<PAGE> 1
================================================================================
FORM 10-Q/A
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 November 1, 1997
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 33-68258
STAGE STORES, INC.; SPECIALTY RETAILERS, INC.; SPECIALTY RETAILERS, INC. (NV)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0407711; 74-0821900; 91-1826900
(State or other jurisdiction of (I.R.S. Employer Identifications No.)
incorporation or organization)
10201 MAIN STREET, HOUSTON, TEXAS 77025
(Address of principal executive offices) (Zip Code)
</TABLE>
(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
November 30, 1997 was 26,480,703 shares of Common Stock and 1,250,584 shares of
Class B Common Stock. The number of shares of common stock of Specialty
Retailers, Inc. outstanding as of November 30, 1997 was 5,000 shares. The number
of shares of common stock of Specialty Retailers, Inc. (NV) as of November 30,
1997 was 1,000 shares.
================================================================================
<PAGE> 2
STAGE STORES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(in thousands, except par value)
<TABLE>
<CAPTION>
November 1, 1997 February 1, 1997
---------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................ $ 15,274 $ 18,286
Undivided interest in accounts receivable trust ...... 64,431 80,672
Merchandise inventories, net ......................... 330,477 187,717
Prepaid expenses ..................................... 24,659 15,690
Other current assets ................................. 47,411 32,797
--------- ---------
Total current assets ........................... 482,252 335,162
Property, equipment and leasehold improvements, net .. 154,707 111,189
Goodwill, net ........................................ 88,391 47,173
Other assets ......................................... 55,209 15,759
--------- ---------
$ 780,559 $ 509,283
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ..................................... $ 105,893 $ 54,336
Accrued interest ..................................... 12,538 12,908
Accrued expenses and other current liabilities ....... 59,354 32,699
--------- ---------
Total current liabilities ...................... 177,785 99,943
Long-term debt ....................................... 398,207 298,453
Other long-term liabilities .......................... 19,320 18,621
--------- ---------
Total liabilities .............................. 595,312 417,017
--------- ---------
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, 26,449 and 22,033 shares
issued and outstanding, respectively ............... 265 220
Class B common stock, par value $0.01, non-voting,
3,000 shares authorized, 1,251 shares
issued and outstanding, respectively ............... 13 13
Additional paid-in capital ........................... 263,264 169,811
Accumulated deficit .................................. (78,295) (77,778)
--------- ---------
Stockholders' equity .............................. 185,247 92,266
--------- ---------
Commitments and contingencies ........................ -- --
--------- ---------
$ 780,559 $ 509,283
========= =========
</TABLE>
1
<PAGE> 3
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(in thousands, except earnings per share)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------ -----------------------------------
November 1, 1997 November 2, 1996 November 1, 1997 November 2, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales ................................ $ 274,269 $ 182,562 $ 703,918 $ 528,489
Cost of sales and related buying,
occupancy and distribution expenses .... 187,447 126,354 481,269 363,577
----------- ----------- ----------- -----------
Gross profit ............................. 86,822 56,208 222,649 164,912
Selling, general and
administrative expenses ................ 69,089 43,071 163,752 121,504
Store opening and closure costs .......... 1,944 795 2,848 1,096
----------- ----------- ----------- -----------
Operating income ......................... 15,789 12,342 56,049 42,312
Interest expense, net .................... 9,767 12,795 28,158 36,849
----------- ----------- ----------- -----------
Income (loss) before income tax and
extraordinary item .................... 6,022 (453) 27,891 5,463
Income tax expense (benefit) ............. 2,349 (188) 10,878 2,208
----------- ----------- ----------- -----------
Income (loss) before extraordinary item .. 3,673 (265) 17,013 3,255
Extraordinary item -- early retirement
of debt ............................... (150) (15,806) (17,530) (15,806)
----------- ----------- ----------- -----------
Net income (loss) ........................ $ 3,523 $ (16,071) $ (517) $ (12,551)
=========== =========== =========== ===========
Earnings (loss) per common share data:
Earnings (loss) per common share before
extraordinary item ................... $ 0.13 $ (0.02) $ 0.66 $ 0.24
Extraordinary item -- early retirement
of debt .............................. -- (1.12) (0.68) (1.19)
----------- ----------- ----------- -----------
Earnings (loss) per common share ........ $ 0.13 $ (1.14) $ (0.02) $ (0.95)
=========== =========== =========== ===========
Weighted average common shares
outstanding .......................... 28,113 14,091 25,782 13,231
=========== =========== =========== ===========
</TABLE>
2
<PAGE> 4
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------------
NOVEMBER 1, 1997 NOVEMBER 2, 1996
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................ $ (517) $ (12,551)
--------- ---------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization ................................. 13,091 10,029
Deferred income taxes ......................................... 2,086 (2,141)
Accretion of discount ......................................... 1,085 10,971
Amortization of debt issue costs .............................. 1,644 1,639
Loss on early extinguishment of debt .......................... 17,530 15,806
Changes in operating assets and liabilities:
Decrease in undivided interest in accounts receivable trust.. 16,241 11,281
Increase in merchandise inventories ......................... (92,779) (55,401)
Increase in other assets .................................... (19,421) (1,530)
Increase in accounts payable and accrued liabilities ........ 47,041 16,223
--------- ---------
Total adjustments ......................................... (13,482) 6,877
--------- ---------
Net cash used in operating activities ....................... (13,999) (5,674)
--------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired .............................. (4,946) (28,151)
Additions to property, equipment and leasehold improvements ..... (41,744) (22,899)
--------- ---------
Net cash used in investing activities ....................... (46,690) (51,050)
--------- ---------
Cash flows from financing activities:
Proceeds from working capital facility .......................... 46,400 --
Proceeds from issuance of long-term debt ........................ 299,720 30,000
Proceeds from issuance of common stock .......................... 21,125 166,202
Payments on long-term debt ...................................... (297,161) (140,526)
Redemption of common stock ...................................... -- (32)
Additions to debt issue costs ................................... (12,407) (2,750)
--------- ---------
Net cash provided by financing activities ................... 57,677 52,894
--------- ---------
Net decrease in cash and cash equivalents ....................... (3,012) (3,830)
Cash and cash equivalents:
Beginning of period ........................................... 18,286 20,273
--------- ---------
End of period ................................................. $ 15,274 $ 16,443
========= =========
Supplemental disclosure of cash flow information:
Interest paid ................................................... $ 26,217 $ 26,150
========= =========
Income taxes paid ............................................... $ 3,746 $ 5,917
========= =========
</TABLE>
On June 26, 1997, the Company acquired C. R. Anthony Company. The Company
purchased Uhlmans, Inc. on June 3, 1996. In conjunction with these acquisitions,
liabilities were assumed as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------------
NOVEMBER 1, 1997 NOVEMBER 2, 1996
---------------- ----------------
<S> <C> <C>
Fair value allocated to assets acquired ........................... $ 120,665 $ 35,250
Cash paid for assets acquired, including acquisition expenses...... (4,946) (28,151)
Value of Common Stock exchanged ................................... (72,284) --
--------- --------
Liabilities assumed ............................................... $ 43,435 $ 7,099
========= ========
</TABLE>
3
<PAGE> 5
STAGE STORES, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------------
Class B
----------------------- Additional
Shares Shares Paid-in Accumulated
Outstanding Amount Outstanding Amount Capital Deficit Total
----------- --------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1997 .......... 22,033 $ 220 1,251 $ 13 $ 169,811 $ (77,778) $ 92,266
Net income ......................... -- -- -- -- -- (517) (517)
Vested compensatory stock options .. -- -- -- -- 88 -- 88
Exercise of stock options .......... 159 2 -- -- 388 -- 390
Issuance of stock in connection with
CR Anthony Acquisition .......... 3,607 36 -- -- 72,248 -- 72,284
Issuance of stock in connection with
Secondary Offering .............. 650 7 -- -- 20,729 -- 20,736
--------- --------- ------ --------- --------- --------- ---------
Balance, November 1, 1997 .......... 26,449 $ 265 1,251 $ 13 $ 263,264 $ (78,295) $ 185,247
========= ========= ====== ========= ========= ========= =========
</TABLE>
4
<PAGE> 6
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 February
1, 1997 filed with Stage Stores, Inc.'s Annual Report on Form 10-K. Certain
reclassifications have been made to prior year amounts to conform with the
current year presentation. The fiscal years discussed herein end on the
Saturday nearest to January 31, in the following calendar year. For example,
references to "1997" mean the fiscal year ended January 31, 1998.
