Supplement
and to the issuance of the Class B-2 Certificates thereunder and hereby direct
the Facility Agent to consent thereto. The Class A Agent hereby certifies that
its records reflect that Alpine Securitization Corp. is the sole Class A Owner.
I. SECTION REPRESENTATIONS AND WARRANTIES. In order to induce each Class A
Purchaser, the Class A Agent and the Facility Agent to enter into this Amendment
and to grant the consent set forth in Section 7 above,
A. SRPC hereby confirms that, after giving effect to this Amendment and the
Restated Supplement and to the transactions contemplated by the Class B-2
Certificate Purchase Agreement, its representations and warranties set forth or
referred to in the Certificate Purchase Agreement are true and correct in all
material respects as of the date hereof, as though made on and as of such date,
and that no event or condition which of itself or with the giving of notice or
the lapse of time or both would constitute a Termination Event has occurred and
is continuing; and
A. SRI hereby confirms that, after giving effect to this Amendment and the
Restated Supplement and to the transactions contemplated by the Class B-2
Certificate Purchase Agreement, its representations and warranties set forth or
referred to in the Certificate Purchase Agreement are true and correct in all
material
<PAGE>
respects as of the date hereof, as though made on and as of such date, and that
no event or condition which of itself or with the giving of notice or the lapse
of time or both would constitute a Termination Event has occurred and is
continuing.
I. SECTION MISCELLANEOUS.
A. As amended by this Amendment, the Certificate Purchase Agreement is in all
respects ratified and confirmed, and the Certificate Purchase Agreement as
amended by this Amendment shall be read, taken and construed as one and the same
instrument.
A. This Amendment shall be effective as of the date first above written when
executed by SRPC, SRI, each Class A Purchaser, the Class A Owner, the Class A
Agent and the Facility Agent, subject to (i) the satisfaction of the conditions
precedent set forth in Section 3.1 of the Class B-2 Certificate Purchase
Agreement, and (ii) receipt by the Class A Agent of executed copies of all
opinions, certificates, letters and other documents required under Section 3.1
of the Class B-2 Certificate Purchase Agreement to be delivered to the Class B-2
Agent (each such opinion, unless otherwise agreed to by the Class A Agent, to be
addressed to the Class A Agent on behalf of the Class A Purchasers and the
Facility Agent or accompanied by a letter providing that the Class A Agent on
behalf of the Class A Purchasers and the Facility Agent may rely on such opinion
as if it were addressed to it), and such additional documents, instruments,
certificates or letters as the Class A Agent may reasonably request.
A. This Amendment shall be binding upon and inure to the benefit of SRPC, SRI,
the Transferor, the Servicer, the Class A Agent, the Facility Agent, the Class A
Purchasers, any Assignee and their respective successors and assigns, subject to
the provisions of Sections 8.1 and 9.4 of the Certificate Purchase Agreement.
A. This Amendment may be executed by one or more of the parties to this
Amendment on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
A. Any provisions of this Amendment which are prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.
A. This Amendment may be amended from time to time only if the conditions set
forth in Section 9.1 of the Certificate Purchase Agreement are satisfied.
A. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
<PAGE>
WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers as of the day and year first above
written.
SRI RECEIVABLES PURCHASE CO., INC.,
individually and as Transferor
By: /s/ MARK A. HESS
Name: Mark A. Hess
Title: Treasurer
SPECIALTY RETAILERS, INC.,
individually and as Servicer
By: /s/ JAMES A. MARCUM
Name: James A. Marcum
Title: Vice Chairman and
Chief Financial Officer
(principal financial and
accounting officer)
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Class A Agent
and as Facility Agent
By: /s/ DENNIS J. KNITOWSKI
Name: Dennis J. Knitowski
Title: Associate
By: /s/ ALBERTO ZONCA
Name: Alberto Zonca
Title: Associate
<PAGE>
THE FOREGOING IS HEREBY
CONSENTED TO:
ALPINE SECURITIZATION CORP.
