SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Quarter Ended 1-8668
July 1, 1994 Commission File Number
___________________________
FINGERHUT COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1396490
(State of Incorporation) (I.R.S. Employer Identification No.)
4400 Baker Road, Minnetonka, Minnesota 55343
(Address of principal executive offices)
(612) 932-3100
(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 _____
As of August 10, 1994, 46,358,273 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>2
FINGERHUT COMPANIES, INC.
FORM 10-Q
July 1, 1994
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Statements of Earnings (Unaudited) -
thirteen weeks and twenty-six weeks ended
July 1, 1994 and June 25, 1993 ....................... 3
Consolidated Statements of Financial Position
(Unaudited) - July 1, 1994, June 25, 1993 and
December 31, 1993 .................................... 4
Consolidated Statements of Cash Flows (Unaudited) -
twenty-six weeks ended July 1, 1994 and
June 25, 1993........................................ 5
Condensed Notes to Consolidated Financial
Statements (Unaudited)................................ 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition..................... 9
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K ..................... 14
Signatures..................................................... 15
<PAGE>3
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of dollars, except share and per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 1, June 25, July 1, June 25,
1994 1993 1994 1993
Revenues:
Net sales $ 388,767 $ 380,293 $ 713,448 $ 721,255
Finance income, net 57,264 40,542 94,727 71,387
446,031 420,835 808,175 792,642
Costs and expenses:
Product cost 197,280 193,024 357,669 364,615
Administrative and
selling expenses 150,888 142,761 284,656 275,343
Provision for
uncollectible accounts 52,084 49,644 90,757 92,790
Discount on sale of
accounts receivable 14,031 6,003 20,953 9,516
Interest expense, net 6,741 9,725 13,731 19,440
421,024 401,157 767,766 761,704
Earnings before taxes 25,007 19,678 40,409 30,938
Provision for income
taxes 8,815 6,702 14,244 10,198
Net earnings $ 16,192 $ 12,976 $ 26,165 $ 20,740
Earnings per share $ .32 $ .26 $ .52 $ .42
Dividends $ .04 $ .04 $ .08 $ .08
Weighted average 50,650,369 49,895,104 50,704,263 49,718,394
shares
See accompanying Condensed Notes to Consolidated Financial Statements.
<PAGE>4
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
(Unaudited)
July 1, June 25, December 31,
1994 1993 1993
ASSETS
Current assets:
Cash and cash equivalents $ 93,638 $ 45,061 $ 66,571
Customer accounts receivable, net 281,942 282,575 333,543
Inventories, net 134,317 172,919 149,389
Promotional material 65,690 61,483 56,083
Deferred income taxes 60,048 68,065 68,404
Other 11,688 8,020 8,218
Total current assets 647,323 638,123 682,208
Property and equipment, net 188,784 178,625 182,510
Excess of cost over fair value of
net assets acquired, net 43,603 47,112 43,977
Customer lists, net 9,768 15,340 10,067
Other assets 63,669 11,319 53,215
$ 953,147 $ 890,519 $ 971,977
LIABILITIES
Current liabilities:
Accounts payable $ 123,506 $ 126,862 $ 120,307
Accrued payroll and employee benefits 23,477 22,114 36,545
Other accrued liabilities 37,858 54,418 49,639
Current portion of long-term debt 316 323 305
Current income taxes payable 3,997 6,747 26,179
Total current liabilities 189,154 210,464 232,975
Long-term debt, less current portion 246,659 247,032 246,820
Deferred income taxes 14,553 9,415 15,459
Other non-current liabilities 5,085 4,299 4,334
455,451 471,210 499,588
STOCKHOLDERS' EQUITY
Preferred stock - - -
Common Stock 463 460 461
Additional paid-in capital 257,827 252,803 254,984
Earnings reinvested 239,406 166,046 216,944
Total stockholders' equity 497,696 419,309 472,389
$ 953,147 $ 890,519 $ 971,977
See accompanying Condensed Notes to Consolidated Financial Statements.
<PAGE>5
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Twenty-Six Weeks Ended
July 1, June 25,
1994 1993
Cash flows from operating activities:
Net earnings $ 26,165 $ 20,740
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation and amortization 16,455 13,529
Change in assets and liabilities, excluding
the effects of business divestitures:
Customer accounts receivable, net 39,562 38,117
Inventories, net 15,072 (25,504)
Promotional material and other current assets (13,077) (11,546)
Accounts payable 3,199 (24,557)
Accrued payroll and employee benefits (13,068) (13,984)
Other accrued liabilities (11,781) (6,128)
Current income taxes payable (20,765) (12,790)
Deferred income taxes 7,450 4,778
Other (9,682) 1,384
Net cash provided (used) by operating activities 39,530 (15,961)
Cash flows from investing activities:
Additions to property and equipment (22,077) (23,290)
Proceeds from business divestitures 12,039 -
Net cash used by investing activities (10,038) (23,290)
Cash flows from financing activities:
Repayments of long-term debt (150) (168)
Issuance of common stock 1,428 1,472
Cash dividends paid (3,703) (3,674)
Net cash used by financing activities (2,425) (2,370)
Net decrease in cash and cash equivalents 27,067 (41,621)
Cash and cash equivalents at beginning of period 66,571 86,682
Cash and cash equivalents at end of period $ 93,638 $ 45,061
Supplemental noncash investing and financing activities:
Tax benefit from exercise of non-qualified
stock options $ 1,417 $ 1,180
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 13,978 $ 19,090
Cash paid during the period for income taxes $ 27,961 $ 18,896
Included in cash and cash equivalents were liquid investments with original
maturities of fifteen days or less.
See accompanying Condensed Notes to Consolidated Financial Statements.
<PAGE>6
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1. Consolidated financial statements
The consolidated financial statements of Fingerhut Companies, Inc.
("Company") reflect the financial position and results of operations of
the Company and its wholly owned subsidiaries. The Company's principal
subsidiaries are Fingerhut Corporation ("Fingerhut") and USA Direct
Incorporated ("USA Direct"). COMB Corporation was sold as of September
3, 1993, FDC, Inc., a subsidiary of Figi's Inc. ("Figi's"), was sold as
of December 31, 1993 and the Company has signed a letter of intent to
sell the remaining assets of Figi's.
The consolidated financial statements as of July 1, 1994 and June
25, 1993, and for the thirteen and twenty-six weeks ended July 1, 1994
and June 25, 1993, included herein are unaudited and have been prepared
by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. The interim financial statements reflect all adjustments
(consisting of normal recurring accruals) that are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's 1993 Annual Report to Shareholders and
incorporated by reference in the Company's annual report on Form 10-K
filed with the Securities and Exchange Commission. The results of
operations for the interim period should not be considered indicative of
the results to be expected for the entire year.
Reclassifications have been made to prior years' consolidated
financial statements whenever necessary to conform to the current
year's presentation.
2. Summary of significant accounting policies adopted in 1994
During the first quarter of 1994, the Company completed their study of
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" and determined there were no
significant adjustments required for the implementation of this
pronouncement.
3. Earnings per share of common stock and common stock equivalents
Earnings per share was computed by dividing net earnings by the weighted
average shares of common stock and common stock equivalents outstanding
during the periods. The dilutive effect of the potential exercise of
outstanding options to purchase shares of common stock was calculated
using the treasury stock method.
<PAGE>7
4. Sale of accounts receivable
The Receivables Transfer Agreement was replaced with the Fingerhut Master
Trust in June 1994. Under the Fingerhut Master Trust, Fingerhut sold a
greater percentage of its receivables, which had the effect of increasing
the proceeds received by the Company as of July 1, 1994. The proceeds
from the sale of accounts receivable were $872.9 million, $620.0 million
and $829.0 million as of July 1, 1994, June 25, 1993 and December 31,
1993, respectively. The Company's interest in the Fingerhut Master Trust
was approximately $121.9 million as of July 1, 1994. The holdback under
the Receivables Transfer Agreement, which represented the Company's
interest under that agreement, was approximately $154.0 million and
$227.0 million as of June 25, 1993 and December 31, 1993, respectively.
5. Customer accounts receivable, net
Customer accounts receivable, net consisted of the following:
(In thousands of dollars) July 1, June 25, December 31,
1994 1993 1993
Due from customers $ 391,174 $ 415,824 $ 466,390
Reserve for uncollectible
accounts, net of anticipated
recoveries (71,759) (80,739) (70,011)
Reserve for returns
and exchanges (10,362) (15,826) (18,988)
Other reserves (13,433) (18,429) (19,135)
Net collectible amount 295,620 300,830 358,256
Unearned finance income (13,678) (18,255) (24,713)
Customer accounts
receivable, net $ 281,942 $ 282,575 $ 333,543
6. Revolving credit facility
Interest expense related to the revolving credit facility for the twenty-
six week periods ended July 1, 1994 and June 25, 1993 was $27 thousand
and $0, respectively. The average outstanding balances during such
periods were $852 thousand and $0, respectively, and the average annual
interest rate for the 1994 period was 6.30%.
7. Stockholders' equity
During the twenty-six week period ended July 1, 1994, 196,975 shares of
common stock were issued related to the exercise of employee stock
options, bringing the total shares of common stock outstanding as of July
1, 1994 to 46,345,423.
<PAGE>8
8. Subsequent event
On July 21, 1994, the Company declared a cash dividend in the amount of
$.04 per share, aggregating approximately $1.9 million, payable on
August 25, 1994, to the shareholders of record as of the close of
business on August 4, 1994.
In July 1994, the Company repurchased 55,000 shares of its common stock
at prevailing market prices under its previously announced stock
repurchase program.
<PAGE>9
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRTEEN AND TWENTY-SIX WEEKS ENDED
JULY 1, 1994 AND JUNE 25, 1993
Results of Operations
Second Quarter
Net sales for the current thirteen week period were $388.8 million compared to
net sales of $380.3 million for the related period in 1993. Net sales for the
current period increased 12% from $347.6 million, when excluding COMB, FDC and
Figi's which the Company sold, or entered into a signed letter of intent to
sell, in 1993 (the "Sold Subsidiaries"). Fingerhut Corporation ("Fingerhut"),
the core business, had second quarter net sales of $370.2 million compared to
$330.7 million in the same period in 1993, an increase of 12%. Net sales from
Fingerhut's existing customer list increased 13% to $304.3 million due to
increased mailings, partially offset by lower response rates. Net sales from
Fingerhut's new customer acquisition programs increased 6% to $65.9 million
primarily due to increased customers and higher sales per mailing. Net sales
from USA Direct Incorporated ("USA Direct") were $16.7 million compared to
$15.6 million for the same period in 1993. Montgomery Ward Direct, our joint
venture with Montgomery Ward, had net sales of $36.5 million compared to $20.4
million in the related 1993 period, an increase of 79%. This joint venture is
reported under the equity method of accounting and, as such, these sales are
not included as revenues in the Company's consolidated financial statements.
Net finance income for the current thirteen week period increased to $57.3
million from $40.5 million in the related period in 1993 due to a higher
percent of accounts receivable sold under the Fingerhut Master Trust (which
replaced the former Receivables Transfer Agreement), as well as increased
sales from Fingerhut's existing customers.
Product cost for the current thirteen week period was $197.3 million, or 50.7%
of net sales, compared to $193.0 million, or 50.8% of net sales, during the
comparable prior year period. Product cost decreased as a percent of net
sales due to the elimination of the Sold Subsidiaries, which had a higher
product cost as a percent of net sales. This was offset by higher
liquidations in the second quarter compared to the prior year. Fingerhut's
inventory levels have remained virtually flat year to year while sales have
shown continued growth trends.
Administrative and selling expenses for the current thirteen week period
increased to $150.9 million, or 38.8% of net sales, compared to $142.8
million, or 37.5% of net sales, in the comparable prior year period due to
lower sales per advertising dollar from Fingerhut's existing customers and USA
Direct, and planned higher depreciation costs.
The provision for uncollectible accounts for the second quarter of 1994 was
$52.1 million, or 13.4% of net sales, compared to $49.6 million, or 13.1% of
net sales, for the same period in the prior year. The increase as a percent
of net sales was due to the Sold Subsidiaries, which had a lower provision for
uncollectible accounts as a percent of net sales, partially offset by lower
levels of uncollectible accounts from Fingerhut's existing and new customer
acquisition programs. These lower provisions for uncollectible accounts for
Fingerhut's new and existing customers provide the opportunity to mail deeper
into customer lists, which the Company plans to do, which should positively
impact response rates and result in a slight increase in provisions for
uncollectible accounts in the future.
<PAGE>10
Discount on sale of accounts receivable for the thirteen week period ended
July 1, 1994 was $14.0 million compared to $6.0 million for the comparable
period in 1993. The increase resulted from higher short-term interest rates,
as well as a greater amount of accounts receivable sold under the Fingerhut
Master Trust and an increase in sales from Fingerhut's existing customers.
Net interest expense for the current thirteen week period was $6.7 million
compared to $9.7 million in the second quarter of 1993. The decrease was
primarily attributable to the expiration of $160 million of interest rate swap
agreements on June 30, 1993.
The effective tax rate for the second quarter of 1994 was 35.3% compared with
34.1% in the comparable prior year period. The current quarter tax rate
increased compared to the prior year as a result of the Omnibus Budget
Reconciliation Act of 1993.
As a result of the items discussed above, net earnings for the thirteen week
period ended July 1, 1994 were $16.2 million or $.32 per share, compared to
second quarter 1993 net earnings of $13.0 million or $.26 per share.
First Half
Fingerhut Companies, Inc. net sales for the twenty-six week period ended July
1, 1994 were $713.4 million compared to $721.3 million for the corresponding
period in 1993. Excluding the Sold Subsidiaries, net sales for the first half
increased 9% from $654.5 million. Fingerhut had first half net sales of
$674.6 million compared to $606.1 million in 1993, an increase of 11%. Net
sales from Fingerhut's existing customer list increased 13% to $548.0 million
primarily as a result of additional mailings. Net sales from Fingerhut's new
customer acquisition programs increased 3% to $126.6 million primarily due to
increased sales per mailing. Net sales from USA Direct were $35.5 million
compared to $45.7 million for the same period in 1993, the result of different
product promotions and lower customer response. Montgomery Ward Direct had
net sales of $69.8 million compared to $35.2 million for the related period in
1993, an increase of 98%. These sales are not included as revenues in the
Company's consolidated financial statements.
Net finance income for the first half of 1994 was $94.7 million compared to
$71.4 million for the same period in 1993. The increase was due to increased
sales from Fingerhut's existing customers and a higher percent of accounts
receivable sold under the Fingerhut Master Trust.
Product cost for the twenty-six week period ended July 1, 1994 was $357.7
million or 50.1% of net sales compared to $364.6 million or 50.6% of net sales
during the comparable prior year period. The decrease as a percent of net
sales was due to the Sold Subsidiaries, which had a higher product cost as a
percent of net sales, partially offset by the timing of liquidations.
<PAGE>11
Administrative and selling expenses for the first half of 1994 were $284.7
million, or 39.9% of net sales, compared to $275.3 million, or 38.2% of net
sales, in the comparable prior year period. The increase as a percent of net
sales was due to lower sales per advertising dollar from Fingerhut's existing
and new customers and planned higher depreciation costs.
The provision for uncollectible accounts for the first half of 1994 was $90.8
million or 12.7% of net sales compared with $92.8 million or 12.9% of net
sales for the same period in the prior year. The decrease as a percent of net
sales was due to lower levels of uncollectible accounts on sales from
Fingerhut's existing and new customer acquisition programs, partially offset
by the Sold Subsidiaries which had a lower provision for uncollectible
accounts as a percent of net sales.
Discount on sale of accounts receivable for the twenty-six week period ended
July 1, 1994 was $21.0 million compared to $9.5 million for the comparable
period in 1993. The increase resulted from higher short-term interest rates,
as well as an increase in the amount of accounts receivable sold due to an
increase in sales from Fingerhut's existing customers and the replacement of
the Receivable Transfer Agreement with the Fingerhut Master Trust.
Net interest expense for the first half of 1994 was $13.7 million compared to
$19.4 million in the comparable prior year period. The decrease was primarily
attributable to the expiration of $160 million of interest rate swap
agreements on June 30, 1993.
The effective tax rate for the first twenty-six weeks of 1994 was 35.2%
compared with 33.0% in the first half of the prior year. The current tax rate
increased by approximately one percentage point compared to the prior year as
a result of the Omnibus Budget Reconciliation Act of 1993. In addition, the
1993 tax rate reflected a favorable one-time cumulative effect due to the
adoption of FAS 109, "Accounting for Income Taxes".
As a result of the items discussed above, net earnings for the twenty-six week
period ended July 1, 1994 were $26.2 million or $.52 per share, compared to
first half 1993 net earnings of $20.7 million or $.42 per share.
Liquidity and Capital Resources
The Company funds its operations through internally generated funds, the sale
of accounts receivable pursuant to the Fingerhut Master Trust, borrowings
under the Revolving Credit Facility and issuance of long-term debt and common
stock.
The Receivables Transfer Agreement was replaced with the Fingerhut Master
Trust in June 1994 (See note 4 of the Condensed Notes to Consolidated
Financial Statements). Under the Fingerhut Master Trust, Fingerhut sold a
greater percentage of its receivables, which had the effect of increasing the
proceeds received by the Company as of July 1, 1994. The proceeds received as
of July 1, 1994 and December 31, 1993 were $872.9 million and $829.0 million,
respectively, compared with $620.0 million as of June 25, 1993 and $653.0
million as of December 25, 1992.
<PAGE>12
The Revolving Credit Facility provides for aggregate commitments of $250.0
million, which includes the issuance of up to $125.0 million in letters of
credit. As of July 1, 1994 and June 25, 1993, the Company had no borrowings
under the Revolving Credit Facility but had outstanding letters of credit of
$13.9 million and $55.1 million, respectively. A total of $125.0 million of
the commitment expires in October 1994 and the remaining $125.0 million
matures in October 1997. The Company believes a replacement of the portion of
the facility that expires in October 1994 will be completed prior to the
expiration date and on acceptable terms. The outstanding portion of open
letters of credit not reflected above aggregated $36.1 million at July 1,
1994.
The Company had an aggregate amount of fixed rate notes outstanding of $245.0
million as of July 1, 1994 and $200.0 million as of June 25, 1993.
The Company generated $39.5 million of cash from operations during the twenty-
six week period ended July 1, 1994, compared with a use of $16.0 million for
the related period in 1993. This net $55.5 million increase in cash provided
from operations resulted from decreased working capital requirements. The
most significant items affecting working capital were changes in inventory and
accounts payable. The change in inventories from a use of cash in 1993 to a
source of cash in 1994 was primarily due to Fingerhut's inventory levels
remaining relatively flat in 1994 compared to increasing levels during the
comparable period in 1993, as well as the 1993 activities of the Sold
Subsidiaries. The change in accounts payable from a $24.6 million use of cash
in 1993 to a $3.2 million source of cash in 1994 resulted from the additional
week of activity in fiscal 1993 and the timing of purchases and disbursements.
The $12.0 million decrease in net cash used by investing activities was the
result of proceeds received from businesses divested at the end of the prior
year.
Three separate facility additions have been approved by the Company's Board of
Directors. The $20.0 million 500,000 square-foot warehouse and distribution
facility expansion in St. Cloud, Minnesota is planned to be fully operational
during the fourth quarter of 1994. Spending through July 1, 1994 on the St.
Cloud expansion was $5.5 million. Construction on a western distribution
center in Spanish Fork, Utah will begin in the third quarter. This one
million square-foot facility is projected to cost approximately $57.0 million
and to be fully operational in early 1996. The company also broke ground in
the third quarter for a $23.0 million data and technology center in Plymouth,
Minnesota, which is anticipated to be open in the second quarter of 1995.
In 1994, the Company has obligations to provide up to an additional $5.0
million of capital to Montgomery Ward Direct. At July 1, 1994, the Company's
aggregate capital investment in Montgomery Ward Direct was $5.0 million.
<PAGE>13
The Company leases certain office and warehouse facilities that, during the
remainder of 1994, the lessor has the right to require the Company to
purchase. If the lessor exercises this right, the Company will purchase the
facilities for approximately $15 million in the first half of 1995.
During the first quarter of 1994, the Company signed long-term cable
agreements with Time Warner Cable and Continental Cablevision relating to S
The Shopping Network, Inc. These agreements require payments to be made to
Time Warner and Continental in exchange for cable carriage and other services.
The Company has continued to fund startup of S Network operations, currently
scheduled to launch in late 1994. Recent events in the cable home shopping
industry, including proposed acquisitions and/or mergers, however, may affect
the timing of the S Network launch.
On May 12, 1994, the Company announced that its Board of Directors authorized
the repurchase of up to 500,000 shares of the Company's common stock that may
be made from time to time at prevailing prices in the open market or by block
purchase and may be discontinued at any time. The purchases will be made
within certain restrictions relating to volume, price and timing in order to
minimize the impact of the purchase on the market for the Company's stock. No
shares were purchased during the second quarter of 1994. In July 1994, the
Company repurchased 55,000 shares of its common stock at prevailing market
prices.
The Company believes it will have sufficient funds available to meet current
and anticipated commitments.
On June 30, 1994, the final $100.0 million of interest rate swap agreements
expired. These agreements carried a fixed interest rate of 9.5% and thus,
will favorably impact interest expense in future periods.
On July 21, 1994, the Company declared a cash dividend of $.04 per share, or
an aggregate of $1.9 million, payable on August 25, 1994, to the shareholders
of record as of the close of business on August 4, 1994.
<PAGE>14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.a. Purchase Agreement dated as of June 29, 1994
between Fingerhut Receivables, Inc. and Fingerhut
Corporation.
10.b. Pooling and Servicing Agreement dated as of June
29, 1994 among Fingerhut Receivables, Inc., as
Transferor, Fingerhut Corporation, as Servicer,
and The Bank of New York (Delaware), as Trustee
on behalf of the Certificate holders of the
Fingerhut Master Trust.
10.b(i) Series 1994-1 Supplement dated as of June 29,
1994.
11 Computation of Earnings per Share
(b) Reports on Form 8-K:
None
<PAGE>15
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.
FINGERHUT COMPANIES, INC.
Date: August 15, 1994 By:
/s/ Daniel J. McAthie
Daniel J. McAthie
Senior Vice President
Chief Financial Officer
(Principal Financial Officer)
Date: August 15, 1994 By:
/s/ Michael N. Albrecht
Michael N. Albrecht
Vice President, Corporate Controller
and Investor Relations
(Principal Accounting Officer)
FINGERHUT RECEIVABLES, INC.