Stage Stores conducts its business primarily through it's wholly owned
subsidiary Specialty Retailers, Inc. ("SRI"), which operated 602 family apparel
stores predominately located in the central United States as of November 1,
1997. Stage Stores has no operations of its own. 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.
3. On September 16, 1997, the Company completed an offering of
approximately 7.1 million shares of common stock at a price of $34 7/8 per
share. 6.4 million shares of this offering 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 New Credit Agreement.
4. During the second quarter of 1997, the Company 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) to pay related fees and expenses; and (iii) to 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 "New Credit Agreement"). The New Credit
Agreement provides for a $100.0 million working capital and letter of credit
facility and a $100.0 million expansion revolving credit facility. The New
Credit Agreement replaced the Company's existing $75.0 million credit facility.
In connection with the above transactions, the Company recorded an
extraordinary charge 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.
5. On June 26, 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,
5
<PAGE> 7
including acquisition costs and net of cash acquired. CR Anthony had net sales
of $288.4 million and net income of $4.8 million of the year ended February 1,
1997.
The following unaudited pro forma information gives effect to the
acquisition of CR Anthony and the refinancing of the Company's debt as
discussed in Note 4 above as if each transaction had occurred at the beginning
of the periods presented (in thousands, except per common share data):
<TABLE>
<CAPTION>
Nine months
ended
November 1,
1997 Fiscal 1996
------------ -----------
(unaudited)
<S> <C> <C>
Net sales ............................................... $ 812,418 $1,081,000
============ ==========
Income before extraordinary items ....................... $ 15,769 $ 31,308
============ ==========
Earnings per common share before extraordinary items .... $ 0.55 $ 1.15
============ ==========
</TABLE>
The above amounts are based on certain estimates and assumptions which
the Company believes are reasonable. The pro forma results do not purport to be
indicative of the results which would have occurred if the acquisition or
refinancing had actually taken place at the beginning of the periods presented,
nor are they necessarily indicative of the results of any future periods.
The acquisition of CR Anthony was accounted for under the purchase
method of accounting. Accordingly, the total acquisition cost was allocated to
the assets acquired and liabilities assumed at their estimated fair values
based upon information currently available to the Company. The excess of the
purchase price over the estimated fair value of such assets and liabilities was
recognized as goodwill and is being amortized on a straight-line basis over
forty years. This preliminary purchase price allocation will be adjusted, if
necessary, based on additional information as it becomes available.
6. During October 1996, the Company completed an initial public
offering (the "Offering") of its common stock. The Company sold 10,750,000
shares at an initial offering price of $16.50 per share. The net proceeds from
the Offering to the Company were approximately $165.7 million after deducting
underwriting discounts and expenses related to the transaction. The net
proceeds were used primarily to retire the 12 3/4% Senior Discount Debentures
due 2000 (the "Senior Discount Debentures"). The remaining proceeds of
approximately $26.5 million were used for general corporate purposes.
Immediately prior to the Offering, the Board of Directors approved a .94727 for
1 reverse stock split, the effect of which is reflected in the accompanying
financial statements for all periods presented.
6
<PAGE> 8
7. SRI is the primary obligor under the long-term indebtedness issued
in connection with the Note Offering (see Note 4). Stage Stores and Specialty
Retailers, Inc. (NV) (which was incorporated during June, 1997), a wholly-owned
subsidiary of Stage Stores, are guarantors under such indebtedness. The
consolidating condensed financial information for Stage Stores and its
wholly-owned subsidiaries are presented below.
CONSOLIDATING CONDENSED BALANCE SHEET
FEBRUARY 1, 1997
(in thousands, unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Specialty SRI Stage Stage
Retailers, Receivables SRI SRI Stores, Stores
Inc. Purchase Co. Eliminations Consolidated Inc. Eliminations Consolidated
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents ..... $ 18,270 $ -- $ -- $ 18,270 $ 16 $ -- $ 18,286
Undivided interest in
accounts receivable trust .. (9,419) 90,091 -- 80,672 -- -- 80,672
Merchandise inventories, net .. 187,717 -- -- 187,717 -- -- 187,717
Prepaid expenses .............. 15,679 11 -- 15,690 -- -- 15,690
Other current assets .......... 27,165 5,632 -- 32,797 -- -- 32,797
--------------------------------------------------------------------------------------------------
Total current assets ....... 239,412 95,734 -- 335,146 16 -- 335,162
Property, equipment and
leasehold improvements,
net ........................ 111,189 -- -- 111,189 -- -- 111,189
Goodwill, net ................. 47,173 -- -- 47,173 -- -- 47,173
Other assets .................. 8,308 7,451 -- 15,759 -- -- 15,759
Investment in subsidiaries .... 35,482 -- (35,482) -- 28,144 (28,144) --
--------------------------------------------------------------------------------------------------
$ 441,564 $ 103,185 $ (35,482) $ 509,267 $ 28,160 $ (28,144) $ 509,283
==================================================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable .............. $ 54,336 $ -- $ -- $ 54,336 $ -- $ -- $ 54,336
Accrued interest .............. 12,410 498 -- 12,908 -- -- 12,908
Accrued expenses and other
current liabilities ........ 31,866 722 -- 32,588 111 -- 32,699
--------------------------------------------------------------------------------------------------
Total current liabilities .. 98,612 1,220 -- 99,832 111 -- 99,943
Long-term debt ................ 268,453 30,000 -- 298,453 -- -- 298,453
Intercompany notes/advances ... 29,176 35,041 -- 64,217 (64,217) -- --
Other long-term liabilities ... 17,179 1,442 -- 18,621 -- -- 18,621
--------------------------------------------------------------------------------------------------
Total liabilities .......... 413,420 67,703 -- 481,123 (64,106) -- 417,017
--------------------------------------------------------------------------------------------------
Preferred stock ............... -- -- -- -- -- -- --
Common stock .................. -- -- -- -- 220 -- 220
Class B common stock .......... -- -- -- -- 13 -- 13
Additional paid-in capital .... 3,317 29,726 (29,726) 3,317 169,811 (3,317) 169,811
Accumulated equity (deficit) .. 24,827 5,756 (5,756) 24,827 (77,778) (24,827) (77,778)
--------------------------------------------------------------------------------------------------
Stockholders' equity ....... 28,144 35,482 (35,482) 28,144 92,266 (28,144) 92,266
--------------------------------------------------------------------------------------------------
$ 441,564 $ 103,185 $ (35,482) $ 509,267 $ 28,160 $ (28,144) $ 509,283
==================================================================================================
</TABLE>
7
<PAGE> 9
CONSOLIDATING CONDENSED BALANCE SHEET
NOVEMBER 1, 1997
(in thousands, unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Specialty SRI Stage
Retailers, Receivables SRI SRI Stores,
Inc. Purchase Co. Eliminations Consolidated Inc.