as a Class A Purchaser and as Class A Owner
By Credit Suisse First Boston, New York Branch,
its attorney-in-fact
By: /s/ AIMEE SEVILLA
Name: Aimee Sevilla
Title: Associate
By: /s/ MARGOTH PILLA
Name: Margoth Pilla
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Class A Purchaser
By: /s/ DENNIS J. KNITOWSKI
Name: Dennis J. Knitowski
Title: Associate
By: /s/ ALBERTO ZONCA
Name: Alberto Zonca
Title: Associate
EXHIBIT 4.5
AMENDMENT NO. 1 TO
CLASS B CERTIFICATE PURCHASE AGREEMENT
THIS AMENDMENT NO. 1, dated as of October 16, 1998 by and among SRI
RECEIVABLES PURCHASE CO., INC., a Delaware corporation ("SRPC"), individually
and as Transferor (as defined below), SPECIALTY RETAILERS, INC., a Texas
corporation ("SRI"), individually and as Servicer (as defined below), the CLASS
B PURCHASERS parties hereto (collectively, the "CLASS B Purchasers") and CREDIT
SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York
Branch ("CSFB"), as Class B Agent and as Facility Agent (each as defined below).
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to the Class B Certificate
Purchase Agreement, dated as of December 3, 1997, as modified by the increase
and extension of commitment thereunder dated as of September 28, 1998 (as so
modified, the "CERTIFICATE PURCHASE AGREEMENT"; terms used in this Amendment and
not otherwise defined herein being used as defined in, or for purposes of, the
Certificate Purchase Agreement), relating to the purchase by the Class B
Purchasers of the Class B Initial Invested Amount and from time to time of
Additional Class B Invested Amounts in respect of the Class B Variable Funding
Certificates, Series 1997-1 issued by the SRI Receivables Master Trust; and
WHEREAS, the Transferor has requested that the Class B Purchasers
consent to a proposed Amended and Restated Supplement to be dated as of October
16, 1998, which would amend and, as so amended, restate the Supplement (as so
amended and restated, the "RESTATED SUPPLEMENT"); and
WHEREAS, pursuant to the Restated Supplement, the Trust proposes to
issue its Class B-2 Variable Funding Certificates, Series 1997-1 (the "CLASS B-2
CERTIFICATES"), which would be sold to certain purchasers (the "CLASS B-2
PURCHASERS") pursuant to a Class B-2 Certificate Purchase Agreement, dated as of
October 16, 1998, among SRPC, individually and as Transferor, SRI, individually
and as Servicer, the Class B-2 Purchasers, CSFB, as Class B-2 Agent (in such
capacity, the "CLASS B-2 AGENT"), and the Facility Agent; and
WHEREAS, in connection with the Restated Supplement and the issuance
of the Class B-2 Certificates, the Transferor has requested that the other
parties hereto amend the Certificate Purchase Agreement in certain respects and
that the Class B Purchasers, the Class B Agent and the Facility Agent consent to
the amendments to and restatement of the Supplement set forth in the Restated
Supplement; and
<PAGE>
WHEREAS, the other parties hereto are willing to consent to such
amendments and to such restatement on the terms and conditions provided for
herein;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and adequacy
of which are hereby expressly acknowledged, the parties hereto agree as follows:
I. SECTION AMENDMENTS TO SECTION 1.1.
A. The definition of "Related Documents" contained in Section 1.1 is hereby
amended and restated to read in its entirety as follows:
"RELATED DOCUMENTS" shall mean, collectively, this
Agreement (including the Class B Fee Letter and all Joinder
Supplements and Transfer Supplements), the Class A Purchase
Agreement, the Class B-2 Purchase Agreement, the Master Pooling and
Servicing Agreement, the Supplement, the Series 1997-1 Certificates,
the Receivables Purchase Agreement and the Receivables Transfer
Agreement.