Buyer
and
FINGERHUT CORPORATION
Seller
PURCHASE AGREEMENT
Dated as of June 29, 1994
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions. . . . . . . . . . 2
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING
OF RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Sale . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
CONSIDERATION AND PAYMENT . . . . . . . . . . . . . . . . . . 6
Section 3.1 Purchase Price . . . . . . . . . . . . . . . . . 6
Section 3.2 Payment of Purchase Price. . . . . . . . . . . . 6
Section 3.3 Settlement . . . . . . . . . . . . . . . . . . . 6
Section 3.4 Capital Contribution . . . . . . . . . . . . . . 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . 8
Section 4.1 Seller's Representations and Warranties. . . . . 8
Section 4.2 Seller's Representations and Warranties
Regarding Receivables. . . . . . . . . . . . . . . 11
Section 4.3 Representations and Warranties of
the Buyer. . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
COVENANTS OF SELLER AND BUYER . . . . . . . . . . . . . . . . 16
Section 5.1 Seller Covenants . . . . . . . . . . . . . . . . 16
Section 5.2 Addition of Receivables. . . . . . . . . . . . . 18
Section 5.3 Buyer Covenant Regarding Sale Treatment. . . . . 18
ARTICLE VI
REPURCHASE OBLIGATION . . . . . . . . . . . . . . . . . . . . 19
Section 6.1 Mandatory Repurchase . . . . . . . . . . . . . . 19
Section 6.2 Conveyance of Reassigned Receivables . . . . . . 20
ARTICLE VII
CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 21
Section 7.1 Conditions to the Buyer's Obligations
Regarding Receivables. . . . . . . . . . . . . . . 21
Section 7.2 Conditions Precedent to the Seller's
Obligations. . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII
TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . . . 23
Section 8.1 Termination. . . . . . . . . . . . . . . . . . . 23
ARTICLE IX
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . 24
Section 9.1 Amendment . . . . . . . . . . . . . . . . . . . 24
Section 9.2 Governing Law . . . . . . . . . . . . . . . . . 24
Section 9.3 Notices . . . . . . . . . . . . . . . . . . . . 24
Section 9.4 Severability of Provisions. . . . . . . . . . . 24
Section 9.5 Assignment. . . . . . . . . . . . . . . . . . . 25
Section 9.6 Further Assurances. . . . . . . . . . . . . . . 25
Section 9.7 No Waiver; Cumulative Remedies. . . . . . . . . 25
Section 9.8 Counterparts. . . . . . . . . . . . . . . . . . 26
Section 9.9 Binding Effect; Third-Party Beneficiaries . . . 26
Section 9.10 Merger and Integration. . . . . . . . . . . . 26
Section 9.11 Headings. . . . . . . . . . . . . . . . . . . . 26
Section 9.12 Schedules and Exhibits. . . . . . . . . . . . . 26
Section 9.13 No Bankruptcy Petition Against the Buyer. . . . 26
Section 9.14 Merger or Consolidation of, or
Assumption of the Obligations of, the
Seller . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.15 Protection of Right, Title and Interest
to Receivables . . . . . . . . . . . . . . . . . . 27
Exhibit A Form of Weekly Report
Schedule 1 Seller's Chief Executive Office
Schedule 2 Tax Returns and Payments
PURCHASE AGREEMENT, dated as of June 29, 1994
(the "Agreement"), by and between FINGERHUT CORPORATION,
a Minnesota corporation ("Fingerhut" or the "Seller"),
and FINGERHUT RECEIVABLES, INC., a Delaware corporation
("FRI" or the "Buyer").
W I T N E S S E T H :
WHEREAS, the Buyer desires to purchase from
time to time certain installment sale contract receiv-
ables generated on or before the Initial Closing Date or
to be generated after the Initial Closing Date by the
Seller in the normal course of its business;
WHEREAS, the Seller desires to sell and assign
from time to time certain installment sale contract re-
ceivables to the Buyer upon the terms and conditions
hereinafter set forth;
WHEREAS, the Buyer is an Affiliate of the Sell-
er;
NOW, THEREFORE, it is hereby agreed by and
between the Buyer and the Seller as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of
this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires, capital-
ized terms used herein shall have the following meanings
assigned to them:
"Credit Adjustment" shall have the meaning set
forth in Section 3.2(b) hereof.
"Involuntary Case" shall have the meaning set
forth in Section 2.1(c) hereof.
"Opinion of Counsel" shall mean a written
opinion of counsel acceptable to the Buyer and the Sell-
er, which counsel may be an employee of the Seller.
"Pooling and Servicing Agreement" shall mean
the pooling and servicing agreement dated as of June 29,
1994 by and among the Transferor, Fingerhut and the
Trustee.
"Purchase Price" shall have the meaning set
forth in Section 3.1 hereof.
"Sale Papers" shall have the meaning set forth
in Section 4.1(c) hereof.
"Secured Obligations" shall have the meaning
set forth in Section 2.1(f) hereof.
"Seller's Discount" shall mean, for any day on
which Receivables are conveyed hereunder, the discount
used to determine the Seller's accounting basis in the
Receivables on such day.
"Termination Date" shall have the meaning set
forth in Section 8.1 hereof.
Section 1.2 Other Definitional Provisions.
The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any Sale
Paper shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; and Section,
Subsection, Schedule and Exhibit references contained in
this Agreement are references to Sections, Subsections,
Schedules and Exhibits in or to this Agreement unless
otherwise specified. All capitalized terms not otherwise
defined herein are defined in the Pooling and Servicing
Agreement. In the event that any term or provision
contained herein shall conflict with or be inconsistent
with any provisions contained in the Pooling and Servic-
ing Agreement, the terms and provisions contained herein
shall govern with respect to this Agreement.
[END OF ARTICLE I]
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING
OF RECEIVABLES
Section 2.1 Sale. (a) In consideration for
the Purchase Price and upon the terms and subject to the
conditions set forth herein, the Seller does hereby sell,
assign, transfer, set-over, and otherwise convey to the
Buyer, and the Buyer does hereby purchase from the Sell-
er, on the terms and subject to the conditions specifi-
cally set forth herein, all of the Seller's right, title
and interest in, to and under (i) the Receivables now
existing and hereafter created and all monies due or to
become due with respect thereto, (ii) Recoveries and
(iii) all proceeds of the foregoing. The foregoing sale,
transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or
an assumption by the Buyer of any obligation of the
Seller in connection with the Receivables or any agree-
ment or instrument relating thereto, including, without
limitation, any obligation to any Obligors or insurers.
(b) In connection with the foregoing sale, the
Seller agrees to record and file on or prior to the
Initial Closing Date, at its own expense, a financing
statement or statements with respect to the Receivables
and the other property described in Section 2.1(a) sold
by the Seller hereunder meeting the requirements of
applicable state law in such manner and in such jurisdic-
tions as are necessary to perfect and protect the inter-
ests of the Buyer created hereby under the applicable UCC
against all creditors of and purchasers from the Seller,
and to deliver a file-stamped copy of such financing
statements or other evidence of such filings to the Buyer
within 10 days after the Initial Closing Date.
(c) The Buyer shall not purchase Receivables
hereunder if the Seller shall become an involuntary party
to (or be made the subject of) any bankruptcy proceeding
or any other insolvency, readjustment of debt, marshal-
ling of assets and liabilities or similar proceedings of
or relating to the Seller or relating to all or substan-
tially all of its property (an "Involuntary Case") upon
receipt by the Seller at its head corporate office of
notice of such Involuntary Case.
(d) The Buyer shall not purchase Receivables
hereunder if the Seller shall admit in writing its in-
ability to pay its debts as they are due, or the Seller
shall commence a voluntary case under the federal bank-
ruptcy laws, as now or hereafter in effect, or any pres-
ent or future federal or state bankruptcy, insolvency or
similar law, or the Seller shall consent to the appoint-
ment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other
similar official of the Seller or of any substantial part
of its property or the Seller shall make an assignment
for the benefit of creditors or the Seller shall fail
generally to pay its debts as such debts become due or
the Seller shall take corporate action in furtherance of
any of the foregoing.
(e) In connection with the sale and conveyance
hereunder, the Seller agrees, at its own expense, on or
prior to the Initial Closing Date and on each Business
Day thereafter, to indicate or cause to be indicated
clearly and unambiguously in its accounting records that
such Receivables and the other property described in
clauses (i), (ii) and (iii) of Section 2.1(a) have been
sold to the Buyer pursuant to this Agreement as of the
Initial Closing Date or such Business Day as applicable.
(f) It is the express intent of the Seller and
the Buyer that the conveyance of the Receivables by the
Seller to the Buyer pursuant to this Agreement be con-
strued as a sale of such Receivables by the Seller to the
Buyer. It is, further, not the intention of the Seller
and the Buyer that such conveyance be deemed a grant of a
security interest in the Receivables by the Seller to the
Buyer to secure a debt or other obligation of the Seller.
However, in the event that, notwithstanding the intent of
the parties, the Receivables are held to continue to be
property of the Seller, then (i) this Agreement also
shall be deemed to be and hereby is a security agreement
within the meaning of the UCC; and (ii) the conveyance by
the Seller provided for in this Agreement shall be deemed
to be and the Seller hereby grants to the Buyer a securi-
ty interest in and to all of the Seller's right, title
and interest in (w) all Receivables outstanding on the
Initial Closing Date and thereafter created by the Seller
and all rights (but not the obligations) relating to such
Receivables, (x) with respect to the Receivables, all
accounts (as defined in the applicable UCC) outstanding
on the Initial Closing Date and thereafter created by
the Seller, and all rights (but not the obligations)
relating thereto, (y) all monies due or to become due
with respect thereto and (z) all proceeds of the forego-
ing to secure (1) the rights of the Buyer and (2) a loan
to the Seller in the amount of the Purchase Price as set
forth in this Agreement (the "Secured Obligations"). The
Seller and the Buyer shall, to the extent consistent with
this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a
security interest in the Receivables, such security
interest would be deemed to be a perfected security
interest of first priority in favor of the Buyer under
applicable law and will be maintained as such throughout
the term of this Agreement. The Seller and the Buyer may
rely upon an Opinion of Counsel addressed to them as to
what is required to provide the Buyer with such security
interest; and any such Opinion of Counsel shall permit
the Trustee, on behalf of the Certificateholders, the
Certificateholders (in the case of any Series issued in a
placement exempt from the registration requirements of
the Securities Act) and the Rating Agencies to rely on
it.
[END OF ARTICLE II]
ARTICLE III
CONSIDERATION AND PAYMENT
Section 3.1 Purchase Price. The Purchase
Price for the Receivables and related property conveyed
to the Buyer under this Agreement shall be a dollar
amount equal to for Receivables transferred on any date,
the product of (i) the aggregate Outstanding Balance of
all Receivables as of the Initial Closing Date, and (ii)
one minus the then applicable Seller's Discount.
Section 3.2 Payment of Purchase Price.
(a) The Purchase Price for Receivables shall be paid or
provided for on the Initial Closing Date with respect to
the Receivables existing on the Initial Closing Date and
on each Business Day thereafter on which Receivables are
transferred hereunder, as the case may be, by payment in
immediately available funds to the extent such funds are
available. To the extent that the total Purchase Price
for Receivables is not paid in full by the Buyer on the
Initial Closing Date or on each Business Day on which Re-
ceivables are purchased hereunder in cash, the Seller
shall be deemed to have contributed Receivables in an
aggregate principal amount equal to such shortfall to the
Buyer.
(b) The Purchase Price shall be adjusted on a
monthly basis (a "Credit Adjustment") with respect to any
Receivable adjusted as provided in subsection 3.8 of the
Pooling and Servicing Agreement in an amount equal to the
amount of such Credit Adjustment specified in subsection
3.8 of the Pooling and Servicing Agreement. If the Buyer
is required thereunder to deposit amounts into the Excess
Funding Account, the Seller shall pay the amount so
adjusted to the Buyer.
Section 3.3 Settlement. On each Tuesday (or
if any Tuesday is not a Business Day the next succeeding
Business Day), the Seller shall deliver to the Buyer a
Weekly Report showing the aggregate Purchase Price of Re-
ceivables generated, the aggregate amount of Receivables
deemed to have been contributed by the Seller to the
Buyer, the aggregate amount, if any, paid to the Buyer
pursuant to Section 6.1 hereof, the aggregate amount of
cash paid for Receivables generated in each case for the
period from and including the preceding Tuesday (or next
succeeding Business Day, as applicable) to but not in-
cluding such Tuesday.
Section 3.4 Capital Contribution. The Seller
has contributed cash in exchange for 100 shares of common
stock of the Buyer, which 100 shares represent all of the
outstanding capital stock of the Buyer. In addition, in
connection with the sale of Receivables to the Buyer on
the Initial Closing Date, Receivables with an Outstanding
Balance equal to $194,986,254.91 shall be deemed paid for
by the Buyer with cash and such cash shall be retained by
the Buyer and will be considered to have been contributed
to the Buyer as capital surplus.
[END OF ARTICLE III]
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Seller's Representations and
Warranties. The Seller represents and warrants to the
Buyer as of the Initial Closing Date, and shall be deemed
to represent and warrant as of the date of any Supplement
and the related Closing Date, that:
(a) Organization and Good Standing. The
Seller is a corporation duly organized and validly exist-
ing in good standing under the laws of the State of
Minnesota and has the corporate power and authority and
legal right to own its property and conduct its business
as such properties are presently owned and as such busi-
ness is presently conducted and to execute, deliver and
perform its obligations under this Agreement and each
other document or instrument to be delivered by the
Seller hereunder (collectively, the "Sale Papers").
(b) Due Qualification. The Seller is duly
qualified to do business and is in good standing (or is
exempt from such requirements), as a foreign corporation
in any state required in order to conduct business, and
has obtained all necessary licenses and approvals with
respect to the Seller required under applicable law.
(c) Due Authorization. The execution and
delivery of Sale Papers, and the consummation of the
transactions provided for herein and therein have been
duly authorized by the Seller by all necessary corporate
action on its part.
(d) Binding Obligation. Each of the Sale
Papers, and the consummation of the transactions provided
for therein, constitutes a legal, valid and binding obli-
gation of the Seller, enforceable in accordance with its
terms, except as enforceability may be limited by appli-
cable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereinafter in effect,
affecting the enforcement of creditors' rights in general
and as such enforceability may be limited by general
principles of equity (whether considered in a proceeding
at law or in equity).
(e) No Conflicts. The execution and delivery
of the Sale Papers and the performance of the transac-
tions contemplated thereby, do not (i) contravene the
Seller's charter or by-laws or (ii) violate any material
provision of law applicable to it or require any filing
(except for the filings under the UCC), registration,
consent or approval under, any law, rule, regulation,
order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to the
Seller, except for such filings, registrations, consents
or approvals as have already been obtained and are in
full force and effect.
(f) Taxes. Except as specified on Schedule 2,
the Seller has filed all tax returns required to be filed
and has paid or made adequate provision for the payment
of all taxes, assessments and other governmental charges
due from the Seller or is contesting any such tax, as-
sessment or other governmental charge in good faith
through appropriate proceedings.
(g) No Violation. The execution and delivery
of the Sale Papers, the performance of the transactions
contemplated by the Sale Papers and the fulfillment of
the terms thereof, will not violate any Requirements of
Law applicable to the Seller, will not violate, result in
any breach of any of the material terms and provisions of
or constitute (with or without notice or lapse of time or
both) a default under any Requirement of Law applicable
to the Seller, or any material indenture, contract,
agreement, mortgage, deed of trust or other material in-
strument to which the Seller is a party or by which it or
its properties are bound.
(h) No Proceedings. There are no proceedings
or investigations pending or, to the best knowledge of
the Seller, threatened against the Seller before any
Governmental Authority (i) asserting the invalidity of
the Sale Papers, (ii) seeking to prevent the consummation
of any of the transactions contemplated thereby, (iii)
seeking any determination or ruling that would materially
and adversely affect the performance by the Seller of its
obligations thereunder or (iv) seeking any determination
or ruling that would materially and adversely affect the
validity or enforceability thereof.
(i) All Consents Required. All approvals,
authorizations, consents, orders or other actions of any
Governmental Authority required in connection with the
execution and delivery of the Sale Papers, the perfor-
mance of the transactions contemplated by the Sale Papers
and the fulfillment of the terms hereof and thereof, have
been obtained.
(j) Bona Fide Receivables. Each Receivable is
or will be an account receivable arising out of the sale
of consumer goods, services or financial service products
by the Seller. The Seller has no knowledge of any fact
which should have led it to expect at the time of the
classification of any Receivable as an Eligible Receiv-
able that such Receivable would not be paid in full when
due, and each Receivable classified as an Eligible Re-
ceivable by the Seller in any document or report deliv-
ered under this Agreement satisfies the requirements of
eligibility contained in the definition of Eligible
Receivable set forth in the Pooling and Servicing Agree-
ment.
(k) Place of Business. The principal execu-
tive offices of the Seller are in Minnetonka, Minnesota
and the offices where the Seller keeps its records con-
cerning the Receivables and related Contracts are in
Minnetonka, Minnesota and St. Cloud, Minnesota.
(l) Use of Proceeds. No proceeds of the sale
of any Receivable hereunder received by the Seller will
be used by the Seller to purchase or carry any margin
stock.
(m) Pay Out Event. As of the Initial Closing
Date, no Pay Out Event and no condition that with the
giving of notice and/or the passage of time would consti-
tute a Pay Out Event (a "Prospective Pay Out Event"), has
occurred and is continuing.
(n) Not an Investment Company. The Seller is
not an "investment company" within the meaning of the In-
vestment Company Act, or is exempt from all provisions of
such Act.
The representations and warranties set forth in
this Section 4.1 shall survive the sale of the Receiv-
ables to the Buyer. The Seller hereby represents and
warrants to the Buyer, that the representations and
warranties of the Seller set forth in Section 4.1 are
true and correct as of such date. Upon discovery by the
Seller or the Buyer of a material breach of any of the
foregoing representations and warranties, the party
discovering such breach shall give prompt written notice
thereof to the other.
Section 4.2 Seller's Representations and
Warranties Regarding Receivables.
(a) Valid Sale, etc. The Seller (x) hereby
represents and warrants as of the Initial Closing Date,
with respect to the Receivables created on or prior to,
and outstanding on, such date and (y) shall be deemed to
represent and warrant as of the date of the creation and
transfer to the Buyer of any Receivables with respect to
such Receivables, that:
(i) Each of this Agreement and the Pool-
ing and Servicing Agreement constitutes the legal,
valid and binding obligation of the Seller, enforce-
able against the Seller in accordance with its
terms, except (A) as such enforceability may be
limited by applicable bankruptcy, insolvency, reor-
ganization, moratorium or other similar laws now or
hereafter in effect, affecting the enforcement of
creditors' rights in general, and (B) as such en-
forceability may be limited by general principles of
equity (whether considered in a suit at law or in
equity).
(ii) The transfer of Receivables by the
Seller to the Buyer under this Agreement constitutes
a valid sale, transfer, assignment, set-over and
conveyance to the Buyer of all right, title and
interest of the Seller in and to the Receivables,
whether then existing or thereafter created, and
such Receivables will be held by the Buyer free and
clear of any Lien of any Person claiming through or
under the Seller or any of its Affiliates except for
Permitted Liens. This Agreement constitutes a valid
sale, transfer, assignment, set-over and conveyance
to the Buyer of all right, title and interest of the
Seller in and to the Receivables purported to be
sold hereunder, whether then existing or thereafter
created and the proceeds thereof.
(iii) The Seller is not insolvent and
will not be rendered insolvent upon sale of the
Receivables to the Buyer.
(iv) The Seller is (or, with respect to
Receivables arising after the date hereof, will be)
the legal and beneficial owner of all right, title
and interest in and to each Receivable and each
Receivable has been or will be transferred to the
Buyer free and clear of any Lien other than Permit-
ted Liens.
(v) All consents, licenses, approvals or
authorizations of or registrations or declarations
with any Governmental Authority required in connec-
tion with the transfer of such Receivables to the
Buyer have been obtained.
(vi) Each Receivable classified as an
"Eligible Receivable" by the Seller in any document
or report delivered hereunder will satisfy the
requirements contained in the definition of Eligible
Receivable as of the time of such document or re-
port.
(vii) Each Receivable then existing has
been conveyed to the Buyer free and clear of any
Lien of any Person claiming through or under the
Seller or any of its Affiliates (other than Permit-
ted Liens) and in compliance, in all material re-
spects, with all Requirements of Law applicable to
the Seller.
(b) Daily Representations and Warranties. On
each day on which any new Receivable is created by the
Seller, the Seller shall be deemed to represent and war-
rant to the Buyer that (A) each Receivable purchased by
the Seller on such day has been conveyed to the Buyer in
compliance, in all material respects, with all Require-
ments of Law applicable to the Seller and free and clear
of any Lien of any Person claiming through or under the
Seller or any of its Affiliates (other than Permitted
Liens) and (B) with respect to each such Receivable, all
consents, licenses, approvals or authorizations of or
registrations or declarations with, any Governmental
Authority required to be obtained, effected or given by
the Seller in connection with the conveyance of such Re-
ceivable to the Buyer have been duly obtained, effected
or given and are in full force and effect.
(c) Notice of Breach. The representations and
warranties set forth in this Section 4.2 shall survive
the sale, transfer and assignment of the respective Re-
ceivables to the Buyer. Upon discovery by the Seller or
the Buyer of a breach of any of the representations and
warranties set forth in this Section 4.2, the party
discovering such breach shall give prompt written notice
thereof to the other. The Seller agrees to cooperate
with the Buyer in attempting to cure any such breach.
Section 4.3 Representations and Warranties of
the Buyer. The Buyer hereby represents and warrants and
agrees with, as of the date hereof and as of the Initial
Closing Date, the Seller and shall be deemed to represent
and warrant as of the date of the creation of any Receiv-
able sold to the Buyer hereunder that:
(a) Organization and Good Standing. The Buyer
is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and
has the corporate power and authority and legal right to
own its property and conduct its business as such prop-
erties are presently owned and such business is presently
conducted and to execute, deliver, and perform its obli-
gations under the Sale Papers.
(b) Due Qualification. The Buyer is duly
qualified to do business and is in good standing (or is
exempt from such requirements) as a foreign corporation
in any state required in order to conduct business and
has obtained all necessary licenses and approvals with
respect to the Buyer required under federal and Delaware
law.
(c) Due Authorization. The execution and
delivery of the Sale Papers and the consummation of the
transactions provided for in the Sale Papers have been
duly authorized by the Buyer by all necessary corporate
action on its part.
(d) No Conflicts. The execution and delivery
of the Sale Papers and the performance of the transac-
tions contemplated thereby do not (i) contravene the
Buyer's certificate of incorporation or by-laws or (ii)
violate any material provision of law applicable to it,
or require any filing (except for the filings under the
UCC), registration, consent or approval under, any law,
rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having
applicability to the Buyer, except for such filings,
registrations, consents or approvals as have already been
obtained and are in full force and effect.
(e) No Violation. The execution and delivery
of the Sale Papers, the performance of the transactions
contemplated by the Sale Papers, and the fulfillment of
the terms of the Sale Papers will not violate any Re-
quirements of Law applicable to the Buyer, will not
violate, result in any breach of any of the material
terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under any
Requirement of Law applicable to the Buyer, or any mate-
rial indenture, contract, agreement, mortgage, deed of
trust or other material instrument to which the Buyer is
a party or by which it or its properties are bound.
(f) No Proceedings. There are no proceedings
or investigations pending or, to the best knowledge of
the Buyer, threatened against the Buyer, before any
Governmental Authority (i) asserting the invalidity of
the Sale Papers, (ii) seeking to prevent the consummation
of any of the transactions contemplated by the Sale Pa-
pers, (iii) seeking any determination or ruling that
would materially and adversely affect the performance by
the Buyer of its obligations thereunder or (iv) seeking
any determination or ruling that would materially and ad-
versely affect the validity or enforceability of the Sale
Papers.