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents ..... $ 15,258 $ -- $ -- $ 15,258 $ 16
Undivided interest in
accounts receivable trust .. (12,496) 76,927 -- 64,431 --
Merchandise inventories, net .. 330,477 -- -- 330,477 --
Prepaid expenses .............. 24,324 335 -- 24,659 --
Other current assets .......... 39,240 8,171 -- 47,411 --
--------------------------------------------------------------------
Total current assets ....... 396,803 85,433 -- 482,236 16
Property, equipment and
leasehold improvements,
net ........................ 153,609 -- -- 153,609 --
Goodwill, net ................. 88,391 -- -- 88,391 --
Other assets .................. 48,743 6,466 -- 55,209 --
Investment in subsidiaries .... 40,711 -- (40,711) -- 185,320
--------------------------------------------------------------------
$ 728,257 $ 91,899 $ (40,711) $ 779,445 $ 185,336
====================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable .............. $ 105,893 $ -- $ -- $ 105,893 $ --
Accrued interest .............. 11,110 1,428 -- 12,538 --
Accrued expenses and other
current liabilities ........ 57,457 95 -- 57,552 193
--------------------------------------------------------------------
Total current liabilities .. 174,460 1,523 -- 175,983 193
Long-term debt ................ 368,207 30,000 -- 398,207 --
Intercompany notes/advances ... 144,237 17,046 -- 161,283 (104)
Other long-term liabilities ... 16,701 2,619 -- 19,320 --
--------------------------------------------------------------------
Total liabilities .......... 703,605 51,188 -- 754,793 89
--------------------------------------------------------------------
Preferred stock ............... -- -- -- -- --
Common stock .................. -- -- -- -- 265
Class B common stock .......... -- -- -- -- 13
Additional paid-in capital .... 3,316 32,970 (32,970) 3,316 263,264
Accumulated equity (deficit) .. 21,336 7,741 (7,741) 21,336 (78,295)
--------------------------------------------------------------------
Stockholders' equity ....... 24,652 40,711 (40,711) 24,652 185,247
--------------------------------------------------------------------
$ 728,257 $ 91,899 $ (40,711) $ 779,445 $ 185,336
====================================================================
<CAPTION>
Specialty Stage
Retailers, Stores
Inc. (NV) Eliminations Consolidated
----------------------------------------
<S> <C> <C> <C>
ASSETS
------
Cash and cash equivalents ..... $ -- $ -- $ 15,274
Undivided interest in ......... -- -- 64,431
accounts receivable trust
Merchandise inventories, net .. -- -- 330,477
Prepaid expenses .............. -- -- 24,659
Other current assets .......... -- -- 47,411
---------------------------------------
Total current assets ....... -- -- 482,252
Property, equipment and
leasehold improvements,
net ........................ 1,098 -- 154,707
Goodwill, net ................. -- -- 88,391
Other assets .................. -- -- 55,209
Investment in subsidiaries .... -- (185,320) --
---------------------------------------
$ 1,098 $(185,320) $ 780,559
=======================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Accounts payable .............. $ -- $ -- $ 105,893
Accrued interest .............. -- -- 12,538
Accrued expenses and other
current liabilities ........ 1,609 -- 59,354
---------------------------------------
Total current liabilities .. 1,609 -- 177,785
Long-term debt ................ -- -- 398,207
Intercompany notes/advances ... (161,179) -- --
Other long-term liabilities ... -- -- 19,320
---------------------------------------
Total liabilities .......... (159,570) -- 595,312
---------------------------------------
Preferred stock ............... -- -- --
Common stock .................. -- -- 265
Class B common stock .......... -- -- 13
Additional paid-in capital .... 157,680 (160,996) 263,264
Accumulated equity (deficit) .. 2,988 (24,324) (78,295)
---------------------------------------
Stockholders' equity ....... 160,668 (185,320) 185,247
---------------------------------------
$ 1,098 $(185,320) $ 780,559
=======================================
</TABLE>
8
<PAGE> 10
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 2, 1996
(in thousands, unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Specialty SRI Stage Stage
Retailers, Receivables SRI SRI Stores, Stores
Inc. Purchase Co. Eliminations Consolidated Inc. Eliminations Consolidated
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ..................... $ 528,489 $ -- $ -- $ 528,489 $ -- $ -- $ 528,489
Cost of sales and related
buying, occupancy and
distribution expenses ...... 363,577 -- -- 363,577 -- -- 363,577
-----------------------------------------------------------------------------------------------
Gross profit .................. 164,912 -- -- 164,912 -- 164,912
Selling, general and
administrative expenses .... 125,322 (3,832) -- 121,490 14 -- 121,504
Store opening and closure
costs ...................... 1,096 -- -- 1,096 -- -- 1,096
-----------------------------------------------------------------------------------------------
Operating income .............. 38,494 3,832 -- 42,326 (14) -- 42,312
Interest expense, net ......... 26,204 (304) -- 25,900 10,949 -- 36,849
-----------------------------------------------------------------------------------------------
Income (loss) before
income taxes................ 12,290 4,136 -- 16,426 (10,963) -- 5,463
Income tax expense (benefit) .. 4,502 1,538 -- 6,040 (3,832) -- 2,208
-----------------------------------------------------------------------------------------------
Income (loss) before equity
in net earnings of
subsidiaries and
extraordinary item ......... 7,788 2,598 -- 10,386 (7,131) -- 3,255
Equity in net earnings of
subsidiaries ............... 2,598 -- (2,598) -- (5,420) 5,420 --
-----------------------------------------------------------------------------------------------
Income (loss) before
extraordinary item ......... 10,386 2,598 (2,598) 10,386 (12,551) 5,420 3,255
Extraordinary item - early
retirement of debt ......... (15,806) -- -- (15,806) -- -- (15,806)
-----------------------------------------------------------------------------------------------
Net income (loss) ............. $ (5,420) $ 2,598 $ (2,598) $ (5,420) $ (12,551) $ 5,420 $ (12,551)
===============================================================================================
</TABLE>
9
<PAGE> 11
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED NOVEMBER 1, 1997
(in thousands, unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Specialty SRI Stage
Retailers, Receivables SRI SRI Stores,
Inc. Purchase Co. Eliminations Consolidated Inc.
---------------------------------------------------------------------
<S> <C> <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 .... 175,563 (11,847) -- 163,716 19
Store opening and closure
costs ...................... 2,848 -- -- 2,848 --
---------------------------------------------------------------------
Operating income .............. 44,238 11,847 -- 56,085 (19)
Interest expense, net ......... 24,086 8,684 -- 32,770 --
---------------------------------------------------------------------
Income (loss) before
income taxes ............... 20,152 3,163 -- 23,315 (19)
Income tax expense (benefit) .. 8,099 1,177 -- 9,276 (7)
---------------------------------------------------------------------
Income (loss) before equity
in net earnings of
subsidiaries and
extraordinary item ......... 12,053 1,986 -- 14,039 (12)
Equity in net earnings of
subsidiaries ............... 1,986 -- (1,986) -- (505)
---------------------------------------------------------------------
Income (loss) before
extraordinary item ......... 14,039 1,986 (1,986) 14,039 (517)
Extraordinary item - early
retirement of debt ......... (17,530) -- -- (17,530) --
---------------------------------------------------------------------
Net income (loss) ............. $ (3,491) $ 1,986 $ (1,986) $ (3,491) $ (517)
=====================================================================
<CAPTION>
Specialty Stage
Retailers, Stores
Inc. (NV) Eliminations Consolidated
--------------------------------------
<S> <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 .... 17 -- 163,752
Store opening and closure
costs ...................... -- -- 2,848
--------------------------------------
Operating income .............. (17) -- 56,049
Interest expense, net ......... (4,612) -- 28,158
--------------------------------------
Income (loss) before
income taxes ............... 4,595 -- 27,891
Income tax expense (benefit) .. 1,609 -- 10,878
--------------------------------------
Income (loss) before equity
in net earnings of
subsidiaries and
extraordinary item ......... 2,986 -- 17,013
Equity in net earnings of
subsidiaries ............... -- 505 --
--------------------------------------
Income (loss) before
extraordinary item ......... 2,986 505 17,013
Extraordinary item - early
retirement of debt ......... -- -- (17,530)
--------------------------------------
Net income (loss) ............. $ 2,986 $ 505 $ (517)
======================================
</TABLE>
10
<PAGE> 12
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED NOVEMBER 2, 1996
(in thousands, unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Specialty SRI Stage
Retailers, Receivables SRI SRI Stores,
Inc. Purchase Co. Eliminations Consolidated Inc.