A. The following definitions are hereby added to Section 1.1 of the Certificate
Purchase Agreement in their appropriate alphabetical order:
"CLASS B-2 CERTIFICATE PURCHASE AGREEMENT" shall mean
the Class B-2 Certificate Purchase Agreement, dated as of October
16, 1998 among SRPC, individually and as Transferor, SRI,
individually and as Servicer, the Class B-2 Purchasers parties
thereto, the Class B-2 Agent referred to therein and the Facility
Agent, as amended, modified or otherwise supplemented from time to
time.
"CLASS B-2 CERTIFICATES" shall mean the Trust's Class
B-2 Variable Funding Certificates, Series 1997-1.
"GRANITE" shall mean Granite National Bank, N.A., a
national banking association, which is a subsidiary of Stage.
"RECEIVABLES TRANSFER AGREEMENT" shall mean the
Receivables Transfer Agreement, dated as of August 1, 1998, between
SRI, as purchaser, and Granite, as transferor, as the same may from
time to time be amended or otherwise modified.
<PAGE>
I. SECTION AMENDMENT TO SUBSECTION 3.2. Subsection 3.2(d) of the Certificate
Purchase Agreement is hereby amended and restated to read in its entirety as
follows:
(d) after giving effect to such purchase, the sum of the Class
B-2 Invested Amount and the Class C Invested Amount shall equal not less
than the greater of (i) 17.5% of the Invested Amount on the applicable
Purchase Date and (ii) 5% of the highest Invested Amount during the 180
days preceding such Purchase Date;
I. SECTION AMENDMENT TO SECTION 4.2. Subsection (m) of Section 4.2 of the
Certificate Purchase Agreement is hereby replaced by the following new
subsections (m) and (n):
(m) The representations and warranties of Granite set forth in
Section 4.02 and 4.03 of the Receivables Transfer Agreement are true and
correct in all material respects.
(n) All written factual information heretofore furnished by
SRPC, SRI, Granite or Stage to, or for delivery to, the Class B Agent for
purposes of or in connection with this Agreement, including information
relating to the Accounts, the Receivables and the credit card business of
SRPC, SRI or Granite, was true and correct in all material respects on the
date as of which such information was stated or certified and remains true
and correct in all material respects (unless such information specifically
relates to an earlier date in which case such information shall have been
true and correct in all material respects on such earlier date).
I. SECTION AMENDMENTS TO SECTION 5.1.
A. Subsection 5.1(e) of the Certificate Purchase
Agreement is hereby amended and restated to read as follows:
(e) SRI shall furnish to the Class B Agent (i) promptly
when publicly available, the annual (audited) and quarterly
(unaudited) consolidated and consolidating financial statements of
each of Stage and SRPC, the publicly available portions of Granite's
quarterly and annual consolidated reports of condition and income
and such other publicly available financial information, if any, as
to Stage, SRI, Granite or SRPC as the Class B Agent may request, and
(ii) promptly after known to SRI, information with respect to any
action, suit or proceeding involving SRI or any of its Affiliates by
or before any court or any Governmental Authority which, if
adversely determined, would
<PAGE>
materially adversely affect the business, results of operation or
financial condition of SRPC, SRI or Granite;
A. Subsection 5.1(k) of the Certificate Purchase
Agreement is hereby amended and restated to read as follows:
(k) the Transferor and the Servicer shall timely make
all payments, deposits or transfers and give all instructions to
transfer required by this Agreement, the Pooling and Servicing
Agreement, the Receivables Purchase Agreement and the Receivables
Transfer Agreement;
I. SECTION AMENDMENT TO SECTION 6.1. Section 6.1 of the Certificate Purchase
Agreement is hereby amended and restated to read as follows:
6.1 COVENANTS OF SRPC, ETC. SRPC, SRI, the Transferor and
the Servicer shall hold in confidence, and not disclose to any Person, the
terms of any fees payable in connection with this Agreement except they
may disclose such information (i) to their officers, directors, employees,
agents, counsel, accountants, auditors, advisors or representatives, (ii)
with the consent of the Required Class B-2 Purchasers and Class B-2 Agent,
or (iii) to the extent SRPC, SRI, Granite, the Transferor or the Servicer
or any Affiliate of either of them should be required by any law or
regulation applicable to it or requested by any Governmental Authority to
disclose such information; PROVIDED, that, in the case of clause (iii),
SRPC, the Transferor, SRI, Granite or the Servicer, as the case may be,
will use all reasonable efforts to maintain confidentiality and will
(unless otherwise prohibited by law) notify the Class B Agent of its
intention to make any such disclosure prior to making such disclosure.