(g) All Consents Required. All approvals,
authorizations, consents, orders, or other actions of any
Governmental Authority required in connection with the
execution and delivery of the Sale Papers, the perfor-
mance of the transactions contemplated by the Sale Pa-
pers, and the fulfillment of the terms of the Sale Papers
have been obtained.
The representations and warranties set forth in
this Section 4.3 shall survive the sale of the Receiv-
ables to the Buyer. The Buyer hereby represents and
warrants to the Seller that the representations and
warranties of the Buyer set forth in Section 4.3 are true
and correct as of such date. Upon discovery by the Buyer
or the Seller of a breach of any of the foregoing repre-
sentations and warranties, the party discovering such
breach shall give prompt written notice to the other.
[END OF ARTICLE IV]
ARTICLE V
COVENANTS OF SELLER AND BUYER
Section 5.1 Seller Covenants. The Seller
hereby covenants that:
(a) Receivables to be Accounts or General
Intangibles. The Seller will take no action to cause any
Receivable to be evidenced by any instrument (as defined
in the UCC as in effect in the Relevant UCC State),
except in connection with the enforcement or collection
of a Receivable. Except in such circumstances, the
Seller will take no action to cause any Receivable to be
anything other than an "account" (as defined in the UCC
as in effect in the Relevant UCC State).
(b) Security Interests. Except for the con-
veyances hereunder, the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien, on any Receiv-
able, whether now existing or hereafter created, or any
interest therein; the Seller will immediately notify the
Buyer of the existence of any Lien on any Receivable; and
the Seller shall defend the right, title and interest of
the Buyer in, to and under the Receivables, whether now
existing or hereafter created, against all claims of
third parties claiming through or under the Seller;
provided, however, that nothing in this subsection 5.1(b)
shall prevent or be deemed to prohibit the Seller from
suffering to exist upon any of the Receivables any Per-
mitted Lien.
(c) Contracts and Credit and Collection Poli-
cies. The Seller shall take all actions reasonably
within its control to comply with and perform its obliga-
tions under the Contracts relating to the Receivables and
the Credit and Collection Policy except insofar as any
failure to comply or perform would not materially and ad-
versely affect the rights of the Buyer. The Seller may
change the terms and provisions of the Contracts or the
Credit and Collection Policy in any respect (i) if it
would not, in the reasonable belief of the Seller, mate-
rially impair the collectibility of any Receivable or
cause, immediately or with the passage of time, a Pay Out
Event to occur and (ii) if such change (A) (if it owns a
comparable segment of receivables) is made applicable to
the comparable segment of the receivables owned by the
Buyer or Seller, if any, which have characteristics the
same as, or substantially similar to, the Receivables
that are the subject of such change and (B) (if it does
not own such a comparable segment of receivables) will
not be made with the intent to materially benefit the
Seller over the Buyer or to materially adversely affect
the Buyer, except as otherwise restricted by an endorse-
ment, sponsorship, or other agreement between the Seller
and an unrelated third party or by the terms of the
Contracts.
(d) [Reserved]
(e) Delivery of Collections. In the event
that the Seller receives Collections, the Seller agrees
to deposit such Collections into the Collection Account
as soon as practicable after the receipt thereof, but in
no event later than the second Business Day following the
Date of Processing thereof.
(f) Conveyance of Receivables. Except as
provided in Section 9.5, the Seller covenants and agrees
that it will not convey, assign, exchange or otherwise
transfer any Receivable, to any Person other than the
Buyer prior to the termination of this Agreement pursuant
to Article VIII except for transfers to the Fingerhut
Credit Card Bank; provided, however, that the Seller
shall not be prohibited hereby from conveying, assign-
ing, exchanging or otherwise transferring a Receivable in
connection with a transaction in which the Seller and its
successor agree to comply with provisions substantially
similar to those of Section 9.14.
(g) Notice of Liens. The Seller shall notify
the Buyer promptly after becoming aware of any Lien on
any Receivable other than Permitted Liens.
(h) Separate Business. The Seller will not
permit its assets to be commingled with those of the
Buyer and the Seller shall maintain separate corporate
records and books of account from those of the Buyer.
The Seller will not conduct its business in the name of
the Buyer and will cause the Buyer to conduct its busi-
ness solely in its own name so as not to mislead others
as to the identity of the entity with which those others
are concerned. The Seller will provide for its own
operating expenses and liabilities from its own funds.
The Seller will not hold itself out, or permit itself to
be held out, as having agreed to pay, or as generally
being liable for, the debts of the Buyer, except that the
organizational expenses of the Buyer may be paid by the
Seller and that the Seller will contribute to the Trans-
feror on the Initial Closing Date a demand note. The
Seller shall cause the Buyer not to hold itself out, or
permit itself to be held out, as having agreed to pay, or
as being liable for, the debts of the Seller. The Seller
will maintain an arm's length relationship with the Buyer
with respect to any transactions between the Seller, on
the one hand, and the Buyer, on the other.
Section 5.2 Addition of Receivables.
All receivables which meet the definition of
Receivables shall be included as Receivables from and
after the date upon which such Receivables are created
and all such Receivables, whether such Receivables are
then existing or thereafter created, shall be sold auto-
matically to the Buyer upon creation by the Seller.
Section 5.3 Buyer Covenant Regarding Sale
Treatment. The Buyer agrees to treat this conveyance for
all purposes (including, without limitation, tax and
financial accounting purposes) as a sale on all relevant
books, records, tax returns, financial statements and
other applicable documents.
[END OF ARTICLE V]
ARTICLE VI
REPURCHASE OBLIGATION
Section 6.1 Mandatory Repurchase.
(a) Breach of Warranty. In the event of a
breach with respect to a Receivable of any of the repre-
sentations and warranties set forth in Section 4.1(j) or
subsections 4.2(a)(iii) through (vii) or 4.2(b), or in
the event that a Receivable is not an Eligible Receivable
on the date of its transfer to the Buyer as a result of
the failure to satisfy the conditions set forth in the
definition of Eligible Receivable, such Receivable shall
be designated an "Ineligible Receivable" and the Seller
shall pay to the Buyer an amount in cash equal to the
purchase price paid for any such Ineligible Receivable by
the Buyer to the Seller. Such payment must be made by
the close of business on the fifth Business Day following
the day such Receivable has been designated an Ineligible
Receivable; provided, however, that such amount may be
offset against any amounts due from the Buyer to the
Seller with respect to the Purchase Price for Receivables
sold to the Buyer on such day. The obligation of the
Seller set forth in this Section shall constitute the
sole remedy respecting any breach of the representations
and warranties set forth in the above-referenced Sections
or failure to meet the conditions set forth in the defi-
nition of Eligible Receivable with respect to such Re-
ceivable available to the Buyer.
(b) Reassignment of the Sold Assets. In the
event of a breach of any of the representations and
warranties set forth in Section 4.1(a), (b), and (c) and
4.2(a)(i) and (ii), the Buyer by notice given in writing
to the Seller may direct the Seller to accept reassign-
ment of the Receivables at the amount specified below
within 60 days of such notice (or within such longer
period as may be specified in such notice), and the
Seller shall be obligated to accept reassignment of the
Receivables within such applicable period on the terms
and conditions set forth below; provided, however, that
no such reassignment shall be required to be made if, at
any time during such applicable period, the Seller deliv-
ers to the Buyer an Officer's Certificate stating that
the representations and warranties contained in Section
4.1(a), (b), and (c) and 4.2(a)(i) and (ii) shall then be
true and correct in all material respects as if made on
such day. The Seller shall pay to the Buyer on the day
of such reassignment an amount equal to the aggregate In-
vested Amount plus accrued and unpaid interest on the
Investor Certificates. On the day on which such amount
has been paid, each Receivable shall be sold and reas-
signed to the Seller, and the Buyer shall execute and
deliver such instruments of sale and assignment, in each
case without recourse, representation or warranty, as
shall be reasonably requested by the Seller to vest in
the Seller, or its designee or assignee, all right, title
and interest of the Buyer in and to each Receivable. The
obligation of the Seller to purchase each Receivable
pursuant to this Section shall constitute the sole remedy
available to the Buyer for a breach of the representa-
tions and warranties contained in Section 4.1(a), (b),
and (c) and 4.2(a)(i) and (ii).
Section 6.2 Conveyance of Reassigned Receiv-
ables. Upon the request of the Seller, the Buyer shall
execute and deliver to the Seller a reconveyance substan-
tially in such form and upon such terms as shall be
acceptable to the Seller, pursuant to which the Buyer
evidences the conveyance to the Seller of all of the
Buyer's right, title, and interest in any Receivables
reconveyed to the Seller pursuant to Section 6.1(b). The
Buyer shall (and shall cause the Trustee to) execute such
other documents or instruments of conveyance or take such
other actions as the Seller may reasonably require to
effect any repurchase of Receivables pursuant to this
Article VI.
[END OF ARTICLE VI]
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to the Buyer's Obliga-
tions Regarding Receivables. The obligations of the
Buyer to purchase the Receivables on any Business Day
shall be subject to the satisfaction of the following
conditions:
(a) All representations and warranties of the
Seller contained in this Agreement shall be true and
correct on the Initial Closing Date and on the day of
creation of any Receivable created thereafter with the
same effect as though such representations and warranties
had been made on such date;
(b) All information concerning the Receivables
provided to the Buyer shall be true and correct in all
material respects as of the Initial Closing Date, in the
case of Receivables sold to the Buyer on the Initial
Closing Date, or the applicable Date of Processing, in
the case of Receivables created after the Initial Closing
Date;
(c) At the Initial Closing Date, the Seller
shall have substantially performed all other obligations
required to be performed by the provisions of this Agree-
ment;
(d) With respect to Receivables sold to the
Buyer on the Initial Closing Date, the Seller shall have
filed the financing statement(s) required to be filed
pursuant to Section 2.1(b); and
(e) All corporate and legal proceedings and
all instruments in connection with the transactions
contemplated by this Agreement shall be satisfactory in
form and substance to the Buyer, and the Buyer shall have
received from the Seller copies of all documents (includ-
ing, without limitation, records of corporate proceed-
ings) relevant to the transactions herein contemplated as
the Buyer may reasonably have requested.
Section 7.2 Conditions Precedent to the
Seller's Obligations. The obligations of the Seller to
sell Receivables on any Business Day shall be subject to
the satisfaction of the following conditions:
(a) All representations and warranties of the
Buyer contained in this Agreement shall be true and
correct with the same effect as though such representa-
tions and warranties had been made on such date;
(b) Payment or provision for payment of the
Purchase Price in accordance with the provisions of
Section 3.3 hereof shall have been made; and
(c) All corporate and legal proceedings and
all instruments in connection with the transactions
contemplated by this Agreement shall be satisfactory in
form and substance to the Seller, and the Seller shall
have received from the Buyer copies of all documents
(including, without limitation, records of corporate
proceedings) relevant to the transactions herein contem-
plated as the Seller may reasonably have requested.
[END OF ARTICLE VII]
ARTICLE VIII
TERM AND TERMINATION
Section 8.1 Termination. Upon the termination
of the Trust pursuant to Section 12.1 of the Pooling and
Servicing Agreement and the surrender of the Exchangeable
Transferor's Certificate, the Buyer shall return to the
Seller (without recourse, representation or warranty) all
right, title and interest of the Buyer in the Receiv-
ables, whether then existing or thereafter created, all
moneys due or to become due with respect thereto, and all
proceeds thereof except for amounts held by the Trustee
pursuant to subsection 12.3(b) of the Pooling and Servic-
ing Agreement. The Buyer shall execute and deliver such
instruments of transfer and assignment, in each case
without recourse, as shall be reasonably requested by the
Seller to vest in the Seller all right, title and inter-
est which the Buyer had in the Receivables.
[END OF ARTICLE VIII]
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Amendment. This Agreement and any
other Sale Papers and the rights and obligations of the
parties hereunder may not be changed orally, but only by
an instrument in writing signed by the Buyer and the
Seller. The Seller shall provide prompt written notice
of any such amendment to the Rating Agencies.
Section 9.2 Governing Law. THIS AGREEMENT AND
THE OTHER SALE PAPERS SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 9.3 Notices. All demands, notices and
communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered at
or mailed by registered mail, return receipt requested,
to:
(a) in the case of the Buyer, to:
Fingerhut Receivables, Inc.
4400 Baker Road, Suite F480
Minnetonka, Minnesota 55343
(612) 936-5035
(b) in the case of the Seller, to:
Fingerhut Corporation
4400 Baker Road
Minnetonka, Minnesota 55343
(612) 932-3100
or, as to each party, at such other address as shall be
designated by such party in a written notice to each
other party.
Section 9.4 Severability of Provisions. If
any one or more of the covenants, agreements, provisions
or terms of the Sale Papers shall for any reason whatso-
ever be held invalid, then such covenants, agreements,
provisions, or terms shall be deemed severable from the
remaining covenants, agreements, provisions, or terms of
the Sale Papers and shall in no way affect the validity
or enforceability of the other provisions of the Sale
Papers.
Section 9.5 Assignment. Notwithstanding
anything to the contrary contained herein, this Agreement
may not be assigned by the Buyer or the Seller except as
contemplated by this Section 9.5 and the Pooling and
Servicing Agreement; provided, however, that simulta-
neously with the execution and delivery of this Agree-
ment, the Buyer shall assign all of its right, title and
interest herein to the Trustee for the benefit of the
Investor Certificateholders of all Series as provided in
Section 2.1 of the Pooling and Servicing Agreement, to
which the Seller hereby expressly consents; provided,
further, that except for the foregoing assignment, no
such assignment shall occur unless the Buyer shall have
received confirmation from the Rating Agencies that such
assignment shall not cause a reduction or withdrawal of
the rating of any Series of Certificates. The Seller
agrees to perform its obligations hereunder for the
benefit of the Trust and that the Trustee may enforce the
provisions of this Agreement, exercise the rights of the
Buyer and enforce the obligations of the Seller hereunder
without the consent of the Buyer; provided, however, that
the Seller may assign all of its right, title and inter-
est herein to a national banking association formed by
Fingerhut Corporation or any Affiliate thereof to own its
customer accounts and receivables.
Section 9.6 Further Assurances. The Buyer and
the Seller agree to do and perform, from time to time,
any and all acts and to execute any and all further
instruments required or reasonably requested by the other
party more fully to effect the purposes of the Sale Pa-
pers, including, without limitation, the execution of any
financing statements or continuation statements or equiv-
alent documents relating to the Receivables for filing
under the provisions of the UCC or other laws of any
applicable jurisdiction.
Section 9.7 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the
part of the Buyer or the Seller, any right, remedy, power
or privilege hereunder, shall operate as a waiver there-
of; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies,
powers and privilege provided by law.
Section 9.8 Counterparts. The Sale Papers may
be executed in two or more counterparts including telefax
transmission thereof (and by different parties on sepa-
rate counterparts), each of which shall be an original,
but all of which together shall constitute one and the
same instrument.
Section 9.9 Binding Effect; Third-Party Bene-
ficiaries. The Sale Papers will inure to the benefit of
and be binding upon the parties hereto and their respec-
tive successors and permitted assigns.
Section 9.10 Merger and Integration. Except
as specifically stated otherwise herein, the Sale Papers
set forth the entire understanding of the parties relat-
ing to the subject matter hereof, and all prior under-
standings, written or oral, are superseded by the Sale
Papers. The Sale Papers may not be modified, amended,
waived or supplemented except as provided herein.
Section 9.11 Headings. The headings herein
are for purposes of reference only and shall not other-
wise affect the meaning or interpretation of any provi-
sion hereof.
Section 9.12 Schedules and Exhibits. The
schedules and exhibits attached hereto and referred to
herein shall constitute a part of this Agreement and are
incorporated into this Agreement for all purposes.
Section 9.13 No Bankruptcy Petition Against
the Buyer. The Seller hereby covenants and agrees that,
prior to the date which is one year and one day after the
payment in full of all Invested Amounts, it will not
institute against or join any other Person in instituting
against the Buyer any bankruptcy, reorganization, ar-
rangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or
any state of the United States.
Section 9.14 Merger or Consolidation of, or
Assumption of the Obligations of, the Seller. The Seller
shall not consolidate with or merge into any other corpo-
ration or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(i) the corporation formed by such con-
solidation or into which the Seller is merged or the
Person which acquires by conveyance or transfer the
properties and assets of the Seller substantially as
an entirety shall be a corporation organized and
existing under the laws of the United States of
America or any State or the District of Columbia
and, if the Seller is not the surviving entity,
shall expressly assume, by an agreement supplemental
hereto, executed and delivered to the Buyer in form
satisfactory to the Buyer, the performance of every
covenant and obligation of the Seller hereunder (to
the extent that any right, covenant or obligation of
the Seller, as applicable hereunder, is inapplicable
to the successor entity, such successor entity shall
be subject to such covenant or obligation, or bene-
fit from such right, as would apply, to the extent
practicable, to such successor entity); and
(ii) the Seller shall have delivered to
the Buyer an Officer's Certificate that such consol-
idation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 9.14
and that all conditions precedent herein provided
for relating to such transaction have been complied
with and an Opinion of Counsel that such supplemen-
tal agreement is legal, valid and binding with
respect to the successor entity and that the entity
surviving such consolidation, conveyance or transfer
is organized and existing under the laws of the
United States of America or any State or the Dis-
trict of Columbia. The Rating Agencies shall re-
ceive prompt written notice of such merger or con-
solidation of the Seller.
Section 9.15 Protection of Right, Title and
Interest to Receivables.
(a) The Seller shall cause this Agreement, all
amendments hereto and/or all financing statements and
continuation statements and any other necessary documents
covering the Seller's and the Buyer's right, title and
interest to the Receivables to be promptly recorded,
registered and filed, and at all times to be kept record-
ed, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and
protect the right, title and interest of the Buyer here-
under to the Receivables and proceeds thereof. The
Seller shall deliver to the Buyer file-stamped copies of,
or filing receipts for, any document recorded, registered
or filed as provided above, as soon as available follow-
ing such recording, registration or filing. The Buyer
shall cooperate fully with the Seller in connection with
the obligations set forth above and will execute any and
all documents reasonably required to fulfill the intent
of this subsection 9.15(a).
(b) Within 30 days after the Seller makes any
change in its name, identity or corporate structure which
would make any financing statement or continuation state-
ment filed in accordance with paragraph (a) above materi-
ally misleading within the meaning of Section 9-402(7) of
the UCC as in effect in the Relevant UCC State, the
Seller shall give the Buyer written notice of any such
change and shall file such financing statements or amend-
ments as may be necessary to continue the perfection of
the Buyer's security interest in the Receivables and the
proceeds thereof.
(c) The Seller will give the Buyer prompt
written notice of any relocation of any office from which
it services Receivables or keeps records concerning the
Receivables or of its principal executive office and
whether, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any
amendment of any previously filed financing or continua-
tion statement or of any new financing statement and
shall file such financing statements or amendments as may
be necessary to continue the perfection of the Buyer's
security interest in the Receivables and the proceeds
thereof. The Seller will at all times maintain each
office from which it services Receivables and its princi-
pal executive office within the United States of America.
[END OF ARTICLE IX]
IN WITNESS WHEREOF, the Buyer and the Seller
each have caused this Agreement to be duly executed by
their respective officers as of the day and year first
above written.
FINGERHUT RECEIVABLES, INC.,
as Buyer
By:________________________
Title:
FINGERHUT CORPORATION,
as Seller
By:________________________
Title:
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT CORPORATION
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of Certificateholders
of the Fingerhut Master Trust
POOLING AND SERVICING AGREEMENT
Dated as of June 29, 1994
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions
Section 1.2 Other Definitional Provisions
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1 Conveyance of Receivables
Section 2.2 Acceptance by Trustee
Section 2.3 Representations and Warranties of the
Transferor
Section 2.4 Representations and Warranties of the
Transferor Relating to the Agreement and
the Receivables
Section 2.5Covenants of the Transferor
Section 2.6 Addition of Receivables
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.1 Acceptance of Appointment and Other Mat-
ters Relating to the Servicer
Section 3.2 Servicing Compensation
Section 3.3 Representations and Warranties of the
Servicer
Section3.4 Reports and Records for the Trustee
Section 3.5Annual Servicer's Certificate
Section 3.6Annual Independent Accountants' Servicing
Report
Section 3.7Tax Treatment
Section 3.8Adjustments
Section 3.9Notices to Fingerhut
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1Rights of Certificateholders
Section 4.2Establishment of Accounts
Section 4.3Collections and Allocations
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates
Section 6.2 Authentication of Certificates
Section 6.3 Registration of Transfer and Exchange of
Certificates
Section 6.4 Mutilated, Destroyed, Lost or Stolen
Certificates
Section 6.5 Persons Deemed Owners
Section 6.6 Appointment of Paying Agent
Section 6.7 Access to List of Certificateholders'
Names and Addresses
Section 6.8 Authenticating Agent
Section 6.9 Tender of Exchangeable Transferor
Certificate
Section 6.10 Book-Entry Certificates
Section 6.11 Notices to Clearing Agency
Section 6.12 Definitive Certificates
Section 6.13 Global Certificate; Euro-Certificate
Exchange Date
Section 6.14 Meetings of Certificateholders
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 Liability of the Transferor
Section 7.2 Merger or Consolidation of, or Assumption
of the Obligations of, the Transferor
Section 7.3 Limitation on Liability
Section 7.4 Liabilities
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
Section 8.1 Liability of the Servicer
Section 8.2 Merger or Consolidation of, or Assumption
of the Obligations of, the Servicer
Section 8.3 Limitation on Liability of the Servicer
and Others
Section 8.4 Servicer Indemnification of the
Transferor, the Trust and the Trustee
Section 8.5 The Servicer Not to Resign
Section 8.6 Access to Certain Documentation and
Information Regarding the Receivables
Section 8.7 Delegation of Duties
ARTICLE IX
PAY OUT EVENTS
Section 9.1 Pay Out Events
Section 9.2 Additional Rights Upon the Occurrence of
Certain Events
ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults
Section 10.2 Trustee to Act; Appointment of
Successor
Section 10.3 Notification to Certificateholders
Section 10.4 Waiver of Past Defaults
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee
Section 11.2 Certain Matters Affecting the Trustee
Section 11.3 Trustee Not Liable for Recitals in
Certificates
Section 11.4 Trustee May Own Certificates
Section 11.5 The Servicer to Pay Trustee's Fees
and Expenses
Section 11.6 Eligibility Requirements for Trustee
Section 11.7 Resignation or Removal of Trustee
Section 11.8 Successor Trustee
Section 11.9 Merger or Consolidation of Trustee
Section 11.10 Appointment of Co-Trustee or Separate
Trustee
Section 11.11 Tax Returns
Section 11.12 Trustee May Enforce Claims Without
Possession of Certificates
Section 11.13 Suits for Enforcement
Section 11.14 Rights of Certificateholders to
Direct Trustee
Section 11.15 Representations and Warranties
of Trustee
Section 11.16 Maintenance of Office or Agency
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust
Section 12.2 Optional Termination
Section 12.3 Final Payment with Respect to
any Series
Section 12.4 Termination Rights of Holder of
Exchangeable Transferor Certificate
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment
Section 13.2 Protection of Right, Title and
Interest to Trust
Section 13.3 Limitation on Rights of
Certificateholders
Section 13.4 Governing Law
Section 13.5 Notices
Section 13.6 Severability of Provisions
Section 13.7 Assignment
Section 13.8 Certificates Non-Assessable and
Fully Paid
Section 13.9 Further Assurances
Section 13.10 No Waiver; Cumulative Remedies
Section 13.11 Counterparts
Section 13.12 Third-Party Beneficiaries
Section 13.13 Actions by Certificateholders
Section 13.14 Rule 144A Information
Section 13.15 Merger and Integration
Section 13.16 Heading
Schedule 1 Tax Returns and Payments
Exhibit A Form of Exchangeable Transferor Certificate
Exhibit B Form of Daily Report
Exhibit C Form of Settlement Statement
Exhibit D Form of Annual Servicer's Certificate
Exhibit E Form of Annual Opinion of Counsel
Exhibit F Form of Reconveyance of Receivables
POOLING AND SERVICING AGREEMENT, dated as of June
29, 1994 by and among FINGERHUT RECEIVABLES INC., a
corporation organized and existing under the laws of the
State of Delaware, as Transferor, FINGERHUT CORPORATION, a
corporation organized and existing under the laws of the
State of Minnesota, as Servicer, and THE BANK OF NEW YORK
(DELAWARE), a banking corporation organized and existing
under the laws of the State of Delaware, as Trustee.