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net cash provided by
(used in) operating activities ... $ 3,006 $ (8,680) $ -- $ (5,674) $ --
---------------------------------------------------------------------
Cash flows from investing activities:
Acquisitions, net of cash acquired .. (28,151) -- -- (28,151) --
Intercompany notes/advances ......... -- -- -- -- (161,672)
Additions to property, equipment and
leasehold improvements ........... (22,899) -- -- (22,899) --
Proceeds from the sales of
accounts receivable, net ......... (10,792) 10,792 -- -- --
---------------------------------------------------------------------
Net cash used in
investing activities ............. (61,842) 10,792 -- (51,050) (161,672)
---------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt ................... -- 30,000 -- 30,000 --
Proceeds from issuance of
common stock ..................... -- -- -- -- 166,202
Payments on long-term debt .......... (140,526) -- -- (140,526) --
Intercompany notes/advances ......... 161,672 -- -- 161,672 --
Redemption of common stock .......... -- -- -- -- (32)
Additions to debt issue costs ....... (115) (2,635) -- (2,750) --
Dividends paid to SRI ............... 29,477 (29,477) -- -- --
---------------------------------------------------------------------
Net cash provided by (used in)
financing activities ............. 50,508 (2,112) -- 48,396 166,170
---------------------------------------------------------------------
Net increase (decrease) in
cash and cash equivalents ........ (8,328) -- -- (8,328) 4,498
Cash and cash equivalents:
Beginning of period .............. 20,264 -- -- 20,264 9
---------------------------------------------------------------------
End of period .................... $ 11,936 $ -- $ -- $ 11,936 $ 4,507
=====================================================================
<CAPTION>
Stage
Stores
Eliminations Consolidated
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in)
operating activities ............. $ -- $ (5,674)
------------------------
Cash flows from investing activities:
Acquisitions, net of cash
acquired ......................... -- (28,151)
Intercompany notes/advances ......... 161,672 --
Additions to property, equipment and
leasehold improvements ........... -- (22,899)
Proceeds from the sales of
accounts receivable, net ......... -- --
------------------------
Net cash used in
investing Activities ............. 161,672 (51,050)
------------------------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt ................... -- 30,000
Proceeds from issuance of
common stock ..................... -- 166,202
Payments on long-term debt .......... -- (140,526)
Intercompany notes/advances ......... (161,672) --
Redemption of common stock .......... -- (32)
Additions to debt issue costs ....... -- (2,750)
Dividends paid to SRI ............... -- --
------------------------
Net cash provided by (used in)
financing activities ............. (161,672) 52,894
------------------------
Net increase (decrease) in
cash and cash equivalents ........ -- (3,830)
Cash and cash equivalents:
Beginning of period .............. -- 20,273
------------------------
End of period .................... $ -- $ 16,443
========================
</TABLE>
11
<PAGE> 13
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED NOVEMBER 1, 1997
(in thousands, unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Specialty SRI Stage Specialty
Retailers, Receivables SRI SRI Stores, Retailers,
Inc. Purchase Co. Eliminations Consolidated Inc. Inc. (NV)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net cash provided by
(used in) operating activities ....... $ (439) $ (13,613) $ -- $ (14,052) $ -- $ 53
-------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisitions, net of cash acquired ...... (4,946) -- -- (4,946) -- --
Investment in subsidiaries .............. -- -- -- -- (21,178) --
Intercompany notes/advances ............. 21,178 -- -- 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 used in investing activities. (39,195) 13,683 -- (25,512) (21,178) (21,178)
-------------------------------------------------------------------------------
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 .. -- -- -- -- 21,178 (53)
Proceeds from capital contributions ..... -- -- -- -- -- 21,178
Payments on long-term debt .............. (297,161) -- -- (297,161) -- --
Additions to debt issue costs ........... (12,337) (70) -- (12,407) -- --
-------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities ................. 36,622 (70) -- 36,552 21,178 21,125
-------------------------------------------------------------------------------
Net decrease in cash and
cash equivalents ..................... (3,012) -- -- (3,012) -- --
Cash and cash equivalents:
Beginning of period .................. 18,270 -- -- 18,270 16 --
-------------------------------------------------------------------------------
End of period ........................ $ 15,258 $ -- $ -- $ 15,258 $ 16 $ --
===============================================================================
<CAPTION>
Stage
Stores
Eliminations Consolidated
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by
(used in) operating
activities ........................... $ -- $ (13,999)
------------------------
Cash flows from investing activities:
Acquisitions, net of cash
acquired ............................. -- (4,946)
Investment in subsidiaries .............. 21,178 --
Intercompany notes/advances ............. -- --
Additions to property,
equipment and leasehold
improvements ......................... -- (41,744)
Proceeds from the sales of
accounts receivable, net ............. -- --
------------------------
Net cash used in
investing Activities ................. 21,178 (46,690)
------------------------
Cash flows from financing activities:
Proceed from working
capital facility ..................... -- 46,400
Proceeds from issuance of
long-term debt ....................... -- 299,720
Proceeds from issuance of
common stock ......................... -- 21,125
Proceeds from capital
contributions ........................ (21,178) --
Payments on long-term debt .............. -- (297,161)
Additions to debt issue
costs ................................ -- (12,407)
------------------------
Net cash provided by
(used in)
financing activities ................. (21,178) 57,677
------------------------
Net decrease in cash and
cash equivalents ..................... -- (3,012)
Cash and cash equivalents:
Beginning of period .................. -- 18,286
------------------------
End of period ........................ $ -- $ 15,274
========================
</TABLE>
12
<PAGE> 14
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 well known
national brand name family apparel in over 400 small towns and communities
predominately 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.
Acquisition of CR Anthony Company. On June 26, 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 has converted 130 of the "Anthonys" and
"Anthonys Limited" stores to the Company's format under its "Stage" and
"Bealls" trade names to date. The Company intends to convert the majority of
the remaining CR Anthony stores to the Company's format and trade names during
the first half of 1998.
CR Anthony's operating strategy was to offer brand name and private
label apparel and footwear for the entire family at competitive prices. The
stores acquired are located in 16 states, with the highest concentrations in
Texas, Oklahoma, Kansas and New Mexico. Approximately 87% of CR Anthony stores
are located in small markets and communities with populations generally below
30,000 and its stores' format average approximately 12,000 square feet.
The Company believes that the acquisition of CR Anthony is consistent
with its growth strategy to expand as a retailer of moderately priced national
brand name apparel into small and underserved markets through both organic
store development and strategic acquisitions. The acquisition provided an
opportunity for the Company to accelerate its expansion program in existing
markets and extend its presence in new markets. The Company believes that the
acquisition is attractive because: (i) there is a relatively small number of
markets in which the two companies directly overlap; (ii) a majority of the
acquired stores are in markets which fit the Company's demographic profile;
(iii) a majority of the acquired stores are comparable in size to the Company's
stores in similar markets; and (iv) the acquired stores are located in states
which are the same or are contiguous to stores in which the Company currently
operates.
The addition of the CR Anthony stores not only expands the geographic
reach of the Company, but it is expected that there will be meaningful
synergies between the Company and CR Anthony including: (i) central overhead
cost savings; (ii) CR Anthony revenue enhancement opportunities; and (iii) CR
Anthony gross margin improvement opportunities.
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 1996 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Sales for the third quarter of 1997 increased 50.2% to $274.3 million
from $182.6 million in the comparable period of 1996. The increase in third
quarter sales was primarily due to approximately $5.5 million of sales from
stores opened during 1997 and 1996 which are not included in comparable store
sales, $81.3 million of sales from the recently acquired CR Anthony stores, as
well as a 2.8% increase in third quarter comparable store sales. Sales for the
first nine months of 1997 increased 33.2% to $703.9 million from $528.5 million
in the comparable period of 1996. The increase in sales for the nine month
period was primarily due to $39.7 million of sales from stores opened during
1997 and 1996 which are not included in comparable store sales, $113.8 million
of sales from the acquired CR Anthony stores, as well as a 4.4% increase in
comparable store sales. The increase in comparable store sales was primarily
attributable to the
13
<PAGE> 15
strong performance of the Company's small market stores partially offset by a
slight decline in sales at the Company's metropolitan stores.
Gross profit increased 54.5% to $86.8 million for the third quarter of
1997, from $56.2 million in the comparable period of 1996. Gross profit margin
for the third quarter of 1997 increased to 31.7% from 30.8% for the comparable
period in 1996. Gross profit margin for the third quarter of 1997 was favorably
impacted by an increase in markup on merchandise sold due to a favorable mix of
merchandise and lower markdowns in the Company's existing stores as a result of
well controlled inventories during the quarter. Gross profit for the first nine
months of 1997 increased 35.0% to $222.6 million from $164.9 million in the
comparable period of 1996. Gross profit margin for the first nine months of
1997 increased to 31.6% from 31.2% for the comparable period in 1996 due to the
factors discussed above as well as additional leverage of the fixed cost
component of gross margin.