I. SECTION AMENDMENTS TO ARTICLE 7.
A. Sections 7.3, 7.6 and 7.7 of the Certificate Purchase Agreement are hereby
amended to add "Granite," after "SRI," each time such word appears therein.
A. Subsection 7.9(b) of the Certificate Purchase
Agreement is hereby amended and restated to read as follows:
(b) The Facility Agent may resign as Facility Agent upon
ten days' notice to the Class B Purchasers, the Class A Purchasers
(as defined in the Class A Certificate Purchase Agreement), the
Class B-2 Purchasers (as defined in the Class B-2 Certificate
Purchase Agreement), the Trustee, the Transferor and the Servicer
with such resignation becoming effective upon a
<PAGE>
successor agent succeeding to the rights, powers and duties of the
Facility Agent pursuant to this subsection 7.9(b). If the Facility
Agent shall resign as Facility Agent under this Agreement, then the
Required Class B Purchasers and the Required Class B Owners shall
appoint from among the Committed Class B Purchasers hereunder or the
Committed Class A Purchasers under the Class A Certificate Purchase
Agreement a successor Facility Agent of the Class A
Certificateholders and the Class B Certificateholders as provided in
the Supplement; PROVIDED that no such appointment shall be effective
unless such successor is also appointed as successor Facility Agent
under the Class B Certificate Purchase Agreement and the Class B-2
Certificate Purchase Agreement. The successor agent shall succeed to
the rights, powers and duties of the Facility Agent, and the term
"Facility Agent" shall mean such successor agent effective upon its
appointment, and the former Facility Agent's rights, powers and
duties as Facility Agent shall be terminated, without any other or
further act or deed on the part of such former Facility Agent or any
of the parties to this Agreement. After the retiring Facility
Agent's resignation as Facility Agent, the provisions of this
Section 7 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Facility Agent under this
Agreement.
I. SECTION CONSENT. Each Class B Purchaser, Alpine Securitization Corp., as the
Class B Owner and the Class B Agent hereby consent to the Restated Supplement
and to the issuance of the Class B-2 Certificates thereunder and hereby direct
the Facility Agent to consent thereto. The Class B Agent hereby certifies that
its records reflect that Alpine Securitization Corp. is the sole Class B Owner.
I. SECTION REPRESENTATIONS AND WARRANTIES. In order to induce each Class B
Purchaser, the Class B Agent and the Facility Agent to enter into this Amendment
and to grant the consent set forth in Section 7 above,
A. SRPC hereby confirms that, after giving effect to this Amendment and the
Restated Supplement and to the transactions contemplated by the Class B-2
Certificate Purchase Agreement, its representations and warranties set forth or
referred to in the Certificate Purchase Agreement are true and correct in all
material respects as of the date hereof, as though made on and as of such date,
and that no event or condition which of itself or with the giving of notice or
the lapse of time or both would constitute a Termination Event has occurred and
is continuing; and
A. SRI hereby confirms that, after giving effect to this Amendment and the
Restated Supplement and to the transactions contemplated by the Class B-2
Certificate Purchase Agreement, its representations and warranties set forth or
referred to in the Certificate Purchase Agreement are true and correct in all
material respects as of the date hereof, as though made on and as of such date,
and that no event or
<PAGE>
condition which of itself or with the giving of notice or the lapse of time or
both would constitute a Termination Event has occurred and is continuing.