In consideration of the mutual agreements herein
contained, each party agrees as follows for the benefit of
the other parties and the Certificateholders:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Whenever used in this
Agreement, the following words and phrases shall have the
following meanings:
"Adjustment Payment" shall have the meaning
specified in subsection 3.8(a).
"Affiliate" means, with respect to a particular
Person, any Person that, directly or indirectly, is in
control of, is controlled by, or is under common control
with, such Person.
"Aggregate Invested Amount" shall mean, as of any
date of determination, the sum of the Invested Amounts of
all Series of Certificates issued and outstanding on such
date of determination.
"Aggregate Investor Percentage" with respect to
Principal Collections, Imputed Yield Collections and
Defaulted Receivables, as the case may be, shall mean, as of
any date of determination, the sum of such Investor
Percentages of all Series of Certificates issued and
outstanding on such date of determination; provided,
however, that the Aggregate Investor Percentage shall not
exceed 100%.
"Aggregate Principal Receivables" shall mean, for
any day, the aggregate amount of Principal Receivables at
the end of such day.
"Agreement" shall mean this Pooling and Servicing
Agreement and all amendments hereof and supplements hereto,
including any Supplement.
"Amortization Period" shall mean, with respect to
any Series, the period following the Revolving Period for
such Series, which shall be the Amortization Period, the
Early Amortization Period, or other amortization or
accumulation period, in each case as defined with respect to
such Series in the related Supplement.
"Amortization Period Commencement Date" shall mean
with respect to any Series, the date on which the
Amortization Period with respect thereto commences.
"Applicants" shall have the meaning specified in
Section 6.7.
"Appointment Day" shall have the meaning specified
in subsection 9.2(a).
"Authentication Agent" shall have the meaning
specified in Section 6.8.
"Authorized Newspaper" shall mean a newspaper of
general circulation in the Borough of Manhattan, The City of
New York printed in the English language and customarily
published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
"Back End Customer" means a customer who has
purchased at least one previous product from Fingerhut and
has either paid for or is current on payments for the
initial purchase.
"Bearer Certificates" shall have the meaning
specified in Section 6.1.
"Bearer Rules" shall mean the provisions of the
Internal Revenue Code, in effect from time to time,
governing the treatment of bearer obligations, including
sections 163(f), 871, 881, 1441, 1442 and 4701, and any
regulations thereunder including, to the extent applicable
to any Series, proposed or temporary regulations of the
Internal Revenue Service.
"Book-Entry Certificates" shall mean certificates
evidencing a beneficial interest in the Investor
Certificates, ownership and transfers of which shall be made
through book entries by a Clearing Agency as described in
Section 6.10; provided, that after the occurrence of a
condition whereupon book-entry registration and transfer are
no longer authorized and Definitive Certificates are to be
issued to the Certificate Owners, such certificates shall no
longer be "Book-Entry Certificates".
"Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in
New York, New York or Delaware (or, with respect to any
Series, any additional city specified in the related
Supplement) are authorized or obligated by law or executive
order to be closed, and such other days in each year
designated by the Servicer in writing to the Trustee by the
first day of December in the preceding year.
"Cash Equivalents" shall mean, unless otherwise
provided in the Supplement with respect to any Series, (a)
negotiable instruments or securities represented by
instruments in bearer or registered form which evidence (i)
obligations of or fully guaranteed by the United States of
America; (ii) time deposits, promissory notes, or
certificates of deposit of any depositary institution or
trust company; provided, however, that at the time of the
Trust's investment or contractual commitment to invest
therein, the certificates of deposit or short-term deposits
of such depositary institution or trust company shall have a
credit rating from Standard & Poor's of A-1+ and from
Moody's of P-1; (iii) commercial paper having, at the time
of the Trust's investment or contractual commitment to
invest therein, a rating from Standard &
Poor's of A-1+ and from Moody's of P-1; (iv) bankers
acceptances issued by any depositary institution or trust
company described in clause (a)(ii) above; and (v)
investments in money market funds rated AAA-m or AAA-mg by
Standard & Poor's and Aaa by Moody's or otherwise approved
in writing by Moody's and Standard & Poor's; (b) time
deposits and demand deposits in the name of the Trust or the
Trustee in any depositary institution or trust company
referred to in clause (a)(ii) above; (c) securities not
represented by an instrument that are registered in the name
of the Trustee or its nominee (which may not be Fingerhut or
an Affiliate) upon books maintained for that purpose by or
on behalf of the issuer thereof and identified on books
maintained for that purpose by the Trustee as held for the
benefit of the Trust or the Certificateholders, and
consisting of (x) shares of an open end diversified
investment company which is registered under the Investment
Company Act which (i) invests its assets exclusively in
obligations of or guaranteed by the United States of America
or any instrumentality or agency thereof having in each
instance a final maturity date of less than one year from
their date of purchase or other Cash Equivalents, (ii) seeks
to maintain a constant net asset value per share, (iii) has
aggregate net assets of not less than $100,000,000 on the
date of purchase of such shares and (iv) which the Rating
Agency designates in writing will not result in a withdrawal
or downgrading of its then current rating of any Series
rated by it or (y) Eurodollar time deposits of a depository
institution or trust company that are rated A1+ by Standard
& Poor's and P-1 by Moody's; provided, however, that at the
time of the Trust's investment or contractual commitment to
invest therein, the Eurodollar deposits of such depositary
institution or trust company shall have a credit rating from
Standard & Poor's of A-1+ and P-1 by Moody's; and (d) any
other investment if the Rating Agency confirms in writing
that such investment will not adversely affect its then
current rating of the Investor Certificates.
"CEDEL" shall mean Cedel S.A.
"Certificate" shall mean any one of the Investor
Certificates of any Series or the Exchangeable Transferor
Certificate.
"Certificateholder" or "Holder" shall mean the
Person in whose name a Certificate is registered in the
Certificate Register and, if applicable, the holder of any
Bearer Certificate or Coupon, as the case may be.
"Certificate Interest" shall mean interest payable
in respect of the Investor Certificates of any Series
pursuant to Article IV of the Agreement as supplemented by
the Supplement for such Series.
"Certificate Owner" shall mean, with respect to
a Book-Entry Certificate, the Person who is the beneficial
owner of such Book-Entry Certificate, as may be reflected on
the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency
(directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).
"Certificate Principal" shall mean principal
payable in respect of the Investor Certificates of any
Series pursuant to Article IV of this Agreement.
"Certificate Rate" shall mean, with respect to any
Series of Certificates (or, for any Series with more than
one Class, for each Class of such Series), the percentage
(or formula on the basis of which such rate shall be
determined) stated in the related Supplement.
"Certificate Register" shall mean the register
maintained pursuant to Section 6.3, providing for the
registration of the Certificates and transfers and exchanges
thereof.
"Class" shall mean, with respect to any Series,
any one of the classes of Certificates of that Series as
specified in the related Supplement.
"Clearing Agency" shall mean an organization
registered as a "clearing agency" pursuant to Section 17A of
the Securities Exchange Act of 1934, as amended.
"Clearing Agency Participant" shall mean a broker,
dealer, bank, other financial institution or other Person
for whom from time to time a Clearing Agency or Foreign
Clearing Agency effects book-entry transfers and pledges of
securities deposited with the Clearing Agency or Foreign
Clearing Agency.
"Closing Date" shall mean, with respect to any
Series, the date of issuance of such Series of Certificates,
as specified in the related Supplement.
"Collection Account" shall have the meaning
specified in subsection 4.2(a).
"Collections" shall mean all payments received by
the Servicer in respect of the Eligible Receivables in the
form of cash, checks or any other form of payment in
accordance with the Contract in effect from time to time on
any Eligible Receivables, other than pre-paid insurance
premiums.
"Contract" means an agreement between Fingerhut
and another person, in the form of a written contract,
invoice or closed-end agreement, in each case pursuant to or
under which such other person shall be obligated to either
pay for merchandise, financial service products or services
or return any such merchandise to Fingerhut.
"Corporate Trust Office" shall mean the principal
office of the Trustee at which at any particular time its
corporate trust business shall be administered, which office
at the date of the execution of this Agreement is located at
White Clay Center, Route 273, Newark, Delaware 19711,
Attention: Corporate Trust Specialized Agency Services.
"Coupon" shall have the meaning specified in
Section 6.1.
"Credit and Collection Policy" means those credit,
collection, customer relations and service policies and
practices in effect on the date hereof relating to the
Contracts and the Receivables as such may be modified from
time to time.
"Daily Report" shall mean a report in the form
specified in subsection 1.2(e) as may be supplemented
pursuant to any Supplement.
"Date of Processing" shall mean, with respect to
any transaction, the date on which such transaction is first
recorded on the Servicer's computer master file of
installment sale contracts (without regard to the effective
date of such recordation).
"Default Amount" shall mean, on any Business Day,
the product of (i) the aggregate Outstanding Balances of
Defaulted Receivables on such Business Day and (ii) one
minus the Discount Factor.
"Defaulted Receivable" shall mean each Eligible
Receivable which, in accordance with the Credit and
Collection Policy or the Servicer's customary and usual
servicing procedures, the Servicer has charged off as
uncollectible; a Receivable shall become a Defaulted
Receivable on the day on which such Receivable is recorded
as charged off as uncollectible on the Servicer's computer
master file of installment sale contracts. Notwithstanding
any other provision hereof, any Defaulted Receivables that
are Ineligible Receivables shall be treated as Ineligible
Receivables rather than Defaulted Receivables.
"Defeasance Account" shall have the meaning
specified in the applicable Supplement.
"Definitive Certificate" shall have the meaning
specified in Section 6.10.
"Depositary" shall have the meaning specified in
Section 6.10.
"Depositary Agreement" shall mean, with respect to
each Series, the agreement among the Transferor, the Trustee
and the Clearing Agency, or as otherwise provided in the
related Supplement.
"Determination Date" shall mean the second
Business Day prior to each Distribution Date.
"Discount Factor" shall mean 25%; provided,
however, that such percentage may be changed from time to
time by the Transferor if such change will not cause a Pay
Out Event to occur and the Rating Agencies will have
confirmed that the change will not result in any of the
Rating Agencies reducing or withdrawing its original rating
on any then outstanding Series rated by it.
"Disposition" shall have the meaning specified in
Section 9.2(a).
"Distribution Account" shall have the meaning
specified in subsection 4.2(c).
"Distribution Date" shall mean, unless otherwise
specified in any Supplement for the related Series, the
twentieth day of each month or, if such twentieth day is not
a Business Day, the next succeeding Business Day.
"Dollars", "$" or "U.S. $" shall mean United
States dollars.
"Eligible Receivable" shall mean each Receivable
that satisfies each of the following criteria: (a) it is
payable in United States dollars, (b) it has not been sold
or pledged to any other party, (c) it constitutes an
"account" as defined in Article 9 of the UCC as then in
effect in the Relevant UCC State, (d) it is at the time of
its transfer to the Trust the legal, valid, and binding
obligation of, or is guaranteed by, a person who is
competent to enter into a contract and incur debt, and is
enforceable against such person in accordance with its
terms, (e) it and the related Contract do not contravene in
any material respect, and Fingerhut with respect to such
Receivable is not in violation of, any material laws, rules,
or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to truth in
lending, usury, fair credit billing, time price plan
billing, fair credit reporting, equal credit opportunity and
fair debt collection practices) that could reasonably be
expected to have an adverse impact on the amount of
collections thereunder, (f) all material consents, licenses,
or authorizations of, or registrations with, any
governmental authority required to be obtained or given in
connection with the creation of such Receivable or the
execution, delivery, creation, and performance of the
related Contract have been duly obtained or given and are in
full force and effect as of the date of the creation of such
Receivables, (g) at the time of its transfer to the Trust,
the Transferor or the Trust will have good and marketable
title free and clear of all liens and security interests
arising under or through the Transferor (other than
Permitted Liens), and (h) it is not a Receivable which,
during the period specified in subsection 2.6(b), is in
excess of the percentage test specified in subsection
2.6(b).
"Enhancement" shall mean, with respect to any
Series, any cash collateral account, cash collateral
guaranty, collateral invested amount, letter of credit,
guaranteed rate agreement, maturity guaranty facility, tax
protection agreement, interest rate cap, interest rate swap,
subordination of the rights of one class to another, or any
other contract, agreement or arrangement for the benefit of
the Certificateholders of such Series (or Certificateholders
of a Class within such Series) as designated in the
applicable Supplement.
"Enhancement Provider" shall mean, with respect to
any Series, the Person, if any, designated as such in the
related Supplement.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"Euroclear Operator" shall mean Morgan Guaranty
Trust Company of New York, Brussels, Belgium office, as
operator of the Euroclear System.
"Excess Funding Account" shall have the meaning
specified in subsection 4.2(d).
"Exchange" shall mean either of the procedures
described in Section 6.9(b).
"Exchangeable Transferor Certificate" shall
mean the certificate executed by the Transferor and
authenticated by the Trustee, substantially in the form of
Exhibit A and exchangeable as provided in Section 6.9;
provided, that at any time there shall be only one
Exchangeable Transferor Certificate.
"Exchange Date" shall have the meaning, with
respect to any Series issued pursuant to an Exchange,
specified in subsection 6.9(b).
"Exchange Notice" shall have the meaning, with
respect to any Series issued pursuant to an Exchange,
specified in subsection 6.9(b).
"Extended Trust Termination Date" shall have the
meaning specified in subsection 12.1(a).
"FDIC" shall mean the Federal Deposit Insurance
Corporation, or any successor thereto.
"Fingerhut" shall mean Fingerhut Corporation, a
corporation organized and existing under the laws of the
State of Minnesota.
"Fixed/Floating Allocation Percentage" shall mean
for a Series for any Business Day or Distribution Date, as
applicable, the percentage equivalent of a fraction, the
numerator of which is the Invested Amount of such Series at
the end of the Revolving Period of such Series and the
denominator of which is the greater of (a) the total amount
of Principal Receivables in the Trust and amounts on deposit
in the Excess Funding Account as of the end of the preceding
Business Day and (b) the sum of the numerators used to
calculate the allocation percentages with respect to
Principal Collections for all Series.
"Floating Allocation Percentage" shall mean for a
Series on any Business Day the sum of the percentage
equivalents of fractions, the numerator of each of which is
the Invested Amount (or adjusted Invested Amount as
specified in the applicable Supplement) for each Class of
such Series 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
amount on deposit in the Excess Funding Account as of the
end of the preceding Business Day and (b) with respect to
Principal Collections only, the sum of the numerators for
all classes of all Series then outstanding used to calculate
the applicable allocation percentage.
"Foreign Clearing Agency" shall mean CEDEL and the
Euroclear Operator.
"FRI" shall mean Fingerhut Receivables, Inc., a
Delaware corporation.
"Global Certificate" shall have the meaning
specified in Section 6.13.
"Governmental Authority" shall mean the United
States of America, any state or other political subdivision
thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government.
"Holder" or "Certificateholder" shall mean the
Person in whose name a Certificate is registered in the
Certificate Register, and if applicable, the holder of any
Bearer Certificate or Coupon, as the case may be.
"Imputed Yield Collections" shall mean the sum of
(A) the product of (x) the aggregate amount of Collections
(other than Recoveries) and (y) the Discount Factor, (B)
investment earnings on amounts on deposit in the Excess
Funding Account on such business day, (C) Recoveries and (D)
collections on Receivables which are not Eligible
Receivables.
"Imputed Yield Receivables" shall mean the product
of the aggregate unpaid balance of the Eligible Receivables
and the Discount Factor.
"Ineligible Receivable" means any Receivable that
does not satisfy the definition of Eligible Receivable.
"Initial Closing Date" shall mean June 29, 1994.
"Initial Invested Amount" shall mean, with respect
to any Series of Certificates, the amount stated in the
related Supplement.
"Insolvency Event" shall have the meaning
specified in subsection 9.2(a).
"Interest Funding Account" shall have the meaning
specified in subsection 4.2(b).
"Internal Revenue Code" shall mean the Internal
Revenue Code of 1986, as amended from time to time.
"Invested Amount" shall have, with respect to any
Series of Certificates, the meaning stated in the related
Supplement.
"Investment Company Act" shall mean the Investment
Company Act of 1940, as amended from time to time.
"Investor Account" shall mean each of the Interest
Funding Account, any Principal Account, the Excess Funding
Account, any Distribution Account and any Series Account.
"Investor Certificate" shall mean any one of the
certificates (including, without limitation, the Bearer
Certificates or the Registered Certificates) executed by the
Transferor and authenticated by the Trustee substantially in
the form (or forms in the case of a Series with multiple
classes) of the investor certificate or variable funding
certificate attached to the related Supplement.
"Investor Certificateholder" shall mean the Holder
of an Investor Certificate.
"Investor Charge Off" shall have, with respect to
each Series, the meaning specified in the applicable
Supplement.
"Investor Default Amount" shall have, with respect
to any Series of Certificates, the meaning stated in the
related Supplement.
"Investor Exchange" shall have the meaning
specified in subsection 6.9(b).
"Investor Percentage" shall mean, with respect to
Principal Collections, Imputed Yield Collections and
Defaulted Receivables, and any Series of Certificates, the
Floating Allocation Percentage or the Fixed/Floating
Allocation Percentage, as applicable.
"Lien" shall mean any lien, security interest or
other encumbrance; provided, however, that any assignment
pursuant to Section 7.2 shall not be deemed to constitute a
Lien.
"Minimum Aggregate Principal Receivables" shall
mean, as of any date of determination, an amount equal to
the sum of (a) the Initial Invested Amounts for all
outstanding Series on such date except a Series created
pursuant to a Variable Funding Supplement at any time and
(b) with respect to a Series created pursuant to a Variable
Funding Supplement, during the Revolving Period for such
Series, the Invested Amount of such Series on such date of
determination or, during the Amortization Period for such
Series, the Invested Amount of such Series on the last day
of the Revolving Period for such Series.
"Minimum Retained Interest" shall mean the product
of the weighted average Minimum Retained Percentages for all
Series and the sum of the outstanding principal amounts of
all classes of all Series.
"Minimum Retained Percentage" shall mean the
highest Minimum Retained Percentage specified in any
Supplement.
"Minimum Transferor Interest" shall mean, as of
any date of determination, the product of (i) the sum of (a)
the aggregate Principal Receivables and (b) the amounts on
deposit in the Excess Funding Account and (ii) the highest
Minimum Transferor Percentage for any Series.
"Minimum Transferor Percentage" shall mean the
highest Minimum Transferor Percentage specified in any
Supplement for an outstanding Series.
"Monthly Investor Servicing Fee" shall mean the
Servicing Fee payable to the Servicer with respect to a
Monthly Period.
"Monthly Period" shall mean, unless otherwise
defined with respect to a Series in the related Supplement,
the period from and including the first day of each fiscal
month of the Transferor to and including the last day of
such fiscal month.
"Moody's" shall mean Moody's Investors Service,
Inc. or its successor.
"Obligor" shall mean a Person obligated to make
payments with respect to a Receivable pursuant to a
Contract.
"Officer's Certificate" shall mean a certificate
signed by any Vice President, Treasurer, Assistant Treasurer
or more senior officer of the Transferor or Servicer and
delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion
of counsel, who may be counsel for or an employee of the
Person providing the opinion, and who shall be reasonably
acceptable to the Trustee.
"Outstanding Balance" shall mean, with respect to
a Receivable on any day, the aggregate amount owed by the
Obligor thereunder as of the close of business on the prior
Business Day (net of returns and adjustments).
"Paying Agent" shall mean any paying agent
appointed pursuant to Section 6.6 and shall initially be The
Bank of New York.
"Pay Out Commencement Date" shall mean, with
respect to each Series, the date on which (a) a Trust Pay
Out Event is deemed to occur pursuant to Section 9.1 or (b)
a Series Pay Out Event is deemed to occur pursuant to the
Supplement for such Series.
"Pay Out Event" shall mean, with respect to each
Series, a Trust Pay Out Event or a Series Pay Out Event.
"Permitted Lien" shall mean with respect to the
Receivables: (i) Liens in favor of the Transferor created
pursuant to the Purchase Agreement assigned to the Trustee
pursuant to this Agreement; (ii) Liens in favor of the
Trustee pursuant to this Agreement; and (iii) Liens which
secure the payment of taxes, assessments and governmental
charges or levies, if such taxes are either (a) not
delinquent or (b) being contested in good faith by
appropriate legal or administrative proceedings and as to
which adequate reserves in accordance with generally
accepted accounting principles shall have been established.
"Person" shall mean any legal person, including
any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated
organization, governmental entity or other entity of similar
nature.
"Pool Factor" shall mean, as of any Record Date, a
number carried out to seven decimals representing the ratio
of the applicable Invested Amount as of such Record Date
(determined after taking into account any reduction in the
Invested Amount which will occur on the following
Distribution Date) to the applicable Initial Invested Amount
unless otherwise specified with respect to a Series in the
related Supplement.
"Principal Account" shall have the meaning
specified in subsection 4.2(b).
"Principal Collections" shall mean, with respect
to any Business Day, the Collections received with respect
to Principal Receivables on such Business Day.
"Principal Receivables" shall mean amounts
shown on the Servicer's records as amounts payable by
Obligors with respect to Eligible Receivables other than
such amounts that are Imputed Yield Receivables or Defaulted
Receivables.
"Principal Shortfalls" shall mean, with respect to
any Business Day and any outstanding Series, the amount
which the related Supplement specifies as the "Principal
Shortfall" for such Business Day.
"Principal Terms" shall have the meaning, with
respect to any Series issued pursuant to an Exchange,
specified in subsection 6.9(c).
"Prospective Pay Out Event" shall have the meaning
specified in subsection 2.3(m).
"Publication Date" shall have the meaning
specified in subsection 9.2(a).
"Purchase Agreement" shall mean the receivables
purchase agreement dated as of June 29, 1994 between the
Transferor, as purchaser of such Receivables, and Fingerhut,
as seller of such Receivables, as amended from time to time.