Selling, general and administrative expenses for the third quarter of
1997 increased 60.3% million to $69.1 million from $43.1 million in the
comparable period of 1996. Selling, general and administrative expenses as a
percentage of sales for the third quarter of 1997 increased to 25.2% from 23.6%
in the comparable period of 1996 due primarily to approximately $2.7 million of
duplicative administrative costs associated with the CR Anthony acquisition.
credit card receivable charge-offs with respect to the Company's proprietary
credit card program, the results of which are included in SG&A, as a percentage
of credit card sales for the third quarter of 1997 decreased as compared to the
third quarter of 1996 as a result of an increased focus on accelerating the
collection rate in the portfolio in order to control bad debts. This decrease in
charge offs was offset by a reduction in the service charge and late fee income
associated with the program during the third quarter of 1997. As a result of the
accelerated collection rate in the portfolio, these factors were partially
offset by improvements in store variable expenses as a rate of sales. Selling,
general and administrative expenses for the first nine months of 1997 increased
34.8% to $163.8 million from $121.5 million in the comparable period of 1996.
Selling, general and administrative expenses as a percentage of sales for the
first nine months of 1997 increased to 23.3% from 23.0% in the comparable period
of 1996 due to approximately $3.7 million of duplicative administrative costs
associated with the CR Anthony acquisition as well as a slight reduction in
service charge and late fee income associated with the Company's private label
credit card program discussed above. These factors were partially offset by
improvements in store variable expenses as a rate of sales. Advertising expenses
as a percentage of sales was 4.8% and 4.6% for the third quarters of 1997 and
1996, respectively, and 4.0% and 4.1% for the first nine months of 1997 and
1996, respectively.
Store opening and closure costs for the third quarter of 1997
increased to $1.9 million from $0.8 million for the same period of 1996 due to
an increase in the number of stores opened during the first nine months of 1997
(including the converted CR Anthony locations) as compared to the same period
in 1996.
Operating income for the third quarter of 1997 increased 28.5% to
$15.8 million from $12.3 million for the third quarter of 1997. Operating
income as a percent of sales for the third quarter of 1997 was 5.8% as compared
to 6.8% for the third quarter of 1996, due primarily to the $2.7 million of
duplicative administrative costs associated with the CR Anthony acquisition, as
well as the increased store opening and closure costs discussed above.
Operating income for the first nine months of 1997 increased 32.4% to $56.0
million from $42.3 million in the comparable period of 1996. Operating income
as a percent of sales was 8.0% for the first nine months of 1997 and 1996.
Net interest expense for the third quarter of 1997 decreased 23.4% to
$9.8 million from $12.8 million for the comparable period in 1996. Net interest
expense for the first nine months of 1997 decreased 23.4% to $28.2 million from
$36.8 million for the comparable period in 1996. Interest expense for both the
three and nine months ended November 1, 1997 decreased from the comparable
periods in the prior year due to the retirement of the Senior Discount
Debentures in connection with the Company's IPO and the refinancing of the
Company's debt during the second quarter of 1997. This decrease was partially
offset by increased interest expense associated with issuance of the SRPC Notes
in May 1996.
As a result of the foregoing, the Company's income before
extraordinary items for the third quarter of 1997 increased to $3.7 million as
compared to a loss of $0.3 million for the comparable period in 1996. The
Company's
14
<PAGE> 16
income before extraordinary items for the first nine months of 1997 increased
by 415.2% to $17.0 million from $3.3 million for the comparable period in 1996.
In connection with the refinancing of the Company's existing 10%
Senior Notes and 11% Senior Subordinated Notes which occurred in June of 1996,
the Company recorded an extraordinary charge 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.
Additionally, during the third quarter, the Company retired approximately
$600,000 of the outstanding amount of the Bealls Holding Subordinated Notes and
the Bealls Holding Junior Subordinated Debentures, which resulted in an
extraordinary charge of $150,200, net of applicable income taxes of $96,000,
related to the tender premiums and write off of unamortized debt issue costs
associated with the retired debt.
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.
The following table shows certain unaudited financial information for
the Company by quarter (in thousands):
<TABLE>
<CAPTION>
1997 1996
----------------------------------------- ------------------------------------------------------
Q1 Q2 Q3 Q1 Q2 Q3 Q4
------------- ------------- ------------ ------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 191,512 $ 238,137 $ 274,269 $ 163,177 $ 182,750 $ 182,562 $ 248,061
Gross profit............. 61,925 73,902 86,822 52,081 56,623 56,208 79,075
Operating income......... 20,524 19,736 15,789 16,045 13,925 12,342 26,258
Quarters' operating
income as a percent
of total............... -- -- -- 24% 20% 18% 38%
Income (loss) before
extraordinary items.... $ 7,094 $ 6,246 $ 3,673 $ 2,652 $ 868 $ (265) $ 10,767
Net income (loss) ....... $ 7,094 $ (11,134) $ 3,523 $ 2,652 $ 868 $ (16,071) $ 10,492
</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
On June 17, 1997, the Company completed the Note Offering, which
consisted of $200.0 million in Senior Notes and $100.0 million in Senior
Subordinated Notes. The gross proceeds from the Note Offering of approximately
$299.7 million were used (i) to retire approximately $248.2 million of the
Company's existing higher coupon Senior Notes and Senior Subordinated Notes and
to pay related fees and expenses and (ii) to pay transaction and other costs
associated with the acquisition of CR Anthony. Concurrently with the Note
Offering, the Company entered into the New Credit Agreement consisting of a
$100.0 million working capital facility and a $100.0 million expansion
revolving credit facility.
On June 26, 1997, in connection with the acquisition of CR Anthony,
the Company issued 3,607,044 shares of Common Stock to stockholders of CR
Anthony and assumed approximately $25.9 million in debt. The acquisition was
15
<PAGE> 17
structured as a merger with CR Anthony merging into SRI whereby the separate
corporate existence of CR Anthony ceased.
On September 16, 1997, the Company completed an offering of
approximately 7.1 million shares of common stock at $34 7/8 per share. 6.4
million shares of this offering 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 net proceeds to
the Company, after deducting underwriting discounts and expenses related to the
transaction, were approximately $20.7 million, which were used to reduce
borrowings outstanding under the Company's New Credit Agreement.
Total working capital increased $69.3 million to $304.5 million at
November 1, 1997 from $235.2 million at February 1, 1997, due primarily to the
acquisition of CR Anthony. The most significant changes in working capital
were: (i) an increase in inventories and accounts payable due to the
acquisition of CR Anthony as well as the seasonal build of inventories in
anticipation of the Christmas selling season; and (ii) a decrease in accounts
receivable as a result of the liquidation of accounts receivable generated
during the Christmas season. Prepaid expenses and other current assets
increased primarily due to the acquisition of CR Anthony and prepaid expenses
associated with new store openings and the conversion of the CR Anthony stores,
partially offset by the collection of a federal tax refund during the first
quarter of 1997. Accrued expenses and other current liabilities increased
primarily due to the acquisition of CR Anthony.
The Company's primary capital requirements are for working capital,
debt service and capital expenditures. Based upon the current capital
structure, management anticipates interest payments for 1997 and 1998 to be
approximately $35.0 million. 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 1997 were $41.7
million as compared to $22.9 million for the comparable period of 1996 as a
result of an increase in the number of new stores opened. Management expects
capital expenditures (including any capital expenditures resulting from the
acquisition of CR Anthony) to be approximately $62.0 million during each of
1997 and 1998, consisting primarily of new store openings, conversion of the CR
Anthony stores to the Company's format, and remodeling and maintenance of
existing stores. In addition, the Company expects to incur approximately $18.0
million in one-time costs in connection with the acquisition of CR Anthony
which consist primarily of costs associated with the termination of contracts,
lease terminations, severance payments to CR Anthony employees and transaction
fees. Required aggregate principal payments on debt of the Company are expected
to total $2.6 million for each of 1997 and 1998.
The Company's current short-term liquidity needs, including a portion
of the one-time costs associated with the acquisition of CR Anthony, are
provided by (i) existing cash balances, (ii) operating cash flows, (iii) the
Accounts Receivable Program and (iv) the New Credit Agreement. 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.