I. SECTION MISCELLANEOUS.
A. As amended by this Amendment, the Certificate Purchase Agreement is in all
respects ratified and confirmed, and the Certificate Purchase Agreement as
amended by this Amendment shall be read, taken and construed as one and the same
instrument.
A. This Amendment shall be effective as of the date first above written when
executed by SRPC, SRI, each Class B Purchaser, the Class B Owner, the Class B
Agent and the Facility Agent, subject to (i) the satisfaction of the conditions
precedent set forth in Section 3.1 of the Class B-2 Certificate Purchase
Agreement, and (ii) receipt by the Class B Agent of executed copies of all
opinions, certificates, letters and other documents required under Section 3.1
of the Class B-2 Certificate Purchase Agreement to be delivered to the Class B-2
Agent (each such opinion, unless otherwise agreed to by the Class B Agent, to be
addressed to the Class B Agent on behalf of the Class B Purchasers and the
Facility Agent or accompanied by a letter providing that the Class B Agent on
behalf of the Class B Purchasers and the Facility Agent may rely on such opinion
as if it were addressed to it), and such additional documents, instruments,
certificates or letters as the Class B Agent may reasonably request.
A. This Amendment shall be binding upon and inure to the benefit of SRPC, SRI,
the Transferor, the Servicer, the Class B Agent, the Facility Agent, the Class B
Purchasers, any Assignee and their respective successors and assigns, subject to
the provisions of Sections 8.1 and 9.4 of the Certificate Purchase Agreement.
A. This Amendment may be executed by one or more of the parties to this
Amendment on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
A. Any provisions of this Amendment which are prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provisions in any
other jurisdiction.
A. This Amendment may be amended from time to time only if the conditions set
forth in Section 9.1 of the Certificate Purchase Agreement are satisfied.
A. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
<PAGE>
WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers as of the day and year first above
written.
SRI RECEIVABLES PURCHASE CO., INC.,
individually and as Transferor
By: /s/ MARK A. HESS
Name: Mark A. Hess
Title: Treasurer
SPECIALTY RETAILERS, INC.,
individually and as Servicer
By: /s/ JAMES A. MARCUM
Name: James A. Marcum
Title: Vice Chairman and
Chief Financial Officer
(principal financial and
accounting officer)
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Class B Agent
and as Facility Agent
By: /s/ DENNIS J. KNITOWSKI
Name: Dennis J. Knitowski
Title: Associate
By: /s/ ALBERTO ZONCA
Name: Alberto Zonca
Title: Associate
<PAGE>
THE FOREGOING IS HEREBY
CONSENTED TO:
ALPINE SECURITIZATION CORP.
as a Class B Purchaser and as Class B Owner
By Credit Suisse First Boston, New York Branch,
its attorney-in-fact
By: /s/ AIMEE SEVILLA
Name: Aimee Sevilla
Title: Associate
By: /s/ MARGOTH PILLA
Name: Margoth Pilla
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
NEW YORK BRANCH, as Class B Purchaser
By: /s/ DENNIS J. KNITOWSKI
Name:
Title: Associate
By: /s/ ALBERTO ZONCA
Name:
Title: Associate
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE STAGE STORES, INC. CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> OCT-31-1998
<CASH> 11,226
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 421,658
<CURRENT-ASSETS> 574,097
<PP&E> 225,121
<DEPRECIATION> 0
<TOTAL-ASSETS> 917,361
<CURRENT-LIABILITIES> 243,494
<BONDS> 450,311
279
0
<COMMON> 0
<OTHER-SE> 212,841
<TOTAL-LIABILITY-AND-EQUITY> 917,361
<SALES> 816,198
<TOTAL-REVENUES> 816,198
<CGS> 571,482
<TOTAL-COSTS> 571,482
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,284
<INCOME-PRETAX> 10,898
<INCOME-TAX> 4,250
<INCOME-CONTINUING> 6,648
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,648
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.23
</TABLE>