"Qualified Institution" shall have the meaning
specified in subsection 4.2(a).
"Rating Agency" shall mean, with respect to each
Series, the rating agency or agencies, if any, specified in
the related Supplement.
"Reassignment Date" shall have the meaning
specified in subsection 2.4(e).
"Receivable" shall mean with respect to any
Obligor, any right to payment of amounts owed by that
Obligor created at a time that such Obligor was a Back End
Customer under a Contract relating to the sale of
merchandise, financial service products or services,
including, without limitation, all rights of Fingerhut and
obligations of the Obligor under the applicable Contract,
other than pre-paid insurance premiums.
"Record Date" shall mean, with respect to any
Distribution Date, unless otherwise specified in the
applicable Supplement, the Business Day preceding such
Distribution Date, except that, with respect to any
Definitive Certificates, Record Date shall mean the fifth
day of the then current Monthly Period.
"Recoveries" shall mean any amounts received by
the Servicer with respect to Receivables that previously
were charged off as uncollectible in accordance with the
Servicer's customary and usual servicing procedures.
"Registered Certificates" shall have the meaning
specified in Section 6.1.
"Related Person" shall mean a Person that is an
Affiliate of Fingerhut, any Investor Certificateholder, any
Enhancement Provider, or any Person whose status would
violate the conditions for a trustee contained in Section
(4)(i) of Rule 3a-7 under the Investment Company Act of
1940, as amended.
"Relevant UCC State" shall mean each jurisdictions
in which the filing of a UCC financing statement is
necessary to perfect the ownership interest and security
interest of the Transferor pursuant to the Purchase
Agreement or the ownership or security interest of the
Trustee established under this Agreement.
"Requirements of Law" for any Person shall mean
the certificate of incorporation or articles of association
and by-laws or other organizational or governing documents
of such Person, and any material law, treaty, rule or
regulation, or determination of an arbitrator or
Governmental Authority, in each case applicable to or
binding upon such Person or to which such Person is subject.
"Responsible Officer" shall mean any officer
within the Corporate Trust Office (or any successor group of
the Trustee), including the President, any Vice President or
any other officer of the Trustee customarily performing
functions similar to those performed by any person who at
the time shall be an above-designated officer and who shall
have direct responsibility for the administration of this
Agreement.
"Retained Interest" shall mean, on any date of
determination, the sum of the Transferor Interest and the
Invested Amount represented by any Transferor Retained
Certificate.
"Retained Percentage" shall mean, on any date of
determination, the percentage equivalent of a fraction the
numerator of which is the Retained Interest and the
denominator of which is the aggregate amount of Principal
Receivables at the end of the day immediately prior to such
date of determination plus all amounts on deposit in the
Excess Funding Account (but not including investment
earnings on such amounts).
"Revolving Period" shall have, with respect to
each Series, the meaning specified in the related
Supplement.
"Secured Obligations" shall have the meaning
specified in Section 2.1.
"Securities Act" shall mean the Securities Act of
1933, as amended from time to time.
"Series" shall mean any series of Investor
Certificates, which may include within any such Series a
Class or Classes of Investor Certificates subordinate to
another such Class or Classes of Investor Certificates.
"Series Account" shall mean any account or
accounts established pursuant to a Supplement for the
benefit of the related Series.
"Series Allocation Percentage" shall mean with
respect to any Series, on any date of determination, the
percentage equivalent of a fraction the numerator of which
is the Invested Amount of such Series and the denominator of
which is the sum of the Invested Amounts of all Series then
outstanding.
"Series Pay Out Event" shall have, with respect to
any Series, the meaning specified in the related Supplement.
"Series Servicing Fee Percentage" shall mean, with
respect to any Series, the amount specified as such in the
related Supplement.
"Series Termination Date" shall mean, with respect
to any Series of Certificates, the date stated as such in
the related Supplement.
"Servicer" shall mean initially Fingerhut
Corporation and thereafter any Person appointed as successor
as herein provided to service the Receivables.
"Servicer Default" shall have the meaning
specified in Section 10.1.
"Servicing Fee" shall have the meaning specified
in the related Supplements.
"Settlement Statement" shall mean a report in the
form specified in subsection 1.2(e) as may be supplemented
pursuant to any Supplement.
"Shared Principal Collections" shall mean, with
respect to any Business Day, for all outstanding Series the
aggregate amount of Principal Collections which the related
Supplements specify are to be treated as "Shared Principal
Collections" available to be allocated to other Series for
such Business Day.
"Standard & Poor's" shall mean Standard & Poor's
Ratings Group or its successor.
"Successor Servicer" shall have the meaning
specified in subsection 10.2(a).
"Supplement" shall mean, with respect to any
Series, a supplement to this Agreement complying with the
terms of Section 6.9 of this Agreement, executed in
conjunction with any issuance of Certificates of such Series
(or, in the case of the issuance of Certificates on the
Initial Closing Date, the supplements executed in connection
with the issuance of such Certificates).
"Termination Notice" shall have, with respect to
any Series, the meaning specified in Section 10.1.
"Transfer" shall mean transfer, sell, exchange,
pledge, hypothecate, participate, or otherwise assign, in
whole or in part.
"Transfer Agent and Registrar" shall have the
meaning specified in Section 6.3 and shall initially be The
Bank of New York.
"Transfer Date" shall mean, with respect to any
Series, the Business Day immediately prior to each
Distribution Date.
"Transferor" shall mean Fingerhut Receivables,
Inc., a corporation organized and existing under the laws of
the State of Delaware, and any successor thereto.
"Transferor Exchange" shall have the meaning
specified in subsection 6.9(b).
"Transferor Interest" shall mean, on any date of
determination, the aggregate amount of Principal Receivables
at the end of the day immediately prior to such date of
determination plus all amounts on deposit in the Excess
Funding Account (but not including investment earnings on
such amounts) at the end of such immediately preceding day,
minus the Aggregate Invested Amount at the end of such
immediately preceding day.
"Transferor Percentage" shall mean, on any date of
determination, when used with respect to Principal
Collections, Imputed Yield Collections and Defaulted
Receivables, a percentage equal to 100% minus the Aggregate
Investor Percentage with respect to such categories of
Receivables.
"Transferor Retained Certificates" shall mean
Investor Certificates of any Series which the Transferor is
required to retain pursuant to the terms of any Supplement.
"Transferor Retained Class" shall mean any Class
of Investor Certificates of any Series which the Transferor
retained pursuant to the terms of any Supplement.
"Trigger Event" shall have the meaning specified
in subsection 9.2(a).
"Trust" shall mean the trust created by this
Agreement, the corpus of which shall consist of the Trust
Property.
"Trust Extension" shall have the meaning specified
in subsection 12.1(a).
"Trust Pay Out Event" shall have, with respect to
each Series, the meaning specified in Section 9.1.
"Trust Property" shall have the meaning assigned
in Section 2.1.
"Trust Termination Date" shall mean the earliest
to occur of (i) unless a Trust Extension shall have
occurred, the day after the Distribution Date with respect
to any Series following the date on which funds shall have
been deposited in the Distribution Account or the applicable
Series Account for the payment of Investor
Certificateholders of each Series then issued and
outstanding sufficient to pay in full the Aggregate Invested
Amount plus interest accrued at the applicable Certificate
Rate through the end of the day prior to the Distribution
Date with respect to each such Series and certain other
amounts as may be specified in any Series Supplement, (ii)
if a Trust Extension shall have occurred, the Extended Trust
Termination Date, and (iii) the date specified in Section
12.1.
"Trustee" shall mean The Bank of New York
(Delaware), a Delaware banking corporation, and its
successors and any Person resulting from or surviving any
consolidation or merger to which it or its successors may be
a party and any successor trustee appointed as herein
provided.
"UCC" shall mean the Uniform Commercial Code, as
amended from time to time, as in effect in the applicable
jurisdiction.
"Undivided Interest" shall mean the undivided
interest in the Trust evidenced by an Investor Certificate.
"Variable Funding Certificates" shall mean a
Series of Investor Certificates, in one or more Classes,
issued pursuant to Section 6.9 and a Variable Funding
Supplement.
"Variable Funding Supplement" shall mean a
Supplement executed in connection with the issuance of
Variable Funding Certificates.
Section 1.2 Other Definitional Provisions.
(a) All terms defined in any Supplement or this
Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(b) As used herein and in any certificate or
other document made or delivered pursuant hereto or thereto,
accounting terms not defined in Section 1.1, and accounting
terms partially defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them
under generally accepted accounting principles. To the
extent that the definitions of accounting terms herein are
inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained
herein shall control.
(c) The agreements, representations and
warranties of Fingerhut in this Agreement and in any
Supplement in its capacity as Servicer and of FRI in its
capacity as Transferor shall be deemed to be the agreements,
representations and warranties of Fingerhut and FRI solely
in each such capacity for so long as either of them acts in
each such capacity under this Agreement.
(d) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement
shall refer to any Supplement or this Agreement as a whole
and not to any particular provision of this Agreement or any
Supplement; and Section, subsection, Schedule and Exhibit
references contained in this Agreement or any Supplement are
references to Sections, subsections, Schedules and Exhibits
in or to this Agreement or any Supplement unless otherwise
specified.
(e) The Daily Report and Settlement Statement
shall be in substantially the forms of Exhibits B and C,
with such changes as the Servicer may determine to be
necessary or desirable; provided, however, that no such
change shall serve to exclude information required by this
Agreement or any Supplement and each such change shall be
reasonably acceptable to the Trustee. The Servicer shall,
upon making such determination and receiving the consent of
the Trustee to such change, deliver to the Trustee and each
Rating Agency an Officer's Certificate to which shall be
annexed the form of the
related Exhibit, as so changed. Upon the delivery of such
Officer's Certificate to the Trustee, the related Exhibit,
as so changed, shall for all purposes of this Agreement
constitute such Exhibit. The Trustee may conclusively rely
upon such Officer's Certificate in determining whether the
related Exhibit, as changed, conforms to the requirements of
this Agreement.
[End of Article I]
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1 Conveyance of Receivables. The
Transferor does hereby transfer, assign, set-over, and
otherwise convey to the Trust for the benefit of the
Certificateholders, without recourse, all of its right,
title and interest in, to and under (i) the Receivables now
existing and hereafter created and all monies due or to
become due with respect thereto, (ii) the Purchase
Agreement, (iii) Recoveries and (iv) all proceeds of the
foregoing. Such property, together with all monies as are
from time to time deposited in the Collection Account, any
Interest Funding Account, any Principal Account, any
Distribution Account, any Series Account and the Excess
Funding Account and all amounts on deposit in or credited to
such accounts (excluding any investment earnings on any such
deposited amount except for such amounts as are on deposit
in the Excess Funding Account) and any other account and all
monies as are from time to time available under any
Enhancement for any Series for payment to Certificateholders
shall constitute the property of the Trust (the "Trust
Property"). The foregoing transfer, assignment, set-over
and conveyance does not constitute and is not intended to
result in a creation or an assumption by the Trust, the
Trustee or any Investor Certificateholder of any obligation
of the Transferor, the Servicer or any other Person in
connection with the Receivables or any agreement or
instrument relating thereto, including, without limitation,
any obligation to any Obligors or insurers, or in connection
with the Purchase Agreement.
In connection with such transfer, assignment, set-
over and conveyance, the Transferor agrees to record and
file, at its own expense, one or more financing statements
(including any continuation statements with respect to such
financing statements when applicable) with respect to the
Receivables now existing and hereafter created for the
transfer of accounts (as defined in Section 9-106 of the UCC
as in effect in the Relevant UCC State) meeting the
requirements of applicable state law in such manner and in
such jurisdictions as are necessary to perfect the
assignment of the Receivables to the Trust, and to deliver
file-stamped copies of such financing statements or
continuation statements or other evidence of such filing
(which may, for purposes of this Section 2.1, consist of
facsimile confirmation of such filing) to the Trustee on or
prior to the date of issuance of the Certificates, and in
the case of any continuation statements filed pursuant to
this Section 2.1, as soon as practicable after receipt
thereof by the Transferor. The foregoing transfer,
assignment, set-over and conveyance to the Trust shall be
made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such transfer, assignment,
set-over and conveyance shall be construed accordingly.
To the extent that the transfer of the Receivables
from the Transferor to the Trust hereunder may be
characterized as a pledge rather than as a sale, the
Transferor hereby grants and transfers to the Trustee for
the benefit of the Certificateholders a first priority
perfected security interest in all of the Transferor's
right, title and interest in, to and under the Trust
Property to secure a loan in an amount equal to the unpaid
principal amount of the Investor Certificates issued
hereunder or to be issued pursuant to this Agreement and the
interest accrued thereon at the related Certificate Rate and
to secure all of the Transferor's and Servicer's obligations
hereunder, including, without limitation, the Transferor's
obligation to transfer Receivables hereafter created to the
Trust (the "Secured Obligations"), and agrees that this
Agreement shall constitute a security agreement under
applicable law.
Section 2.2 Acceptance by Trustee.
(a) The Trustee hereby acknowledges its
acceptance, on behalf of the Trust, of all right, title and
interest previously held by the Transferor in, to and under
the Trust Property and declares that it shall maintain such
right, title and interest, upon the Trust herein set forth,
for the benefit of all Certificateholders.
(b) The Trustee shall have no power to create,
assume or incur indebtedness or other liabilities in the
name of the Trust other than as contemplated in this
Agreement.
Section 2.3 Representations and Warranties of the
Transferor. The Transferor hereby represents and warrants
to the Trustee, on behalf of the Trust, as of the Initial
Closing Date and, with respect to any Series of
Certificates, as of the date of the related Supplement and
the related Closing Date for such Series:
(a) Organization and Good Standing. The
Transferor is a corporation duly organized and validly
existing in good standing under the laws of the State of
Delaware and has the corporate power and authority and legal
right to own its properties and conduct its business as such
properties are presently owned and such business is
presently conducted, and to execute, deliver and perform its
obligations under this Agreement and the Purchase Agreement
and to execute and deliver to the Trustee the Certificates
pursuant hereto.
(b) Due Qualification. The Transferor is duly
qualified to do business and is in good standing (or is
exempt from such requirements) as a foreign corporation in
any state required in order to conduct business, and has
obtained all necessary licenses and approvals with respect
to the Transferor required under federal and Delaware law.
(c) Due Authorization. The execution and
delivery of this Agreement and the Purchase Agreement and
the consummation of the transactions provided for herein and
therein, have been duly authorized by the Transferor by all
necessary corporate action on its part.
(d) Binding Obligation. Each of this Agreement
and the Purchase Agreement, and the consummation of the
transactions provided for herein and therein, constitutes a
legal, valid, and binding obligation of the Transferor,
enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereinafter in effect, affecting the enforcement of
creditors' rights in general and as such enforceability may
be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(e) No Conflicts. The execution and delivery of
this Agreement and the Purchase Agreement and the
performance of the transactions contemplated hereby and
thereby, do not (i) contravene the Transferor's charter or
by-Laws, (ii) violate any material provision of law
applicable to it or require any filing (except for the
filings under the UCC), registration, consent or approval
under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in
effect having applicability to the Transferor, except for
such filings, registrations, consents or approvals as have
already been obtained and are in full force and effect.
(f) Taxes. Except as specified on Schedule 1,
the Transferor and each prior owner of the Receivables has
filed all tax returns required to be filed and has paid or
made adequate provision for the payment of all taxes,
assessments and other governmental charges due from the
Transferor or such prior owner or is contesting any such
tax, assessment or other governmental charge in good faith
through appropriate proceedings.
(g) No Violation. The execution and delivery of
this Agreement and the Purchase Agreement and the execution
and delivery to the Trustee of the Certificates, the
performance of the transactions contemplated by this
Agreement and the Purchase Agreement and the fulfillment of
the terms hereof and thereof will not violate any
Requirements of Law applicable to the Transferor, will not
violate, result in any breach of any of the material terms
and provisions of, or constitute (with or without notice or
lapse of time or both) a default under any Requirement of
Law applicable to the Transferor or any material indenture,
contract, agreement, mortgage, deed of trust or other
material instrument to which the Transferor is a party or by
which it or its properties are bound.
(h) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the
Transferor, threatened against the Transferor, before any
Governmental Authority (i) asserting the invalidity of this
Agreement and the Purchase Agreement, (ii) seeking to
prevent the consummation of any of the transactions
contemplated hereby or thereby, (iii) seeking any
determination or ruling that would materially and adversely
affect the performance by the Transferor of its obligations
thereunder, (iv) seeking any determination or ruling that
would materially and adversely affect the validity or
enforceability thereof or (v) seeking to affect adversely
the tax attributes of the Trust.
(i) All Consents Required. All approvals,
authorizations, consents, orders or other actions of any
Governmental Authority required in connection with the
execution and delivery of this Agreement, the Purchase
Agreement and the Certificates, the performance of the
transactions contemplated by this Agreement and the Purchase
Agreement and the fulfillment of the terms
hereof and thereof, have been obtained.
(j) Bona Fide Receivables. Each Receivable is or
will be an account receivable arising out of the sale of
consumer goods, services or financial service products by
Fingerhut. The Transferor has no knowledge of any fact
which should have led it to expect at the time of the
classification of any Receivable as an Eligible Receivable
that such Receivable would not be paid in full when due, and
each Receivable classified as an Eligible Receivable by the
Transferor in any document or report delivered under this
Agreement satisfies the requirements of eligibility
contained in the definition of Eligible Receivable set forth
in this Agreement.
(k) Place of Business. The principal executive
offices of the Transferor are in Minnetonka, Minnesota, and
the offices where the Transferor keeps its records
concerning the Receivables and related Contracts are in
Minnetonka, Minnesota and St. Cloud, Minnesota.
(l) Use of Proceeds. No proceeds of the issuance
of any Certificate will be used by the Transferor to
purchase or carry any margin security.
(m) Pay Out Event. As of the Initial Closing
Date, no Pay Out Event and no condition that with the giving
of notice and/or the passage of time would constitute a Pay
Out Event (a "Prospective Pay Out Event"), has occurred and
is continuing.
(n) Not an Investment Company. The Transferor is
not an "investment company" within the meaning of the
Investment Company Act, or is exempt from all provisions of
such Act.
For the purposes of the representations and
warranties contained in this Section 2.3 and made by the
Transferor on the Initial Closing Date, "Certificates" shall
mean the Certificates issued on the Initial Closing Date.
The representations and warranties set forth in this Section
2.3 shall survive the transfer and assignment of the
respective Receivables to the Trust, and termination of the
rights and obligations of the Servicer pursuant to Section
10.1. The Transferor hereby represents and warrants to the
Trust, with respect to any Series of Certificates, as of its
Closing Date, unless otherwise stated in the related
Supplement, that the representations and warranties of the
Transferor set forth in Section 2.3, are true and correct as
of such date (and for the purposes of such representations
and warranties, "Certificates" shall mean the Certificates
issued on the related Closing Date) and that each
representation and warranty set forth in this Section 2.3
and in Section 2.4(a)(i) with respect to the Agreement shall
be made at such time with respect to the applicable
Supplement. Upon discovery by the Transferor, the Servicer
or a Responsible Officer of the Trustee of a breach of any
of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to
the others.
Section 2.4 Representations and Warranties of the
Transferor Relating to the Agreement and the Receivables.
(a) Binding Obligation; Valid Transfer and
Assignment. The Transferor hereby represents and warrants
to the Trustee, on behalf of the Trust, that, as of the
Initial Closing Date and with respect to any Series of
Certificates, as of the date of its related Supplement and
Closing Date:
(i) The Purchase Agreement and this
Agreement each constitutes the legal, valid and
binding obligation of the Transferor, enforceable against the
Transferor in accordance with its terms, except (A) as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect, affecting the enforcement of creditors'
rights in general, and (B) as such enforceability may be limited
by general principles of equity (whether considered in a suit at
law or in equity).
(ii) The transfer of Receivables by the
Transferor to the Trust under this Agreement
constitutes either (A) a valid transfer, assignment,
setover and conveyance to the Trust of all right, title
and interest of the Transferor in and to the Trust
Property, and such Trust Property will be held by the
Trust free and clear of any Lien of any Person claiming
through or under the Transferor or any of its
Affiliates except for (x) Permitted Liens, (y) the
interest of the Transferor as Holder of the
Exchangeable Transferor Certificate and any other Class
of Certificates held by the Transferor from time to
time and (z) the Transferor's right, if any, to
interest accruing on, and investment earnings, if any,
in respect of any Interest Funding Account, any
Principal Account, the Excess Funding Account, or any
Series Account, as provided in this Agreement or the
related Supplement, or (B) a grant of a first priority
security interest (as defined in the UCC as in effect
in the Relevant UCC State) in, to and under the Trust
Property, which grant is enforceable with respect to
the existing Receivables and the proceeds thereof upon
execution and delivery of this Agreement, and which
will be enforceable with respect to such Receivables
hereafter created and the proceeds thereof, upon such
creation. If this Agreement constitutes the grant of a
security interest to the Trust in such property, upon
the filing of the financing statement described in
Section 2.1 and in the case of the Receivables
hereafter created and proceeds thereof, upon such
creation, the Trust shall have a first priority
perfected security interest in such property, except
for Permitted Liens. Except as contemplated in this
Agreement or any Supplement, neither the Transferor nor
any Person claiming through or under the Transferor
shall have any claim to or interest in the Collection
Account, any Principal Account, any Interest Funding
Account, the Distribution Account, the Excess Funding
Account, any principal funding account for any Series
or any other Series Account, except for the
Transferor's rights to receive interest accruing on,
and investment earnings in respect of, any such account
as provided in this Agreement (or, if applicable, any
Series Account as provided in any Supplement) and, if
this Agreement constitutes the grant of a security
interest in such property, except for the interest of
the Transferor in such property as a debtor for
purposes of the UCC as in effect in the Relevant UCC
State. The Purchase Agreement constitutes a valid
transfer, assignment, set-over and conveyance to the
Transferor of all right, title and interest of
Fingerhut in and to the Receivables purported to be
sold thereunder, whether then existing or thereafter
created in the applicable Accounts and the proceeds
thereof.
(iii) The Transferor is not insolvent and will
not be rendered insolvent upon the transfer of the
Receivables to the Trust.
(iv) The Transferor is (or, with respect
to Receivables arising after the date hereof, will be)
the legal and beneficial owner of all right, title and
interest in and to each Receivable and each Receivable
has been or will be transferred to the Trust free and
clear of any Lien other than Permitted Liens.
(v) All consents, licenses, approvals or
authorizations of or registrations or declarations with
any Governmental Authority required in connection with
the transfer of Trust Property to the Trust have been
obtained.
(vi) Each Receivable classified as an "Eligible
Receivable" by the Transferor in any document or report
delivered hereunder will satisfy the requirements
contained in the definition of Eligible Receivable as
of the time of such document or report.
(vii) Each Receivable then existing has been
conveyed to the Trust free and clear of any Lien of any
Person claiming through or under the Transferor or any
of its Affiliates (other than Permitted Liens) and in
compliance, in all material respects, with all
Requirements of Law applicable to the Transferor.