The Company securitizes all of its trade accounts receivables through
SRPC. The Company transfers, on a daily basis, all of the accounts receivable
generated from purchases by the holders of the Company's proprietary credit
card to SRPC. SRPC is operated in a manner intended to ensure that its assets
and liabilities are distinct from those of the Company and its other affiliates
as SRPC's creditors have a claim on its assets prior to such assets becoming
available to any creditor of the Company. SRPC, in turn, transfers on a daily
basis, the accounts receivable purchased from the Company to the Trust in
exchange for cash or an increase in the certificates of beneficial ownership in
the Trust (the "Retained Certificates"). The remaining interest in the Trust
which is not represented by the Retained Certificates is held by third-party
investors. The Retained Certificates are effectively subordinated to the
interests of such third-party investors, and are pledged to secure the SRPC
Notes which were issued to finance the Uhlmans acquisition. The SRPC Notes are
secured by, and paid solely from, the Retained Certificates issued to SRPC by
the Trust.
16
<PAGE> 18
Since its inception, the Trust has issued $165.0 million of term
certificates and a revolving certificate (collectively, the "Trust
Certificates") to third parties representing undivided interests in the Trust.
The Trust originally issued a $40.0 million revolving certificate under which
the holder of the revolving certificate agreed to purchase interests in the
Trust equal to the amount of accounts receivable in the Trust above the level
required to support the term certificates up to a maximum of $40.0 million. As
of November 1, 1997, the outstanding balance under the revolving certificate was
$40.0 million. On December 3, 1997, the Trust, through SRPC, replaced the
original revolving certificate with a new $75.0 million revolving certificate.
Other than the borrowing limit, the terms of the new revolving certificate are
essentially the same as those of the certificate it replaced.
If the amount of accounts receivable in the Trust falls below the
level required to support the Trust Certificates, certain principal collections
may be retained in the Trust until such time as the accounts receivable
balances exceed the amount of accounts receivable required to support the Trust
Certificates and any required transferor's interest. SRPC receives
distributions from the Trust of cash in excess of amounts required to satisfy
the Trust's obligations to third-party investors on the Trust Certificates.
Cash so received by SRPC may be used to purchase additional accounts receivable
from, or make distributions to, the Company after SRPC has satisfied its
obligations on the SRPC Notes. The Trust may issue additional series of
certificates from time to time on various terms. Terms of any future series
will be determined at the time of issuance.
Prior to the Company's acquisition of CR Anthony, CR Anthony sold all
of its private label credit card accounts receivable to a Retail Credit
Services Agreement which was to expire on August 1, 1998. The Company
terminated this agreement in exchange for the payment of a termination fee paid
to Citicorp. Additionally, the Company repurchased all of the outstanding
accounts receivable on the termination date (September 10, 1997) at their face
value which approximated $35.1 million. The Company has incorporated these
accounts receivable into the Accounts Receivable Program.
Management believes that funds provided by operations, together with
funds available under the New Credit Agreement 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, including those requirements associated with the acquisition
of CR Anthony. 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.
17
<PAGE> 19
STAGE STORES, INC.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
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.
10.1 Series 1997-1 Supplement dated as of December 3, 1997 to
Amended and Restated Pooling and Servicing Agreement dated as
of August 11, 1995 and Amended on May 30, 1996 by and among SRI
Receivables Purchase Co., Inc., Specialty Retailers, Inc. and
Bankers Trust (Delaware) on behalf of the Series 1997-1
Certificateholders.
27.1 Financial Data Schedule
18
<PAGE> 20
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.
January 20, 1998 /s/ Carl E. Tooker
- ---------------- ---------------------------------
(Date) Carl E. Tooker
Chairman, President and
Chief Executive Officer
January 20, 1998 /s/ James A. Marcum
- ---------------- ---------------------------------
(Date) James A. Marcum
Executive Vice President,
Chief Financial Officer
SPECIALTY RETAILERS, INC.
January 20, 1998 /s/ Carl E. Tooker
- ---------------- ---------------------------------
(Date) Carl E. Tooker
Chairman, President and
Chief Executive Officer
January 20, 1998 /s/ James A. Marcum
- ---------------- ---------------------------------
(Date) James A. Marcum
Executive Vice President,
Chief Financial Officer
SPECIALTY RETAILERS, INC. (NV)
January 20, 1998 /s/ Carl E. Tooker
- ---------------- ---------------------------------
(Date) Carl E. Tooker
Chairman, President and
Chief Executive Officer
January 20, 1998 /s/ James A. Marcum
- ---------------- ---------------------------------
(Date) James A. Marcum
Executive Vice President,
Chief Financial Officer
19
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 Series 1997-1 Supplement dated as of December 3, 1997
to Amended and Restated Pooling and Servicing Agreement
dated as of August 11, 1995 and Amended on May 30, 1996
by and among SRI Receivables Purchase Co., Inc.,
Specialty Retailers, Inc. and Bankers Trust (Delaware)
on behalf of the Series 1997-1 Certificateholders.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
- --------------------------------------------------------------------------------
SRI RECEIVABLES PURCHASE CO., INC.
Transferor
SPECIALTY RETAILERS, INC.
Servicer
and
BANKERS TRUST (DELAWARE)
Trustee
on behalf of the Series 1997-1 Certificateholders
--------------------------------------------------------------
SERIES 1997-1 SUPPLEMENT
Dated as of December 3, 1997
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of August 11, 1995 and Amended on May 30, 1996
------------------------------------------------------------------------
Class A-1
Variable Funding Certificates, Series 1997-1
Class B-1
Variable Funding Certificates, Series 1997-1
Class C-1
Variable Funding Certificates, Series 1997-1
SRI RECEIVABLES MASTER TRUST
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C> <C>
SECTION 1. Designation...........................................................................................1
SECTION 2. Definitions...........................................................................................1
SECTION 3. Reassignment Terms...................................................................................25
SECTION 4. Delivery and Payment for the Series 1997-1 Variable Funding Certificates.............................26
SECTION 5. Form of Delivery of Series 1997-1 Variable Funding Certificates......................................26
SECTION 6. Article IV of Agreement..............................................................................26
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS...............................................................27
Section 4.2 Establishment of Accounts..................................................................27
Section 4.4 Rights of Certificateholders...............................................................29
Section 4.5 Collections and Allocation; Payments on Exchangeable Transferor
Certificate................................................................................29
Section 4.6 Application of Funds on Deposit in the Collection Account for the
Certificates...............................................................................30
Section 4.7 Coverage of Required Amount and Spread Account for the Series
1997-1 Variable Funding Certificates.......................................................38
Section 4.8 Payment of Certificate Interest and Other Amounts..........................................40
Section 4.9 Payment of Certificate Principal...........................................................42
Section 4.10 Investor Charge-Offs......................................................................44
Section 4.11 Shared Principal Collections..............................................................45
SECTION 7. Article V of the Agreement...........................................................................45
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS................................................46
Section 5.1 Distributions..............................................................................46
Section 5.2 Certificateholders' Statement..............................................................48
SECTION 8. Series 1997-1 Pay Out Events.........................................................................49
SECTION 9. Article VI of the Agreement..........................................................................52
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 6.15 Additional Invested Amounts...........................................................52
Section 6.16 Extension.............................................................................55
SECTION 10. Series 1997-1 Termination...........................................................................57
SECTION 11. Limitation on Changes in Invested Amount. ..........................................................57
SECTION 12. Legends; Transfer and Exchange; Restrictions on Transfer of Series 1997-
1 Variable Funding Certificates; Tax Treatment......................................................57
SECTION 13. Successor Trustee...................................................................................59
SECTION 14. Notice to Facility Agent............................................................................59
SECTION 15. Charge Account Agreements and Credit and Collection Policies.......................................59
SECTION 16. Successor Servicer..................................................................................60
SECTION 17. Series 1997-1 Investor Exchange; Certificate Defeasance.............................................60
SECTION 18. Ratification of Agreement...........................................................................61
SECTION 19. Counterparts........................................................................................61
SECTION 20. GOVERNING LAW.......................................................................................61
SECTION 21. The Trustee.........................................................................................61
SECTION 22. Instructions in Writing.............................................................................61
SECTION 23. Amendment...........................................................................................62
SECTION 24. Discount Option.....................................................................................62
SECTION 25. Rating Agency Condition.............................................................................62
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
EXHIBIT A-1 Form of Class A VFC
EXHIBIT A-2 Form of Class B VFC
EXHIBIT A-3 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
</TABLE>
- iii -
<PAGE> 5
SERIES 1997-1 SUPPLEMENT, dated as of December 3, 1997 (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 (as it may be amended hereafter, the
"Agreement"), among the Transferor, the Servicer and the Trustee.