(b) Daily Representations and Warranties. On
each day on which any new Receivable is purchased by the
Transferor, the Transferor shall be deemed to represent and
warrant to the Trust that (A) each Receivable purchased by
the Transferor on such day has been conveyed to the Trust in
compliance, in all material respects, with all Requirements
of Law applicable to the Transferor and free and clear of
any Lien of any Person claiming through or under the
Transferor or any of its Affiliates (other than Permitted
Liens) and (B) with respect to each such Receivable, all
consents, licenses, approvals or authorizations of or
registrations or declarations with, any Governmental
Authority required to be obtained, effected or given by the
Transferor in connection with the conveyance of such
Receivable to the Trust have been duly obtained, effected or
given and are in full force and effect.
(c) Notice of Breach. The representations and
warranties set forth in this Section 2.4 shall survive the
transfer and assignment of the respective Receivables to the
Trust. Upon discovery by the Transferor, the
Servicer or a Responsible Officer of the Trustee of a breach
of any of the representations and warranties set forth in
this Section 2.4, the party discovering such breach shall
give prompt written notice to the other parties mentioned
above. The Transferor agrees to cooperate with the Servicer
and the Trustee in attempting to cure any such breach.
(d) Designation of Ineligible Receivables. In
the event of a breach with respect to a Receivable of any
representations and warranties set forth in subsection
2.3(j) or subsections 2.4(a)(iii) through (vii) or
subsection 2.4(b), or in the event that a Receivable is not
an Eligible Receivable on the date of its transfer to the
Trust as a result of the failure to satisfy the conditions
set forth in the definition of Eligible Receivable, such
Receivable shall be designated an "Ineligible Receivable"
and shall be assigned an Outstanding Balance of zero for the
purpose of determining the aggregate amount of Principal
Receivables on any day; provided, however, that if such
representations and warranties with respect to such
Receivable shall subsequently be true and correct in all
material respects as if such Receivable had been created on
such day or such Receivable shall subsequently satisfy the
conditions set forth in the definition of Eligible
Receivable, such Receivable shall be designated an Eligible
Receivable, and the Outstanding Balance of such Receivable
shall be included in determining the aggregate amount of
Principal Receivables on such day. On and after the date of
its designation as an Ineligible Receivable, each Ineligible
Receivable shall not be given credit in determining the
aggregate amount of Principal Receivables used in the
calculation of any Investor Percentage, the Transferor
Percentage or the Transferor Interest. In the event that on
any Business Day the exclusion of an Ineligible Receivable
from the calculation of the Transferor Interest would cause
the Transferor Interest to be reduced below the Minimum
Transferor Interest, the Transferor shall immediately make a
deposit in the Excess Funding Account (for allocation as a
Principal Receivable) in immediately available funds prior
to the next succeeding Business Day in an amount equal to
the amount by which the Transferor Interest would be reduced
below the Minimum Transferor Interest as a result of the
exclusion of such Ineligible Receivable. The portion of
such deposit allocated to the Investor Certificates of each
Series shall be distributed to the Investor
Certificateholders of each Series in the manner specified in
Article IV.
(e) Reassignment of Trust Portfolio. In the
event of a breach of any of the representations and
warranties set forth in subsections 2.3(a), (b) and (c) and
2.4(a)(i) and (ii) with respect to any Series, either the
Trustee or the Holders of Investor Certificates evidencing
Undivided Interests aggregating more than 50% of the
Invested Amount of such Series, by notice then given in
writing to the Transferor (and to the Trustee and the
Servicer, if given by the Investor Certificateholders of
such Series), may direct the Transferor to accept
reassignment of an amount of Principal Receivables equal to
the face amount of the Invested Amount to be repurchased (as
specified below) within 60 days of such notice (or within
such longer period as may be specified in such notice), and
the Transferor shall be obligated to accept reassignment of
such Receivables on a Distribution
Date specified by the Transferor (such Distribution Date,
the "Reassignment Date") occurring within such applicable
period on the terms and conditions set forth below;
provided, however, that no such reassignment shall be
required to be made, and no notice of such reassignment may
be given, if, at any time during such applicable period, the
representations and warranties contained in subsections
2.3(a), (b) and (c) and subsections 2.4(a)(i) and (ii) shall
then be true and correct in all material respects. The
Transferor shall, on the Transfer Date (in next day funds)
preceding the Reassignment Date, deposit an amount equal to
the reassignment deposit amount for such Series in the
related Distribution Account or Series Account, as provided
in the related Supplement, for distribution to the Investor
Certificateholders pursuant to Article XII. The
reassignment deposit amount with respect to any Series,
unless otherwise stated in the related Supplement, shall be
equal to (i) the Invested Amount of such Series at the end
of the day on the last day of the Monthly Period preceding
the Reassignment Date (provided, however, that with respect
to any Series issued pursuant to a Variable Funding
Supplement such amount shall be the Invested Amount of such
Series as of the Reassignment Date, less the amount, if any,
previously allocated for payment of principal to such
Certificateholders on the related Reassignment Date, in the
Monthly Period in which the Reassignment Date occurs), plus
(ii) an amount equal to all interest accrued but unpaid on
the Investor Certificates of such Series at the applicable
Certificate Rate through such last day, less the amount, if
any, previously allocated for payment of interest to the
Certificateholders of such Series on the related
Distribution Date in the Monthly Period in which the
Reassignment Date occurs plus any other amounts accrued and
owing as specified in the applicable Supplement. Payment of
the reassignment deposit amount with respect to any Series,
and all other amounts in the Distribution Account or the
applicable Series Account in respect of the preceding
Monthly Period, shall be considered a prepayment in full of
the Receivables represented by the Investor Certificates of
such Series. On the Distribution Date following the
Transfer Date on which such amount has been deposited in
full into the Distribution Account or the applicable Series
Account, the Receivables and all monies due or to become due
with respect thereto and all proceeds of the Receivables
shall be released to the Transferor after payment of all
amounts otherwise due hereunder on or prior to such dates
and the Trustee shall execute and deliver such instruments
of transfer or assignment, in each case without recourse,
representation or warranty, as shall be prepared by and as
are reasonably requested by the Transferor to vest in the
Transferor, or its designee or assignee, all right, title
and interest of the Trust in and to such Receivables, all
monies due or to become due with respect thereto and all
proceeds of such Receivables allocated to such Receivables
pursuant to the related Supplement. If the Trustee or the
Investor Certificateholders of any Series give notice
directing the Transferor to accept reassignment as provided
above, the obligation of the Transferor to accept
reassignment of the applicable Receivables and pay the
reassignment deposit amount pursuant to this subsection
2.4(e) shall constitute the sole remedy respecting a breach
of the representations and warranties contained in
subsections 2.3(a), (b) and (c) and 2.4(a)(i) and (ii)
available to the Investor Certificateholders of such Series
or the Trustee on behalf of the Investor Certificateholders
of such Series. The Trustee shall have no duty to conduct
any affirmative investigation as to the occurrence of any
condition requiring the repurchase of any Receivable by the
Transferor pursuant to this Agreement or any Supplement or
the eligibility of any Receivable for purposes of this
Agreement or any Supplement.
Section 2.5 Covenants of the Transferor. The
Transferor hereby covenants that:
(a) Receivables to be Accounts. The Transferor
will take no action to cause any Receivable to be evidenced
by any instrument (as defined in the UCC as in effect in the
Relevant UCC State), except in connection with the
enforcement or collection of a Receivable. Except in such
circumstances, the Transferor will take no action to cause
any Receivable to be anything other than an "account" (as
defined in the UCC as in effect in the Relevant UCC State).
(b) Security Interests. Except for the
conveyances hereunder, the Transferor will not sell, pledge,
assign or transfer to any other Person, or grant, create,
incur, assume or suffer to exist any Lien, on any
Receivable, whether now existing or hereafter created, or
any interest therein; the Transferor will immediately notify
the Trustee of the existence of any Lien on any Receivable;
and the Transferor shall defend the right, title and
interest of the Trust in, to and under the Receivables,
whether now existing or hereafter created, against all
claims of third parties claiming through or under the
Transferor; provided, however, that nothing in this
subsection 2.5(b) shall prevent or be deemed to prohibit the
Transferor from suffering to exist upon any of the
Receivables any Permitted Lien.
(c) Contracts and Credit and Collection Policies.
The Transferor shall take all actions reasonably within its
control to cause Fingerhut to comply with and perform its
obligations under the Contracts relating to the Receivables
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, and permit Fingerhut to change, the
terms and provisions of the Contracts or the Credit and
Collection Policy in any respect (i) if it would not, in the
reasonable belief of the Transferor, materially impair the
collectibility of any Receivable or cause, immediately or
with the passage of time, a Pay Out Event to occur and (ii)
if such change (A) (if it owns a comparable segment of
receivables) is made applicable to the comparable segment of
the receivables owned by the Transferor or Fingerhut, if
any, which have characteristics the same as, or
substantially similar to, the Receivables that are the
subject of such change and (B) (if it does not own such a
comparable segment of receivables) will not be made with the
intent to materially benefit the Transferor over the
Investor Certificateholders or to materially adversely
affect the Investor Certificateholders, except as otherwise
restricted by an endorsement, sponsorship, or other agree
ment between the Transferor and an unrelated third party or
by the terms of the Contracts.
(d) [Reserved]
(e) Delivery of Collections. In the event that
the Transferor receives Collections, the Transferor agrees
to deposit such Collections into the Collection Account as
soon as practicable after the receipt thereof, but in no
event later than two Business Days following the Date of
Processing thereof.
(f) Conveyance of Receivables. The Transferor
covenants and agrees that it will not permit Fingerhut to
convey, assign, exchange or otherwise transfer any Re
ceivable, to any Person other than the Transferor prior to
the termination of this Agreement pursuant to Article XII
except for transfers to the Fingerhut Credit Card Bank;
provided, however, that the Transferor shall not be
prohibited hereby from permitting Fingerhut to convey,
assign, exchange or otherwise transfer a Receivable in
connection with a transaction in which Fingerhut and its
successor agree to comply with provisions substantially
similar to those of Section 7.2.
(g) Notice of Liens. The Transferor shall notify
the Trustee promptly after becoming aware of any Lien on any
Receivable other than Permitted Liens.
(h) Enforcement of Purchase Agreement. The
Transferor agrees to take all action necessary and appro
priate to enforce its rights and claims under the Purchase
Agreement.
(i) Separate Business. The Transferor will not
permit its assets to be commingled with those of Fingerhut
and the Transferor shall maintain separate corporate
records, books of account and bank accounts from those of
Fingerhut. The Transferor will not conduct its business in
the name of Fingerhut and will cause Fingerhut to conduct
its business solely in its own name so as not to mislead
others as to the identity of the entity with which those
others are concerned. The Transferor will provide for its
own operating expenses and liabilities from its own funds,
except that the organizational expenses of the Transferor
may be paid by Fingerhut. The Transferor will not hold
itself out, or permit itself to be held out, as having
agreed to pay, or as generally being liable for, the debts
of Fingerhut. The Transferor shall cause Fingerhut not to
hold itself out, or permit itself to be held out, as having
agreed to pay, or as generally being liable for, the debts
of the Transferor except that the organizational expenses of
the Transferor may be paid by Fingerhut and that Fingerhut
will contribute to the Transferor on the Closing Date a
demand note. The Transferor will maintain an arm's length
relationship with Fingerhut with respect to any transactions
between the Transferor, on the one hand, and Fingerhut, on
the other.
(j) Purchase Agreement Notices. The Transferor
(i) shall promptly give the Trustee copies of any notices,
reports or certificates given or delivered to the Transferor
under the Purchase Agreement, (ii) shall not, without the
consents, approvals and opinions, if any, required by
Section 13.1, as if Section 13.1 related to the Purchase
Agreement rather than this Agreement, enter into any
amendment, supplement or other modifica-
tion to, or waiver of any provision of, the Purchase
Agreement and (iii) shall not permit the addition or removal
of a Receivable to or from the operation of the Purchase
Agreement unless there is a corresponding right or
obligation of the Transferor to add or remove such
Receivable to or from the Trust.
Section 2.6 Addition of Receivables.
(a) All receivables which meet the definition of
Receivables shall be included as Receivables from and after
the date upon which such Receivables are created and all
such Receivables, whether such Receivables are then existing
or thereafter created, shall be transferred automatically to
the Trust upon purchase by the Transferor.
(b) Receivables shall be transferred to the Trust
as Eligible Receivables if, in addition to satisfying the
requirements of clauses (a) through (g) of the definition of
Eligible Receivables, the following condition is met:
unless Moody's otherwise consents, with respect to any
Monthly Period the number of new obligors on Fingerhut
receivables (which shall include any obligors who, prior to
the relevant measuring period, did not have a relationship
with Fingerhut) since the first day of the eleventh
preceding Monthly Period (or, in the case of any date on or
before the last day of the June 1995 Monthly Period, the
last day of the June 1994 Monthly Period) that are Back End
Customers on Receivables minus the number of new obligors on
Fingerhut receivables that are Back End Customers on
Receivables who have previously been approved by Moody's
since the first day of such eleventh preceding Monthly
Period (or the last day of the June 1994 Monthly Period, as
the case may be) shall not exceed 25% of the number of Back
End Customers on Receivables at the close of business on the
last day of such Monthly Period.
[End of Article II]
ARTICLE III
ADMINISTRATION AND SERVICING OF
RECEIVABLES
Section 3.1 Acceptance of Appointment and Other
Matters Relating to the Servicer.
(a) Fingerhut agrees to act as the Servicer under
this Agreement. The Investor Certificateholders of each
Series by their acceptance of the related Certificates
consent to Fingerhut acting as Servicer. Notwithstanding
the foregoing or any other provisions of this Agreement or
any Supplement, the Investor Certificateholders consent to
an Affiliate of Fingerhut acting as Servicer hereunder, in
full substitution thereof; provided that such Affiliate
shall expressly assume in writing (unless such assumption
occurs by operation of law), by an agreement supplemental
hereto, executed and delivered to the Trustee, the
performance of every covenant and obligation of the
Servicer, as applicable hereunder, and shall in all respects
be designated the Servicer under this Agreement; provided,
further, that Fingerhut will remain jointly and severally
liable with such Affiliate.
(b) The Servicer shall service and administer the
Receivables and shall collect payments due under the
Receivables in accordance with its customary and usual
servicing procedures and the Credit and Collection Policies
and shall have full power and authority, acting alone or
through any party properly designated by it hereunder, to do
any and all things in connection with such servicing and
administration that it may deem necessary or desirable.
Without limiting the generality of the foregoing and subject
to Section 10.1, the Servicer is hereby authorized and
empowered (i) to make withdrawals from the Collection
Account as set forth in this Agreement, (ii) unless such
power and authority is revoked by the Trustee on account of
the occurrence of a Servicer Default pursuant to Section
10.1, to instruct the Trustee in writing to make withdrawals
and payments, from any Interest Funding Account, the Excess
Funding Account, any Principal Account and any Series
Account, in accordance with such instructions as set forth
in this Agreement, (iii) unless such power and authority is
revoked by the Trustee on account of the occurrence of a
Servicer Default pursuant to Section 10.1, to instruct the
Trustee in writing to take any action permitted or required
under any Enhancement at such time as set forth in this
Agreement and any Supplement, (iv) to execute and deliver,
on behalf of the Trust for the benefit of the
Certificateholders, any and all instruments of satisfaction
or cancellation, or of partial or full release or discharge,
and all other comparable instruments, with respect to the
Receivables and, after the delinquency of any Receivable and
to the extent permitted under and in compliance with
applicable law and regulations, to commence enforcement
proceedings with respect to such Receivables, (v) to make
any filings, reports, notices, applications, registrations
with, and to seek any consents or authorizations from, the
Securities and Exchange Commission and any state securities
authority on behalf of the Trust as may be necessary or
advisable to comply with any federal or state securities or
reporting requirements and (vi) to delegate certain of its
service, collection, enforcement and administrative duties
hereun-
der with respect to the Receivables to any Person who agrees
to conduct such duties in accordance with the Credit and
Collection Policies; provided, however, that the Servicer
shall notify the Trustee in writing of any such delegation;
and provided further that the Servicer shall remain jointly
and severally liable with such Person. The Trustee agrees
that it shall promptly follow the instructions of the
Servicer to withdraw funds from the Collection Account, any
Principal Account, any Interest Funding Account, the Excess
Funding Account, or any Series Account and to take any
action required under any Enhancement at such time as
required under this Agreement. The Trustee shall execute at
the Servicer's written request such documents prepared by
the Transferor and acceptable to the Trustee as the Servicer
certifies are necessary or appropriate to enable the
Servicer to carry out its servicing and administrative
duties hereunder.
(c) [Reserved]
(d) The Servicer shall not be obligated to use
separate servicing procedures, offices or employees for
servicing the Receivables from the procedures, offices and
employees used by the Servicer in connection with servicing
other receivables.
Section 3.2 Servicing Compensation. As com
pensation for its servicing activities hereunder and
reimbursement for its expenses as set forth in the imme
diately following paragraph, the Servicer shall be entitled
to receive a servicing fee in respect of each day prior to
the termination of the Trust pursuant to Section 12.1 (the
"Servicing Fee"), payable in arrears on each date and in the
manner specified in the applicable Supplement, equal to the
product of (i) a fraction, the numerator of which is the
actual number of days in the measuring period specified in
the applicable Supplement and the denominator of which is
the actual number of days in the year, (ii) the weighted
average Series Servicing Fee Percentage for all Outstanding
Series (based upon the Series Servicing Fee Percentage for
each Series and the Invested Amount of such Series) and
(iii) the daily average aggregate Outstanding Balance of all
Principal Receivables over the term of such measuring
period. The share of the Servicing Fee allocable to each
Series with respect to any date of payment shall be equal to
the product of (i) a fraction, the numerator of which is the
actual number of days in the measuring period specified in
the applicable Supplement and the denominator of which is
the actual number of days in the year, (ii) the applicable
Series Servicing Fee Percentage for such Series and (iii)
the Invested Amount of such Series, as appropriate, as of
the date of determination for such payment as specified in
the applicable Supplement. The remainder of the Servicing
Fee shall be paid by the Transferor, or retained by the
Servicer as provided in Article IV, and in no event shall
the Trust, the Trustee, any Enhancement Provider, or the
Investor Certificateholders be liable for the share of the
Servicing Fee to be paid by the Transferor.
The Servicer shall be responsible for its own
expenses, which shall include the amounts due to the Trustee
pursuant to Section 11.5 and the reasonable fees and
disbursements of independent public accountants and all
other expenses incurred by the Servicer in connection
with its activities hereunder; provided, that the Servicer
shall not be liable for any liabilities, costs or expenses
of the Trust, the Investor Certificateholders or the
Certificate Owners arising under any tax law, including
without limitation any federal, state or local income or
franchise taxes or any other tax imposed on or measured by
income (or any interest, penalties or additions with respect
thereto or arising from a failure to comply therewith). In
the event that the Servicer fails to pay any amounts due to
the Trustee pursuant to Section 11.5, the Trustee shall be
entitled to deduct and receive such amounts from the
Servicing Fee prior to the payment thereof to the Servicer
and the obligations of the Trust
to pay any such amounts shall thereby be fully satisfied. The
Servicer shall be required to pay such expenses for its own
account and shall not be entitled to any payment therefor
other than the Servicing Fee.
Section 3.3 Representations and Warranties of the
Servicer. Fingerhut, as initial Servicer, hereby makes, and
any Successor Servicer by its appointment hereunder shall
make, the following representations and warranties on which
the Trustee has relied in accepting the Receivables in trust
and in authenticating the Certificates issued on the Initial
Closing Date:
(a) Organization and Good Standing. The Servicer
is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and has
the corporate power, authority and legal right to own its
properties and conduct its business as such properties are
presently owned and such business is presently conducted, and
to execute, deliver and perform its obligations under this
Agreement.
(b) Due Qualification. The Servicer is duly
qualified to do business and is in good standing (or is
exempt from such requirements) as a foreign corporation in
any state where such qualification is necessary in order to
service the Receivables as required by this Agreement and has
obtained all necessary licenses and approvals as required
under Federal and state law in order to service the
Receivables as required by this Agreement, and if the
Servicer shall be required by any Requirement of Law to so
qualify or register or obtain such license or approval, then
it shall do so except where the failure to obtain such
license or approval does not materially affect the Servicer's
ability to perform its obligations hereunder or the
enforceability of the Receivables.
(c) Due Authorization. The execution and delivery
of this Agreement and the consummation of the transactions
provided for herein, have been duly authorized by the
Servicer by all necessary corporate action on the part of the
Servicer.
(d) Binding Obligation. This Agreement and the
consummation of the transactions provided for herein,
constitutes a legal, valid and binding obligation of the
Servicer, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereinafter in effect, affecting the enforcement of
creditors' rights in general and as such enforceability may
be limited by general princi-
ples of equity (whether considered in a proceeding at law or
in equity).
(e) No Violation. The execution and delivery of
this Agreement by the Servicer, and the performance of the
transactions contemplated by this Agreement and the
fulfillment of the terms hereof applicable to the Servicer,
will not violate, result in any breach of any of the
material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under,
any Requirement of Law applicable to the Servicer or any
material indenture, contract, agreement, mortgage, deed of
trust or other material instrument to which the Servicer is
a party or by which it is bound.
(f) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of the
Servicer, threatened against the Servicer before any
Governmental Authority (i) asserting the invalidity of this
Agreement, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
contemplated by this Agreement, (iii) seeking any
determination or ruling that would materially and adversely
affect the performance by the Servicer of its obligations
under this Agreement, (iv) seeking any determination or
ruling that would materially and adversely affect the
validity or enforceability of this Agreement or (v) seeking
to affect adversely the tax attributes of the Trust.
(g) Compliance with Requirements of Law. The
Servicer shall duly satisfy all obligations on its part to
be fulfilled under or in connection with each Receivable,
will maintain in effect all qualifications required under
Requirements of Law in order to service properly each
Receivable and will comply in all material respects with all
other Requirements of Law in connection with servicing each
Receivable the failure to comply with which would have a
material adverse effect on the Certificateholders or any
Enhancement Provider.
(h) Protection of Certificateholders' Rights. The
Servicer shall take no action which, nor omit to take any
action the omission of which, would impair the rights of
Certificateholders in any Receivable or the rights of any
Enhancement Provider, nor shall it reschedule, revise or
defer payments due on any Receivable except in accordance
with the Credit and Collection Policies.
(i) All Consents Required. All approvals,
authorizations, consents, orders or other actions of any
Governmental Authority required in connection with the
execution and delivery of this Agreement and the performance
of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof, have been obtained;
provided, however, that the Servicer makes no representation
or warranty regarding State securities or "Blue Sky" laws in
connection with the distribution of the Certificates.
(j) Rescission or Cancellation. The Servicer
shall not permit any rescission or cancellation of any
Receivable except as ordered by a court of competent
jurisdiction or other Governmental Authority or in accor
dance with the Credit and Collection Policy or the normal
operating procedures of the Servicer.
(k) Receivables Not To Be Evidenced by Promissory
Notes. Except in connection with its enforcement or
collection of a Receivable (in which case any such prom
issory note would be made in the name of the Trust on behalf
of the Certificateholders), the Servicer will take no action
to cause any Receivable to be evidenced by an instrument (as
defined in the UCC as in effect in the Relevant UCC State).
(l) Principal Place of Business. The Servicer
shall at all times maintain its principal executive offices
within the United States.