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 three 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") 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 sub sections of the Agreement, as amended or supplemented by this Series
Supplement, except as otherwise provided herein. All capitalized terms not
otherwise defined herein are defined in the Agreement. Each capitalized term
defined herein shall relate only to the Series 1997-1 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.
<PAGE> 6
The "Account Cap Base Table" is as follows:
<TABLE>
<CAPTION>
(A) (B) (C) (D)
Max ESP Min ESP ACBP Level
<S> <C> <C> <C>
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
</TABLE>
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.
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.
- 2 -
<PAGE> 7
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:
<TABLE>
<CAPTION>
(A) (B) (C) (D)
Max 12M DR Min 12M DR ACDRAP Level
<S> <C> <C> <C>
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
</TABLE>
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.
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.
- 3 -
<PAGE> 8
The "Account Cap Payment Rate Table" is as follows:
<TABLE>
<CAPTION>
(A) (B) (C) (D)
Max PRP Min PRP ACPRAP Level
<S> <C> <C> <C>
n/a 10.00% 0.00% 3
10.00% 8.00 1.00 2
8.00 n/a 2.00 1
</TABLE>
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 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
- 4 -
<PAGE> 9
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:
<TABLE>
<CAPTION>
(A) (B) (C)
<S> <C> <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%
</TABLE>
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 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 and the Class C Adjusted
Invested Amount.
"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.
- 5 -
<PAGE> 10
"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, and with respect to
any Class B Certificates, the Class B Certificate Purchase Agreement.
"Certificate Rate" shall mean the Class A Certificate Rate, the Class
B Certificate Rate or the Class C Certificate Rate, as applicable.
"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.
- 6 -
<PAGE> 11
"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 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
- 7 -
<PAGE> 12
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)(vi) 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(c).
"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.
"Class A Purchase Limit" shall mean an amount equal to $75,000,000.
"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.
- 8 -
<PAGE> 13
"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 Trans feror, 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.
"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
- 9 -
<PAGE> 14
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)(vii) 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(h).
"Class B Investor Charge-Offs" shall have the meaning specified in
subsection 4.10(b).
"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 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
- 10 -
<PAGE> 15
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 $7,500,000.
"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 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)(iii).
"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.
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<PAGE> 16
"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)(viii) 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 B 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 B
Certificates on such Distribution Date, the Distribution Date following the
Distribution Date on which the Class B 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.
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<PAGE> 17
"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-3 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 or in subsection 1.1 of the Class B
Certificate Purchase Agreement, as the case may be, which means, in general,
with respect to any Committed Purchaser, a commitment to purchase a portion of
the Class A Invested Amount or the Class B Invested Amount, as the case may be,
pursuant to the provisions of the Class A Certificate Purchase Agreement or the
Class B 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 or the Class B Purchase Agreement, as
applicable.
"Cost of Funds Rate" shall mean, for a Noncommitted Class A Purchaser
or 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) 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
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<PAGE> 18
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 Noncommitted Class B Purchaser
pursuant to the 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
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<PAGE> 19
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 (iii) and (v) through (x) plus the Class A
Floating Allocation Percentage of the amount described in subsection 4.6(a)(iv)
plus the Class B Floating Allocation Percentage of the amount described in
subsection 4.6(a)(iv) 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.
"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).
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<PAGE> 20
"Enhancement" shall mean, with respect to the Class A Certificates,
the subordination of the Class B 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 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.
"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)(xi), 4.7(f) (clause first thereof) and 4.8(a)(viii) 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 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 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%.
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<PAGE> 21
"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).
"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, and with respect to the Class B
Certificateholders' Interest, the Class B 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 calcu late 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 and Class C Floating Allocation Percentage for such
Business Day.
"Initial Determination Date" shall mean January 13, 1998.
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<PAGE> 22
"Initial Invested Amount" shall mean the aggregate initial principal
amount of the Investor Certificates.
"Initial Monthly Distribution Date" shall mean January 15, 1998.
"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 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 (iii).
"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, and (c)
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
and the Class C VFCs.
"Investor Charge-Offs" shall mean the sum of Class A Investor
Charge-Offs, Class B Investor Charge-Offs and Class C Investor Charge-Offs.
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<PAGE> 23
"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)(xii) and (xiii) 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)).
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<PAGE> 24
"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)(v) through (x), plus the Class A
Floating Allocation Percentage of the amount described in subsection 4.6(a)(iv),
plus the Class B Floating Allocation Percentage of the amount described in
subsection 4.6(a)(iv), 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)(xi), 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.
"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.
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<PAGE> 25
"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 each day during the Revolving
Period on which Transferor elects, upon not less than one Business Day notice to
the Facility Agent, to repay principal on the Investor Certificates and each
date on which the Transferor elects to make payments to Exiting Purchasers
pursuant to subsection 4.9(c).
"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 and (c) 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.
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<PAGE> 26
"Reallocated Class B 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)(xiv) 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.
"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 either
a Class A VFC or a Class B VFC is registered in the Certificate Register.
"Senior Certificates" shall mean the Class A Certificates and the
Class B 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.
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"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.
"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(f), 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)(xv) and (ii) with respect to any Transfer Date,
the cumulative amount of Finance Charge Collections designated as such during
the related Monthly Period.
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"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).
"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 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, as the case may be.
"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).
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"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.
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 and the Class B Invested Amount is reduced to an amount less than or
equal to 10% of the sum of the highest combined Class A Invested Amount and
Class B 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 and the Class
B 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 and the Class C VFCs shall be
delivered as Registered Certifi cates 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:
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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.
(g) MAXIMUM SPREAD ACCOUNT AMOUNT. On each Determination Date, the
Servicer shall compute the Account Cap and the Maximum Spread Account Amount.
The Account
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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 and the
Class B 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)(xii).
(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)(xii) 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 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 and the Class C Invested Amount shall be subordinated to the Class A
VFCs, and the Class C Invested Amount shall
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be subordinated to the Class A VFCs and Class B 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) and (ii), the amount of payments made to the Holder
of the 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
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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)(xv).
(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 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"), since the
preceding Business Day 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).
(ii) [Reserved]
(iii) 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 withdrawal pursuant to
subsections 4.6(a)(i) and (ii), 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
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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.
(iv) 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)
through (iii), 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.
(v) 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 (iv), 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 Certificateholders on the next Distribution
Date, (D) on and after such deposit to the Principal Account with
respect to the Class B Invested Amount has been made, paid to the
Class C Certificateholders.
(vi) 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 (v), 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
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Principal Account to be deposited in the Principal Account for
distribution to the Class A Certificateholders on the next Distribution
Date.
(vii) 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 (vi), 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.
(viii) Reimbursement of Class C 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 subsections 4.6(a)(i) through (vii), 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, deposited in the Principal Account for payment
to the Class B Certificateholders on the next Distribution Date, and
(D) on and after the day such deposit to the Principal Account with
respect to Class B 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.
(ix) 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 (viii), 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 and the Class B Purchase Limit as of the
first day of such Interest Accrual Period and (B) the aggregate amount
of unreimbursed Facilities
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<PAGE> 36
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)(ix) during such Interest Accrual Period.
(x) 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
(ix), 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 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.
(xi) 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 (x), the lesser of (1) the aggregate
amount of such shortfalls and (2) the Net Borrowed Excess Spread Amount
for such Business Day.
(xii) 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 (xi), and
shall deposit such funds into the Spread Account until the amount
therein equals the Maximum Spread Account Amount as of such Business
Day.
(xiii) 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 (xii), 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)(ix) and this subsection
4.6(a)(xiii) during such Interest Accrual Period.
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(xiv) 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 (xiii), 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.
(xv) 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 (xiv) 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 and the
Class B 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)(v) through (viii) 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
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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)(v), (vii) and (viii) 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 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
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)(v) and (viii) 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
(iv) an amount equal to the excess, if any, of (A)
the product of (x) the sum of the Class A Fixed Allocation Percentage
and the Class B 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) and (ii)(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 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, 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
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(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 new Class B Invested Amount
plus 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(d), 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 C Invested Amount) will
result in the sum of the Class B 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(c) 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
Exiting Purchasers) cause (1) the sum of the Class C 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 and the Class B
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
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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 and the Class B 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 and Class B 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). On 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, 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)(iii)(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)(xv) 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 either the Class
A Invested Amount or the Class B Invested Amount is greater than zero.