Section 3.4 Reports and Records for the Trustee.
(a) Daily Records. Upon reasonable prior notice
by the Trustee, the Servicer shall make available at an
office of the Servicer (or other location designated by the
Servicer if such records are not accessible by the Servicer
at an office of the Servicer) selected by the Servicer for
inspection by the Trustee or its agent (reasonably
acceptable to the Servicer) on a Business Day during the
Servicer's normal business hours a record setting forth (i)
the Collections on the Receivables and (ii) the amount of
Receivables for the Business Day preceding the date of the
inspection. The Servicer shall, at all times, maintain its
computer files with respect to the Receivables in such a
manner so that the Receivables may be specifically
identified and, upon reasonable prior request of the
Trustee, shall make available to the Trustee, at an office
of the Servicer (or other location designated by the
Servicer if such computer files are not located at an office
of the Servicer) selected by the Servicer, on any Business
Day of the Servicer during the Servicer's normal business
hours any computer programs necessary to make such iden
tification.
(b) Daily Report.
(i) On each Business Day the Servicer shall
prepare a completed Daily Report.
(ii) The Servicer shall deliver to the
Trustee and the Paying Agent the Daily Report by 3:00 p.m. (New
York City time) on each Business Day with respect to activity in
the Receivables for the prior Business Day (or, in the case of a
Daily Report delivered on the second Business Day following a
Saturday, Sunday or other non-Business Day, the aggregate
activity for the preceding Business Day and such preceding non-
Business Days).
(iii) Upon discovery of any error or
receipt of notice of any error in any Daily Report, the
Servicer, the Transferor and the Trustee shall arrange
to confer and shall agree upon any adjustments
necessary to correct any such errors. If any such
error is material, the Servicer or the Trustee, as the
case may be, shall retain all Collections which would
otherwise be paid from the Trust (or such lesser amount
as the Trustee and the Servicer shall agree to be
necessary to cover any such error) in the Collection
Account until such material error
is corrected. Unless the Trustee has received
written notice of any error or discrepancy, the
Trustee may rely on each Daily Report delivered to it
for all purposes hereunder.
(c) Settlement Statement. On the second
Business Day prior to each Distribution Date, the
Servicer shall, prior to 3:00 p.m. (New York City time) on
such day, deliver to the Trustee and the Paying Agent the
Settlement Statement for the related Monthly Period
substantially in the form of Exhibit C hereto, including the
following information (which, in the case of clauses (iii),
(iv) and (v) below, will be stated on the basis of an
original principal amount of $1,000 per Certificate): (i)
the aggregate amount of Collections received in the
Collection Account for the Monthly Period preceding such
Determination Date and the aggregate amount of Imputed Yield
Collections and the aggregate amount of Principal
Collections processed during such Monthly Period; (ii) with
respect to the preceding Monthly Period for each Series of
Certificates the aggregate amount of the applicable Investor
Percentage of Principal Collections, and the aggregate
amount of the applicable Investor Percentage of Imputed
Yield Collections; (iii) for each Series and for each Class
within any such Series, the total amount to be distributed
to Investor Certificateholders on the next succeeding
Distribution Date; (iv) for each Series and for each Class
within any such Series, the amount of such distribution to
Certificateholders allocable to principal; (v) for each
Series and for each Class within any such Series, the amount
of such distribution to Certificateholders allocable to
interest; (vi) for each Series and each Class within a
Series, the Investor Default Amount for the immediately
preceding Monthly Period; (vii) for each Series and each
Class within a Series, the amount of the Investor Charge-
Offs and the amount of the reimbursements of Investor Charge-
Offs for such Distribution Date; (viii) for each Series, the
Servicing Fee for such Distribution Date; (ix) for each
Series, the existing deficit controlled amortization amount,
if applicable; (x) the Aggregate Principal Receivables in
the Trust at the close of business on the last day of the
Monthly Period preceding such Distribution Date; (xi) for
each Series, the Invested Amount at the close of business on
the last day of the Monthly Period immediately preceding
such Distribution Date; (xii) the available amount of any
Enhancement for each Class of each Series, if any; (xiii)
for each Series and each Class within a Series, the Pool
Factor as of the end of the related Monthly Period; (xiv)
whether a Pay Out Event or a Prospective Pay Out Event with
respect to any Series shall have occurred during or with
respect to the related Monthly Period; (xv) the amount of
any Adjustment Payments for the Related Monthly Period; and
(xvi) such other calculations as may be required by any
Supplement. The Trustee shall be under no duty to
recalculate, verify or recompute the information supplied to
it under this Section 3.4 or such other matters as are set
forth in any Settlement Statement. The Servicer shall also
provide a copy of the Settlement Statement in a prompt
manner to each Rating Agency.
Section 3.5 Annual Servicer's Certificate. The
Servicer will deliver, in accordance with Section 13.5, to
the Trustee, any Enhancement Provider and the Rating
Agencies, within 100 days of the end of each
fiscal year, beginning in 1994, an Officer's Certificate
substantially in the form of Exhibit D stating that (a) a
review of the activities of the Servicer during the
preceding fiscal year and of its performance under this
Agreement was made under the supervision of the officer
signing such certificate and (b) to such officer's knowl
edge, based on such review, the Servicer has fully performed
all its obligations under this Agreement throughout such
period, or, if there has been a default in the performance
of any such obligation, specifying each such default known
to such officer and the nature and status thereof. A copy
of such certificate may be obtained by any Investor
Certificateholder by a request in writing to the Trustee
addressed to the Corporate Trust Office.
Section 3.6 Annual Independent Accountants'
Servicing Report.
(a) Within 100 days of the end of each fiscal
year, the Servicer shall cause a firm of nationally
recognized independent public accountants (who may also
render other services to the Servicer or the Transferor) to
furnish a report with respect to the prior fiscal year (or,
in the case of the first such period, the period beginning
on the Initial Closing Date and ending on the last day of
the related fiscal year) to the Trustee, any Enhancement
Provider and each Rating Agency, to the effect that such
firm has applied certain procedures, agreed upon with the
Servicer and the Trustee and substantially as set forth in
Exhibit G hereto, which would re-perform certain accounting
procedures performed by the Servicer pursuant to certain
documents and records relating to the servicing of the
Receivables under this Agreement. In addition, each report
shall set forth the agreed upon procedures performed and the
results of such procedures.
(b) Within 100 days of the end of each fiscal
year, the Servicer shall cause a firm of nationally
recognized independent certified public accountants (who may
also render other services to the Servicer or the
Transferor) to furnish a report to the Trustee, any
Enhancement Provider and the Rating Agency to the effect
that they have compared the mathematical calculations set
forth in each of the monthly certificates forwarded by the
Servicer pursuant to subsection 3.4(c) during the period
covered by such report with the computer reports which were
the source of such amounts and that on the basis of such
comparison, such amounts are in agreement, except for such
exceptions as they believe to be immaterial and such other
exceptions as shall be set forth in such report. A copy of
such report will be sent by the Trustee to each Investor
Certificateholder.
Section 3.7 Tax Treatment. The Transferor has
structured this Agreement and the Investor Certificates with
the intention that the Investor Certificates will qualify
under applicable federal, state, local and foreign tax law
as indebtedness. Except to the extent expressly specified
to the contrary in any Supplement, the Transferor, the
Servicer, the Holder of the Exchangeable Transferor
Certificate, each Investor Certificateholder, Holder of a
Variable Funding Certificate, and each Certificate Owner
agree to treat and to take no action inconsistent with the
treatment of the Investor Certificates (or beneficial
interest therein) as indebt-
edness for purposes of federal, state, local and foreign
income or franchise taxes and any other tax imposed on or
measured by income. Each Investor Certificateholder, Holder
of a Variable Funding Certificate and the Holder of the
Exchangeable Transferor Certificate, by acceptance of its
Certificate and each Certificate Owner, by acquisition of a
beneficial interest in a Certificate, agree to be bound by
the provisions of this Section 3.7. Each Certificateholder
agrees that it will cause any Certificate Owner acquiring an
interest in a Certificate through it to comply with this
Agreement as to treatment as indebtedness under applicable
tax law, as described in this Section 3.7. Furthermore,
subject to Section 11.11, the Trustee shall treat the Trust
as a security device only, and shall not file tax returns or
obtain an employer identification number on behalf of the
Trust.
Section 3.8 Adjustments. (a) If the Servicer
adjusts downward the amount of any 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
charging off such amount as uncollectible, then, in any such
case, the Transferor Interest will be reduced and the
aggregate amount of the Principal Receivables used to
calculate the Investor Percentages applicable to any Series
will be reduced by the principal amount of any such
adjustment. Similarly, the aggregate amount of the
Principal Receivables used to calculate the Investor
Percentages applicable to any Series will be reduced by the
amount of any Principal Receivable which was discovered as
having been created through a fraudulent or counterfeit
charge or with respect to which the covenant contained in
subsection 2.5(b) was breached. Any adjustment required
pursuant to either of the two preceding sentences shall be
made on or prior to the end of the Monthly Period in which
such adjustment obligation arises. In the event that,
following any such exclusion, the Transferor Interest would
be less than the Minimum Transferor Interest, within two
Business Days of the date on which such adjustment obli
gation arises, the Transferor shall pay to the Servicer, for
deposit into the Excess Funding Account, in immediately
available funds an amount equal to the amount by which the
Transferor Interest would be reduced below the Minimum
Transferor Interest as a result of such adjustment or
exclusion. Any amount deposited into the Excess Funding
Account in connection with the adjustment of a Receivable
(an "Adjustment Payment") shall be applied in accordance
with Article IV and the terms of each Supplement.
(b) If (i) the Servicer makes a deposit into the
Collection Account in respect of a Collection of a
Receivable and such Collection was received in the form of a
check which is not honored for any reason or (ii) the
Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more
than the actual amount of such Collection, the Servicer
shall appropriately adjust the amount subsequently deposited
into the Collection Account to reflect such dishonored check
or mistake. Any Receivable in respect of which a dishonored
check is received shall be deemed not to have been paid.
Notwithstanding the first
two sentences of this paragraph, any adjustments made
pursuant to this paragraph will be reflected in a current
report but will not change any amount of Collections
previously reported pursuant to subsection 3.4(b).
Section 3.9 Notices to Fingerhut. In the event
that Fingerhut or any Affiliate thereof is no longer acting
as Servicer, any Successor Servicer appointed pursuant to
Section 10.2 shall deliver or make available to Fingerhut
each certificate and report required to be prepared,
forwarded or delivered thereafter pursuant to Sections 3.4,
3.5 and 3.6.
[End of Article III]
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.1 Rights of Certificateholders. Each
Series of Investor Certificates shall represent Undivided
Interests in the Trust, including the benefits of any
Enhancement issued with respect to such Series and the right
to receive the Collections and other amounts at the times
and in the amounts specified in this Article IV to be
deposited in the Investor Accounts or to be paid to the
Investor Certificateholders of such Series; provided,
however, that the aggregate interest represented by such
Certificates at any time in the Principal Receivables shall
not exceed an amount equal to the Invested Amount of such
Certificates. The Exchangeable Transferor Certificate shall
represent the remaining undivided interest in the Trust,
including the right to receive the Collections and other
amounts at the times and in the amounts specified in this
Article IV to be paid to the Holder of the Exchangeable
Transferor Certificate; provided, however, that the
aggregate interest represented by such Certificate at any
time in the Principal Receivables shall not exceed the
Transferor Interest at such time and such Certificate shall
not represent any interest in the Investor Accounts, except
as provided in this Agreement, or the benefits of any
Enhancement issued with respect to any Series.
Section 4.2 Establishment of Accounts.
(a) The Collection Account. The Servicer, for
the benefit of the Certificateholders, shall establish in
the name of the Trustee, on behalf of the Trust, a non
interest bearing segregated account (the "Collection
Account") bearing a designation clearly indicating that the
funds deposited therein are held in trust for the benefit of
the Certificateholders, and shall cause such Collection
Account to be established and maintained, (i) in a
segregated trust account with the corporate trust department
of a depositary institution or trust company (which may
include the Trustee) organized under the laws of the United
States of America or any one of the states thereof or the
District of Columbia which has a long-term unsecured debt
rating of at least Baa3 by Moody's and whose deposits are
insured to the limits provided by law by the FDIC having
corporate trust powers and acting as trustee for funds
deposited therein (provided, however, that such account need
not be maintained as a segregated trust account with the
corporate trust department of such institution if at all
times the certificates of deposit, short-term deposits or
commercial paper or the long-term unsecured debt obligations
(other than such obligation whose rating is based on
collateral or on the credit of a Person other than such
institution or trust company) of such depositary institution
or trust company shall have a credit rating from Standard &
Poor's of at least A-1+ and P-1 from Moody's in the case of
the certificates of deposit, short-term deposits or
commercial paper, or a rating from Standard & Poor's of AAA
and from Moody's of Aaa in the case of the long-term
unsecured debt obligations) or (ii) with a depositary
institution, which may include the Trustee, which is
acceptable to the Rating Agency (in the case of (i) and
(ii), a "Qualified Insti-
tution"). If, at any time, the institution holding the
Collection Account ceases to be a Qualified Institution, the
Transferor shall direct the Servicer to establish within 10
Business Days a new Collection Account with a Qualified
Institution, transfer any cash and/or any investments to
such new Collection Account and from the date such new
Collection Account is established, it shall be the
"Collection Account." The Servicer shall give written
notice to the Trustee of the location and account number of
the Collection Account and shall notify the Trustee in
writing prior to any subsequent change thereof. Pursuant to
authority granted to it pursuant to subsection 3.1(b), the
Servicer shall have the power revocable by the Trustee to
withdraw funds from the Collection Account for the purposes
of carrying out its duties hereunder.
The Collection Account shall be under the sole
dominion and control of the Trustee and the Trustee shall
possess all right, title and interest in all funds from time
to time on deposit in such account.
(b) The Interest Funding and Principal Accounts.
The Trustee, for the benefit of the Investor
Certificateholders, shall establish and maintain with a
Qualified Institution in the name of the Trust two segre
gated trust accounts for each Series (an "Interest Funding
Account" and a "Principal Account," respectively), each
bearing a designation clearly indicating that the funds
therein are held for the benefit of the Investor
Certificateholders of such Series. Except as provided in
subsection 4.2(e), each Interest Funding Account and each
Principal Account shall be under the sole dominion and
control of the Trustee for the benefit of the Investor
Certificateholders. Pursuant to authority granted to it
hereunder, the Servicer shall have the revocable power to
instruct the Trustee to withdraw funds from the Interest
Funding Account and any Principal Account for any purpose of
carrying out the Servicer's or the Trustee's duties
hereunder. The Trustee at all times shall maintain accurate
records reflecting each transaction in each Principal
Account and each Interest Funding Account and that funds
held therein shall at all times be held in trust for the
benefit of the Investor Certificateholders of such Series.
If, at any time, the institution holding the Interest
Funding Account ceases to be a Qualified Institution, the
Servicer shall direct the Trustee to establish within 10
Business Days a new Interest Funding Account meeting the
conditions specified above with a Qualified Institution,
transfer any cash and/or any investments to such new
Interest Funding Account and from the date such new Interest
Funding Account is established, it shall be the "Interest
Funding Account." Similarly, if, at any time, the
institution holding any Principal Account ceases to be a
Qualified Institution, the Servicer shall direct the Trustee
to establish within 10 Business Days a new Principal Account
meeting the conditions specified above with a Qualified
Institution, transfer any cash and/or any investments to
such new Principal Account and from the date such new
Principal Account is established, it shall be a "Principal
Account."
(c) Distribution Accounts. The Trustee, for the
benefit of the Investor Certificateholders of each Series,
shall cause to be established and maintained in
the name of the Trust, with an office or branch of a
Qualified Institution a non-interest-bearing segregated
demand deposit account for each Series (a "Distribution
Account") bearing a designation clearly indicating that the
funds deposited therein are held in trust for the benefit of
the Investor Certificateholders of such Series. Each
Distribution Account shall be under the sole dominion and
control of the Trustee for the benefit of the Investor
Certificateholders of the related Series. Pursuant to the
authority granted to the Paying Agent herein, the Paying
Agent shall have the power, revocable by the Trustee, to
make withdrawals and payments from the Distribution Account
for the purpose of carrying out the Paying Agent's duties
hereunder. If, at any time, the institution holding a
Distribution Account ceases to be a Qualified Institution,
the Servicer shall direct the Trustee to establish within 10
Business Days a new Distribution Account meeting the
conditions specified above with a Qualified Institution,
transfer any cash and/or any investments to such new
Distribution Account and from the date such new Distribution
Account is established, it shall be a "Distribution
Account."
(d) The Excess Funding Account. The Trustee, for
the benefit of the Certificateholders, shall cause to be
established in the name of the Trustee, on behalf of the
Certificateholders, with a Qualified Institution, a
segregated trust account (the "Excess Funding Account")
bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Cer
tificateholders. Except as provided in subsection 4.3(f),
the Excess Funding Account shall, except as otherwise
provided herein, be under the sole dominion and control of
the Trustee for the benefit of the Certificateholders.
Pursuant to the authority granted to the Servicer herein,
the Servicer shall have the power, revocable by the Trustee,
to make withdrawals and payments from the Excess Funding
Account for the purpose of carrying out the Servicer's or
Trustee's duties hereunder. If, at any time, the
institution holding the Excess Funding Account ceases to be
a Qualified Institution, the Servicer shall direct the
Trustee to establish within 10 Business Days a new Excess
Funding Account meeting the conditions specified above with
a Qualified Institution, transfer any cash and/or any
investments to such new Excess Funding Account and from the
date such new Excess Funding Account is established, it
shall be the "Excess Funding Account."
(e) Administration of the Principal Accounts and
the Interest Funding Accounts. Funds on deposit in each
Principal Account and each Interest Funding Account shall at
all times be invested by the Servicer (or, at the written
direction of the Transferor, by the Trustee) on behalf of
the Transferor in Cash Equivalents. Any such investment
shall mature and such funds shall be available for
withdrawal on the Transfer Date following the Monthly Period
in which such funds were processed for collection. No such
investments shall be liquidated prior to maturity. At the
end of each month, all interest and earnings (net of losses
and investment expenses) on funds on deposit in each
Principal Account and each Interest Funding Account (unless
otherwise specified in the applicable Supplement) shall be
deposited by the Trustee in a separate deposit account with
a Qualified Institution in the name of the Servicer, or a
Person
designated in writing by the Servicer, which shall not
constitute a part of the Trust, or shall otherwise be turned
over by the Trustee to the Servicer not less frequently than
monthly. Subject to the restrictions set forth above, the
Servicer, or a Person designated in writing by the Servicer,
of which the Trustee shall have received written
notification, shall have the authority to instruct the
Trustee with respect to the investment of funds on deposit
in any Principal Account and any Interest Funding Account.
Any investment instructions to the Trustee shall be in
writing, shall be given no later than 10:00 a.m. New York
City time on a Business Day that such investment is proposed
to be made and shall include a certification that the
proposed investment is a Cash Equivalent that matures at or
prior to the time required by this Agreement. For purposes
of determining the availability of funds or the balances in
any Interest Funding Account and any Principal Account for
any reason under this Agreement, all investment earnings on
such funds shall be deemed not to be available or on
deposit.
Section 4.3 Collections and Allocations.
(a) Collections. Obligors shall make payments on
the Receivables to the Servicer who shall deposit all such
payments in the Collection Account no later than the second
Business Day following the Date of Processing thereof.
The Servicer shall allocate such amounts to each
Series of Investor Certificates and to the Holder of the
Exchangeable Transferor Certificate in accordance with this
Article IV and shall cause the Trustee to withdraw the
required amounts from the Collection Account or pay such
amounts to the Holder of the Exchangeable Transferor
Certificate in accordance with this Article IV. The
Servicer shall make such deposits or payments on the date
indicated herein by wire transfer or as otherwise provided
in the Supplement for any Series of Certificates with
respect to such Series.
Notwithstanding anything in this Agreement to the
contrary, but subject to the terms of any Supplement, for so
long as, and only so long as, Fingerhut (or any successors
to Fingerhut pursuant to Section 8.2) or an Affiliate of
Fingerhut shall remain the Servicer hereunder, and (a)(i)
Fingerhut (or any successors to Fingerhut pursuant to
Section 8.2) or an Affiliate of Fingerhut provides to the
Trustee a letter of credit or other form of Enhancement
rated at least A-1 by Standard & Poor's and P-1 by Moody's
(as certified to the Trustee by the Servicer), and (ii)
after notifying each Rating Agency of the proposed use of
such letter of credit or other form of Enhancement the
Transferor shall have received a notice from each Rating
Agency that making payments monthly rather than daily would
not result in a downgrading or withdrawal of any of such
Rating Agency's thenexisting ratings of the Investor
Certificates, or (b) Fingerhut (or any successors to
Fingerhut pursuant to Section 8.2) shall have and maintain a
short-term credit rating of at least A-1 by Standard &
Poor's and P-1 by Moody's (as certified to the Trustee by
the Servicer), the Servicer need not deposit Collections
from the Collection Account into the Principal Account or
the Interest Funding Account or any Series Account, or make
payments to the Holder of the Exchangeable Transferor Cer-
tificate, prior to the close of business on the day any
Collections are deposited in the Collection Account as
otherwise provided in this Article IV, but may instead make
such deposits, payments and withdrawals on each Transfer
Date in an amount equal to the net amount of such deposits,
payments and withdrawals which would have been made but for
the provisions of this paragraph.
(b) Allocations for the Exchangeable Transferor
Certificate. Throughout the existence of the Trust, unless
otherwise stated in any Supplement, on each Business Day the
Servicer shall allocate to the Holder of the Exchangeable
Transferor Certificate an amount equal to the product of (A)
the Transferor Percentage as of the end of the preceding
Business Day and (B) the aggregate amount of Principal
Collections and Imputed Yield Collections available in the
Collection Account. The Servicer shall pay such amount to
the Holder of the Exchangeable Transferor Certificate on
each Business Day; provided, however, that amounts payable
to the Holder of the Exchangeable Transferor Certificate
pursuant to this clause (b) shall instead be deposited in
the Excess Funding Account to the extent necessary to
prevent the Transferor Interest from being less than the
Minimum Transferor Interest.
(c) [Reserved]
(d) Allocation for Series. On each Business Day,
(i) the amount of Imputed Yield Collections available in the
Collection Account allocable to each Series shall be
determined by multiplying the aggregate amount of such
Imputed Yield Collections by the Floating Allocation
Percentage for such Series, (ii) the amount of Principal
Collections available in the Collection Account allocable to
each Series shall be determined by multiplying the aggregate
amount of such Principal Collections by (x) during the
Revolving Period for a Series, the Floating Allocation
Percentage for such Series and (y) during any Amortization
Period for a Series, the Fixed/Floating Allocation
Percentage for such Series, and (iii) the Defaulted
Receivables allocable to each Series shall be determined by
multiplying the aggregate amount of such Defaulted
Receivables by the Floating Allocation Percentage for such
Series. The Servicer shall, prior to the close of business
on the day any Collections are deposited in the Collection
Account, cause the Trustee to withdraw the required amounts
from the Collection Account and cause the Trustee to deposit
such amounts into the applicable Principal Account, the
applicable Interest Funding Account, the Excess Funding
Account, or any Series Account or pay such amounts to the
Holder of the Exchangeable Transferor Certificate in
accordance with the provisions of this Article IV.