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
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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 (x).
(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)(iv) through (x),
(xii) and (xiii). 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)(iv) through (x), (xii) and (xiii). 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 (x) through (xiii) 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
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 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)(iv) through (ix).
(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).
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(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 (viii) of subsection
4.6(a)) for such 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 (vii); provided, however, that with respect to amounts applied
pursuant to subsections 4.6(a)(iv), 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 C Principal
Collections").
(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 (vi) of subsection
4.6(a)) for such 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 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 (vi); provided,
however, that with respect to amounts applied pursuant to subsection 4.6(a)(iv),
such amounts shall be applied only to the extent of the product of (x) the Class
A Floating Allocation
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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 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)(iii).
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)(iii). 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)(iii), 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
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withdrawals pursuant to subsections 4.8(a)(i), (ii) and (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)(iii), and deposit such amount into the Distribution Account for
payment to the Class B Certificateholders.
(v) Class A 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).
(vi) Class B 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).
(vii) Maximum Spread Account Amount. Seventh,
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 (vi), and deposit into the
Spread Account until the amount therein equals to the Maximum Spread
Account Amount as of such Transfer Date.
(viii) Any amounts available in the Interest Funding
Account remaining after giving effect to the payments pursuant to
subsections 4.8(a)(i) through (vii) 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 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) and (y) the Facility Agent from the
Distribution Account the amount deposited into the Distribution Account
allocable thereto pursuant to subsection 4.8(a)(iii), (iv), (vi) and (vii).
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
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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 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 B Invested Amount and the
Class C Invested Amount is no less than 25.0% of the Invested
Amount, (3) the new Class C Invested Amount shall be no less
than 17.5% of the new Invested Amount and (4) the new Class C
Invested Amount shall be no less than 5% of the highest
Invested Amount during the 180 days preceding such Principal
Distribution Date.
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 or Class B 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)
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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 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 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 Invested Amount 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)(iii).
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)(v) and the amount of Excess Finance Charge
Collections, Stored Excess Finance Charge Collections, Repayable Service Fee
Amount, Spread Account Funds,
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Reallocated Class C 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 (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 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 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 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 (vi), the Servicer will apply such Excess Finance
Charge Collections as provided in subsection 4.6(a)(vii) to reimburse the
aggregate amount of Class B Investor Charge-Offs not previously reimbursed, up
to the amount so available.
(c) 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 (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 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) and
4.6(c)(iii)(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 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:
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ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS
SECTION 5.1 DISTRIBUTIONS. (a) on each Distribution Date
(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) 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 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 (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) 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.
(c) On each Distribution Date (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
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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.
(d) On each Principal Distribution Date, the Paying Agent
shall distribute (in accordance with instructions from the Servicer on behalf of
the Transferor pursuant to subsection 4.9(a)) to each Class A Certificateholder
and 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 pro rata share (based on the
aggregate Undivided Interests represented by Class A VFCs or Class B 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 and the
Class B Certificateholders 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:
(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 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 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,
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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 and Class B VFCs will be made only upon presentation and surrender
of the Class A VFCs and 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.
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 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 and the
Class C Certificates, respectively;
(vi) the Invested Amount, the Class A Invested
Amount, the Class B Invested Amount and the Class C Invested Amount,
the Floating Allocation Percentage and, during the Amortization Period,
the Class A Fixed Allocation Percentage, or Class B 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;
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(ix) the aggregate amount of Class A Investor
Charge-Offs, Class B Investor Charge-Offs and Class C Investor
Charge-Offs for the related Monthly Period and the two preceding
Monthly Periods;
(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; and
(xiv) the Aggregate Principal Receivables, the amount
on deposit in the Equalization Account and the Eligible Principal
Receivables.
(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 Transferor or the Servicer, as
applicable, and to the Trustee by the Facility Agent,
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(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 (i) 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, (2) with respect to the representations and
warranties made by the Originator referenced in Section 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;
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(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 and Class B 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 SRI nor an Affiliate of SRI was the Servicer, plus (V) the aggregate
Class A Investor Charge-Offs, Class B 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 (i) 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
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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 (h) 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:
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 or Class B Owners, such Class A Owners or Class B
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 Class B
Certificate 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 and Committed Class B 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" and the "Additional Class B 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 and the
Additional Class B Invested Amount, "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
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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.
(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 and Additional Class B Invested Amounts specifying (i) the aggregate
amount of requested Additional Class A Invested Amounts and Additional Class B
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 and (iv) the amount of
the Additional Class B Invested Amounts which have been purchased by the
Committed Class B 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 the Class A Invested Amount on the
applicable Purchase Date (after giving effect to those purchases which shall be
made on the applicable Purchase Date) exceed (i) the Class A Purchase Limit or
(ii) the amount which would result in the sum of the Class B 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 either Class A Certificateholders or the
Class B Certificateholders purchase any Additional Class A Invested Amount or
any Additional Class B Invested Amount. 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 Class C Invested Amount being at least
equal to the greater of 17.5% of the Invested Amount on such Purchase Date or 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 payment to the Trust
in immediately available funds of
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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 the Class B Invested Amount on the
applicable Purchase Date (after giving effect to those purchases which shall be
made on the applicable Purchase Date) exceeding (i) the Class B Purchase Limit
or (ii) the amount which would result in the sum of the Class C Invested Amount
being less than 17.5% of the Invested Amount on such Purchase Date.
(f) 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 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 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.
(g) Subject to the provisions of subsections 6.15(c) through
(e), the failure of any Holder of the Senior Certificates to purchase any
Additional Class A Invested Amount or any Additional Class B 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 or Additional Class B Invested Amounts unless the conditions to such
purchase contained in the applicable Certificate Purchase Agreement (including
without limitation Section 3.2 thereof) have been satisfied.
(h) 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
- 52 -
<PAGE> 57
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.
(i) 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.
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
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<PAGE> 58
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 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.
- 54 -
<PAGE> 59
SECTION 11. LIMITATION ON CHANGES IN INVESTED AMOUNT. The
Transferor shall not effect more than two "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(d).
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
- 55 -
<PAGE> 60
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 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.
- 56 -
<PAGE> 61
(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.
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 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
- 57 -
<PAGE> 62
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."
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 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, 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 so supple-
- 58 -
<PAGE> 63
mented 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. AMENDMENT. 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 and (iii) the Required Class B Purchasers and the Required Class B
Owners.
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 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
- 59 -
<PAGE> 64
& 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 or Noncommitted Class B
Purchaser by Liquidity Providers (as defined in the applicable Certificate
Purchase Agreement).
<PAGE> 65
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:
---------------------------------
Mark A. Hess
Treasurer
SPECIALTY RETAILERS, INC.
Servicer
By:
---------------------------------
Mark A. Hess
Treasurer
BANKERS TRUST (DELAWARE)
Trustee
By:
---------------------------------
James H. Stallkamp
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE STAGE STORES, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000006885
<NAME> STAGE STORES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> NOV-01-1997
<CASH> 15,274
<SECURITIES> 0
<RECEIVABLES> 64,431
<ALLOWANCES> 0
<INVENTORY> 330,477
<CURRENT-ASSETS> 482,252
<PP&E> 154,707
<DEPRECIATION> 11,220
<TOTAL-ASSETS> 780,559
<CURRENT-LIABILITIES> 177,785
<BONDS> 398,207
0
0
<COMMON> 278
<OTHER-SE> 184,970
<TOTAL-LIABILITY-AND-EQUITY> 780,559
<SALES> 703,918
<TOTAL-REVENUES> 703,918
<CGS> 481,269
<TOTAL-COSTS> 163,752
<OTHER-EXPENSES> 2,848
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,158
<INCOME-PRETAX> 27,891
<INCOME-TAX> 10,878
<INCOME-CONTINUING> 17,013
<DISCONTINUED> 0
<EXTRAORDINARY> (17,530)
<CHANGES> 0
<NET-INCOME> (517)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