(e) Unallocated Principal Collections; Excess
Funding Account. On each Business Day, Shared Principal
Collections shall be allocated to each outstanding Series
pro rata based on the Principal Shortfall, if any, for each
such Series, and then, at the option of the Transferor, any
remainder may be applied as principal with respect to the
Variable Funding Certificates. The Servicer shall pay any
remaining Shared Principal Collections on such Business Day
to the Transferor; provided, that if the Transferor Interest
as determined on such Business Day does not exceed the
Minimum Transferor Interest, then
such remaining Shared Principal Collections shall be
deposited in the Excess Funding Account to the extent
necessary to increase the Transferor Interest above the
Minimum Transferor Interest; provided, further, that if an
Amortization Period has commenced and is continuing with
respect to more than one outstanding Series, such remaining
Shared Principal Collections shall be allocated to such
Series pro rata based on the Investor Percentage for
Principal Receivables applicable for such Series.
(f) Amounts in Excess Funding Account. Amounts on
deposit in the Excess Funding Account on any Business Day
will be invested by the Servicer (or, at the direction of
the Transferor, by the Trustee) on behalf of the Transferor
in Cash Equivalents which shall mature and be available on
or before the next Business Day on which amounts may be
released from the Excess Funding Account. Earnings from such
investments received shall be deposited in the Collection
Account and treated as Imputed Yield Collections. Any
investment instructions to the Trustee shall be in writing
and shall include a certification that the proposed
investment is a Cash Equivalent that matures at or prior to
the date required by this Agreement. If on any Business Day
other than a Business Day on which a Prospective Pay Out
Event has occurred and is continuing, the Transferor
Interest is greater than the Minimum Transferor Interest,
amounts on deposit in the Excess Funding Account may, at the
option of the Transferor, be released to the Holder of the
Exchangeable Transferor Certificate. On the first Business
Day of the Amortization Period for any Series, funds on
deposit in the Excess Funding Account will be deposited in
the Principal Account for such Series to the extent of the
lesser of (x) the Invested Amount of such Series and (y) the
amount then on deposit in the Excess Funding Account.
[THE REMAINDER OF ARTICLE IV IS RESERVED
AND SHALL BE SPECIFIED IN ANY SUPPLEMENT WITH
RESPECT TO ANY SERIES]
[End of Article IV]
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN
ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]
[End of Article V]
ARTICLE VI
THE CERTIFICATES
Section 6.1 The Certificates. Subject to Sections 6.10
and 6.13, the Investor Certificates of each
Series and any Class thereof may be issued in bearer form
(the "Bearer Certificates") with attached interest coupons
and, if applicable, a special coupon (collectively, the
"Coupons") or in fully registered form (the "Registered
Certificates"), and shall be substantially in the form of
the exhibits with respect thereto attached to the related
Supplement. The Exchangeable Transferor Certificate shall
be substantially in the form of Exhibit A. The Investor
Certificates and the Exchangeable Transferor Certificate
shall, upon issue pursuant hereto or to Section 6.9 or
Section 6.10, be executed and delivered by the Transferor to
the Trustee for authentication and redelivery as provided in
Sections 2.1 and 6.2. Any Investor Certificate shall be
issuable in a minimum denomination of $1,000 Undivided
Interest and integral multiples thereof, unless otherwise
specified in any Supplement, and shall be issued upon
original issuance in an original aggregate principal amount
equal to the Initial Invested Amount. The Exchangeable
Transferor Certificate shall be issued as a single
certificate. Each Certificate shall be executed by manual or
facsimile signature on behalf of the Transferor by its
President or any Vice President. Certificates bearing the
manual or facsimile signature of the individual who was, at
the time when such signature was affixed, authorized to sign
on behalf of the Transferor or the Trustee shall not be
rendered invalid, notwithstanding that such individual has
ceased to be so authorized prior to the authentication and
delivery of such Certificates or does not hold such office
at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement, or be valid
for any purpose, unless there appears on such Certificate a
certificate of authentication substantially in the form
provided for herein, executed by or on behalf of the Trustee
by the manual signature of a duly authorized signatory, and
such certificate upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has
been validly issued and duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their
authentication except Bearer Certificates which shall be
dated the applicable Issuance Date as provided in the
related Supplement.
Section 6.2 Authentication of Certificates.
Contemporaneously with the initial assignment and transfer
of the Receivables, whether now existing or hereafter
created and the other components to the Trust, the Trustee
shall authenticate and deliver the initial Series of
Investor Certificates, upon the written order of the
Transferor. Upon the issuance of such Investor Certifi
cates, such Investor Certificates shall be validly issued,
fully paid and non-assessable. The Trustee shall
authenticate and deliver the Exchangeable Transferor
Certificate to the Transferor simultaneously with its
delivery of the initial Series of Investor Certificates.
Upon an Exchange as provided in Section 6.9 and the
satisfaction of certain other conditions specified therein,
the Trustee shall authenticate and deliver the Investor
Certificates of additional Series (with the designa-
tion provided in the related Supplement), upon the written
order of the Transferor. Upon the written order of the
Transferor, the Certificates of any Series shall be duly
authenticated by or on behalf of the Trustee, in authorized
denominations equal to (in the aggregate) the Initial
Invested Amount of such Series of Investor Certificates. If
specified in the related Supplement for any Series, the
Trustee shall authenticate and deliver outside the United
States the Global Certificate that is issued upon original
issuance thereof, upon the written order of the Transferor,
to the Depositary. If specified in the related Supplement
for any Series, the Trustee shall authenticate Book-Entry
Certificates that are issued upon original issuance thereof,
upon the written order of the Transferor, to a Clearing
Agency or its nominee as provided in Section 6.10.
Section 6.3 Registration of Transfer and Exchange
of Certificates.
(a) The Trustee shall cause to be kept at the
office or agency to be maintained by a transfer agent and
registrar (the "Transfer Agent and Registrar") in accordance
with the provisions of Section 11.16, a register (the
"Certificate Register") in which, subject to such reasonable
regulations as it may prescribe, the Transfer Agent and
Registrar shall provide for the registration of the Investor
Certificates of each Series (unless otherwise provided in
the related Supplement) and of transfers and exchanges of
the Investor Certificates as herein provided. Whenever
reference is made in this Agreement to the transfer or
exchange of the Certificates by the Trustee, such reference
shall be deemed to include the transfer or exchange on
behalf of the Trustee by a Transfer Agent and Registrar.
The Bank of New York is hereby initially appointed Transfer
Agent and Registrar for the purposes of registering the
Investor Certificates and transfers and exchanges of the
Investor Certificates as herein provided. If any form of
Investor Certificate is issued as a Global Certificate, The
Bank of New York may, or if and so long as any Series of
Investor Certificates are listed on a stock exchange and
such exchange shall so require, The Bank of New York shall
appoint a co-transfer agent and co-registrar, which will
also be a co-paying agent, in such city as the Transferor
may specify. Any reference in this Agreement to the
Transfer Agent and Registrar shall include any co-transfer
agent and coregistrar unless the context otherwise requires.
The Bank of New York shall be permitted to resign as
Transfer Agent and Registrar upon 30 days' written notice to
the Servicer. In the event that The Bank of New York shall
no longer be the Transfer Agent and Registrar, the Trans
feror shall appoint a successor Transfer Agent and Regis
trar. If any Series with respect to which Book Entry
Certificates were originally issued is no longer issued as
Book-Entry Certificates, then the Servicer may appoint a
successor Transfer Agent and Registrar.
Upon surrender for registration of transfer of any
Certificate at any office or agency of the Transfer Agent
and Registrar maintained for such purpose, the Transferor
shall execute, subject to the provisions of subsection
6.3(c), and the Trustee shall (unless the Transfer Agent and
Registrar is different than the Trustee, in which case the
Transfer Agent and Registrar shall) authenticate and
deliver, in the name of the designated
transferee or transferees, one or more new Certificates in
authorized denominations of like aggregate Undivided
Interests; provided, that the provisions of this paragraph
shall not apply to Bearer Certificates.
At the option of any Holder of Registered
Certificates, Registered Certificates may be exchanged for
other Registered Certificates of the same Series in
authorized denominations of like aggregate Undivided
Interests in the Trust, upon surrender of the Registered
Certificates to be exchanged at any office or agency of the
Transfer Agent and Registrar maintained for such purpose.
At the option of a Bearer Certificateholder, subject to
applicable laws and regulations (including without
limitation, the Bearer Rules), Bearer Certificates may be
exchanged for other Bearer Certificates or Registered
Certificates of the same Series in authorized denominations
of like aggregate Undivided Interests in the Trust, in the
manner specified in the Supplement for such Series, upon
surrender of the Bearer Certificates to be exchanged at an
office or agency of the Transfer Agent and Registrar located
outside the United States. Each Bearer Certificate
surrendered pursuant to this Section 6.3 shall have attached
thereto (or be accompanied by) all unmatured Coupons,
provided that any Bearer Certificate so surrendered after
the close of business on the Record Date preceding the
relevant Distribution Date after the related Series
Termination Date need not have attached the Coupons relating
to such Distribution Date.
Whenever any Investor Certificates of any Series
are so surrendered for exchange, the Transferor shall
execute, and the Trustee shall (unless the Transfer Agent
and Registrar is different than the Trustee, in which case
the Transfer Agent and Registrar shall) authenticate and
deliver, the Investor Certificates of such Series which the
Certificateholder making the exchange is entitled to
receive. Every Investor Certificate presented or
surrendered for registration of transfer or exchange shall
be accompanied by a written instrument of transfer in a form
satisfactory to the Trustee and the Transfer Agent and
Registrar duly executed by the Certificateholder thereof or
his attorney-in-fact duly authorized in writing.
The preceding provisions of this Section 6.3
notwithstanding, the Trustee or the Transfer Agent and
Registrar, as the case may be, shall not be required to
register the transfer of or exchange any Investor Certif
icate of any Series for the period from the Record Date
preceding the due date for any payment to the Distribution
Date with respect to the Investor Certificates of such
Series.
Unless otherwise provided in the related Sup
plement, no service charge shall be made for any regis
tration of transfer or exchange of Certificates, but the
Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or governmental charge that may
be imposed in connection with any transfer or exchange of
Certificates.
All Investor Certificates (together with any
Coupons attached to Bearer Certificates) surrendered for
registration of transfer or exchange shall be canceled by
the Transfer Agent and Registrar and disposed of in a
manner satisfactory to the Trustee. The Trustee shall
cancel and dispose of any Global Certificate upon its ex
change in full for Definitive Certificates, but shall not be
required to destroy such Global Certificates. Such
certificate shall also state that a certificate or cer
tificates of each Foreign Clearing Agency to the effect
referred to in Section 6.13 was received with respect to
each portion of the Global Certificate exchanged for
Definitive Certificates.
The Transferor shall execute and deliver to the
Trustee or the Transfer Agent and Registrar, as applicable,
Bearer Certificates and Registered Certificates in such
amounts and at such times as are necessary to enable the
Trustee to fulfill its responsibilities under this Agreement
and the Certificates.
(b) Except as provided in Section 6.9 or 7.2 or
in any Supplement, in no event shall the Exchangeable
Transferor Certificate or any interest therein be trans
ferred, sold, exchanged, pledged, participated or otherwise
assigned hereunder, in whole or in part, unless the
Transferor shall have consented in writing to such transfer
and unless the Trustee shall have received (1) confirmation
in writing from each Rating Agency that such transfer will
not result in a lowering or withdrawal of its then-existing
rating of any Series of Investor Certificates and (2) an
Opinion of Counsel that such transfer does not (i) adversely
affect the conclusions reached in any of the federal income
tax opinions issued in connection with the original issuance
of any Series of Investor Certificates or (ii) result in a
taxable event to the holders of any such Series.
(c) Unless otherwise provided in the related
Supplement, registration of transfer of Registered Cer
tificates containing a legend relating to the restrictions
on transfer of such Registered Certificates (which legend
shall be set forth in the Supplement relating to such
Investor Certificates) shall be effected only if the
conditions set forth in such related Supplement are
satisfied.
Whenever a Registered Certificate containing the
legend set forth in the related Supplement is presented to
the Transfer Agent and Registrar for registration of
transfer, the Transfer Agent and Registrar shall promptly
seek instructions from the Servicer regarding such transfer.
The Transfer Agent and Registrar and the Trustee shall be
entitled to receive written instructions signed by an
officer of the Trustee prior to registering any such
transfer or authenticating new Registered Certificates, as
the case may be. The Servicer hereby agrees to indemnify
the Transfer Agent and Registrar and the Trustee and to hold
each of them harmless against any loss, liability or expense
incurred without negligence or bad faith on their part
arising out of or in connection with actions taken or
omitted by them in reliance on any such written instructions
furnished pursuant to this subsection 6.3(c).
(d) The Transfer Agent and Registrar will
maintain at its expense in the Borough of Manhattan, The
City of New York, an office or offices or an agency or
agencies where Investor Certificates of such Series may be
surrendered for registration of transfer or exchange.
(e) Prior to the Transfer of any portion of a
Transferor Retained Class, the Trustee shall have received
(i) an Officer's Certificate of the Transferor that on the
date of the proposed Transfer, taking into account the
certificates whose Transfer is proposed, more than 20% (by
Invested Amount and by value) of the outstanding
certificates issued by the Trust with respect to which no
Opinion of Counsel was issued that the applicable class
would be treated as debt for federal income tax purposes
(including the Transferor Certificate and each Transferor
Retained Class) shall be owned by the Transferor and (ii) an
Opinion of Counsel to the effect that such proposed Transfer
will not adversely affect the Federal, Minnesota or Delaware
income tax characterization of any outstanding Series of
Investor Certificates or the taxability (or tax
characterization) of the Trust under Federal, Minnesota or
Delaware income tax laws. The Transferor shall provide to
Moody's notice of any such Transfer and a copy of the
Opinion of Counsel described in clause (ii) above.
Section 6.4 Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate (together,
in the case of Bearer Certificates, with all unmatured
Coupons, if any, appertaining thereto) is surrendered to the
Transfer Agent and Registrar, or the Transfer Agent and
Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there
is delivered to the Transfer Agent and Registrar and the
Trustee such security or indemnity as may be required by
them to hold each of them and the Trust harmless, then, in
the absence of notice to the Trustee that such Certificate
has been acquired by a bona fide purchaser, the Trustee
shall (unless the Transfer Agent and Registrar is different
from the Trustee, in which case the Transfer Agent and
Registrar shall) authenticate and deliver (in compliance
with applicable law), in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like tenor and aggregate Undivided Interest.
In connection with the issuance of any new Certificate under
this Section 6.4, the Trustee or the Transfer Agent and
Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (in
cluding the fees and expenses of the Trustee and the
Transfer Agent and Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section 6.4
shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or
not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 6.5 Persons Deemed Owners. Prior to due
presentation of a Certificate for registration of transfer,
the Trustee, the Paying Agent, the Transfer Agent and
Registrar and any agent of any of them may treat the Person
in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving distributions
pursuant to Article V (as described in any Supplement) and
Article XII and for all other purposes whatsoever, and
neither the Trustee, the Paying Agent, the Transfer Agent
and Registrar nor any agent of any of them shall be affected
by any notice to the contrary; provided, however, that in
determining
whether the holders of Investor Certificates evidencing the
requisite Undivided Interests have given any request,
demand, authorization, direction, notice, consent or waiver
hereunder, Investor Certificates owned by the Transferor,
the Servicer or any Affiliate thereof shall be disregarded
and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in
relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Investor
Certificates which a Responsible Officer in the Corporate
Trust Office of the Trustee knows to be so owned shall be so
disregarded. Investor Certificates so owned that have been
pledged in good faith shall not be disregarded as
outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to
such Investor Certificates and that the pledgee is not the
Transferor, the Servicer or an Affiliate thereof.
In the case of a Bearer Certificate, the Trustee,
the Paying Agent, the Transfer Agent and Registrar and any
agent of any of them may treat the holder of a Bearer
Certificate or Coupon as the owner of such Bearer
Certificate or Coupon for the purpose of receiving dis
tributions pursuant to Article V (as described in any
Supplement) and Article XII and for all other purposes
whatsoever, and neither the Trustee, the Paying Agent, the
Transfer Agent and Registrar nor any agent of any of them
shall be affected by any notice to the contrary.
Certificates so owned that have been pledged in good faith
shall not be disregarded and may be regarded as outstanding,
if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such
Investor Certificates and that the pledgee is not the
Transferor, the Servicer or an Affiliate thereof.
Section 6.6 Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to
Investor Certificateholders from the appropriate account or
accounts maintained for the benefit of Certificateholders as
specified in this Agreement or the related Supplement for
any Series pursuant to Articles IV and V hereof. Any Paying
Agent shall have the revocable power to withdraw funds from
such appropriate account or accounts for the purpose of
making distributions referred to above. The Trustee (or the
Servicer if the Trustee is the Paying Agent) may revoke such
power and remove the Paying Agent, if the Trustee (or the
Servicer if the Trustee is the Paying Agent) determines in
its sole discretion that the Paying Agent shall have failed
to perform its obligations under this Agreement in any
material respect or for other good cause. The Paying Agent,
unless the Supplement with respect to any Series states
otherwise, shall initially be The Bank of New York. The
Bank of New York shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Servicer. Upon
the resignation of the Paying Agent, if the Paying Agent was
not the Trustee, the Trustee shall be the successor Paying
Agent unless and until another successor has been appointed
as Paying Agent. In the event that the Trustee, shall no
longer be the Paying Agent, the Transferor shall appoint a
successor to act as Paying Agent (which shall be a bank or
trust company). Any reference in this Agreement to the
Paying Agent shall
include any co-paying agent unless the context requires
otherwise.
If specified in the related Supplement for any
Series, so long as the Investor Certificates of such Series
are outstanding and the Paying Agent is not located in New
York City, the Transferor shall maintain a copaying agent in
New York City (for Registered Certificates only) or any
other city designated in such Supplement.
(b) The Trustee shall cause each Paying Agent
(other than itself) to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the
Trustee that such Paying Agent will hold all sums, if any,
held by it for payment to the Certificateholders in trust
for the benefit of the Certificateholders entitled thereto
and waive all rights of set off the Paying Agent may have
against any sums held by it until such sums shall be paid to
such Certificateholders and shall agree, and if the Trustee
is the Paying Agent it hereby agrees, that it shall comply
with all requirements of the Internal Revenue Code regarding
the withholding by the Trustee of payments in respect of
federal income taxes due from Certificate Owners.
Section 6.7 Access to List of Certificateholders'
Names and Addresses. The Trustee will furnish or cause to
be furnished by the Transfer Agent and Registrar to the
Servicer or the Paying Agent, within five Business Days
after receipt by the Trustee of a request therefor from the
Servicer or the Paying Agent, respectively, in writing, a
list in such form as the Servicer or the Paying Agent may
reasonably require, of the names and addresses of the
Investor Certificateholders as of the most recent Record
Date for payment of distributions to Investor
Certificateholders. Unless otherwise provided in the
related Supplement, holders of Investor Certificates
evidencing Undivided Interests aggregating not less than 25%
of the Invested Amount of the Investor Certificates of any
Series (the "Applicants") may apply in writing to the
Trustee, and if such application states that the Applicants
desire to communicate with other Investor Certificateholders
of any Series with respect to their rights under this
Agreement or under the Investor Certificates and is
accompanied by a copy of the communication which such
Applicants propose to transmit, then the Trustee, after
having been adequately indemnified by such Applicants for
its costs and expenses, shall afford or shall cause the
Transfer Agent and Registrar to afford such Applicants
access during normal business hours to the most recent list
of Certificateholders held by the Trustee and shall give the
Servicer notice that such request has been made, within five
Business Days after the receipt of such application. Such
list shall be as of a date no more than 45 days prior to the
date of receipt of such Applicants' request. Every
Certificateholder, by receiving and holding a Certificate,
agrees with the Trustee that neither the Trustee, the
Transfer Agent and Registrar, nor any of their respective
agents shall be held accountable by reason of the disclosure
of any such information as to the names and addresses of the
Certificateholders hereunder, regardless of the source from
which such information was obtained.
Section 6.8 Authenticating Agent.
(a) The Trustee may appoint one or more au
thenticating agents (each, an "Authenticating Agent") with
respect to the Certificates which shall be authorized to act
on behalf of the Trustee in authenticating the Certificates
in connection with the issuance, delivery, registration of
transfer, exchange or repayment of the Certificates. The
Trustee will appoint any Transfer Agent and Registrar to be
an Authentication Agent. Whenever reference is made in this
Agreement to the authentication of Certificates by the
Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on
behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the
Trustee by an Authenticating Agent. Each Authenticating
Agent must be acceptable to the Transferor. The Trustee
hereby initially appoints The Bank of New York as its
Authenticating Agent.
(b) Any institution succeeding to the corporate
agency business of an Authenticating Agent shall continue to
be an Authenticating Agent without the execution or filing
of any paper or any further act on the part of the Trustee
or such Authenticating Agent.
(c) An Authenticating Agent may at any time
resign by giving written notice of resignation to the
Trustee and to the Transferor. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving
notice of termination to such Authenticating Agent and to
the Transferor. Upon receiving such a notice of resignation
or upon such a termination, or in case at any time an
Authenticating Agent shall cease to be acceptable to the
Trustee or the Transferor, the Trustee promptly may appoint
a successor Authenticating Agent. Any successor
Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers
and duties of its predecessor hereunder, with like effect as
if originally named as an Authenticating Agent. No
successor Authenticating Agent shall be appointed unless
acceptable to the Trustee and the Transferor.
(d) The Servicer agrees to pay each Authenti
cating Agent from time to time reasonable compensation for
its services under this Section 6.8.
(e) The provisions of Sections 11.1, 11.2 and
11.3 shall be applicable to any Authenticating Agent.
(f) Pursuant to an appointment made under this
Section 6.8, the Certificates may have endorsed thereon, in
lieu of the Trustee's certificate of authentication, an
alternate certificate of authentication in substantially the
following form:
Trustee's Certificate of Authentication
This is one of the certificates described in the
Pooling and Servicing Agreement.
as Authenticating Agent for
the Trustee,
By:
Authorized Signatory
Dated:
Section 6.9 Tender of Exchangeable Transferor
Certificate.
(a) Upon any Exchange, the Transferor shall
deliver to the Trustee for authentication under Section 6.2,
one or more new Series of Investor Certificates. Any such
Series of Investor Certificates shall be substantially in
the form specified in the related Supplement and shall bear,
upon its face, the designation for such Series to which it
belongs, as selected by the Transferor. Except as specified
in any Supplement for a related Series, all Investor
Certificates of any Series shall rank pari passu and be
equally and ratably entitled as provided herein to the
benefits hereof (except that the Enhancement provided for
any Series shall not be available for any other Series)
without preference, priority or distinction on account of
the actual time or times of authentication and delivery, all
in accordance with the terms and provisions of this
Agreement and the related Supplement.
(b) The Holder of the Exchangeable Transferor
Certificate may (i) tender the Exchangeable Transferor
Certificate to the Trustee in exchange for (A) one or more
newly issued Series of Investor Certificates or, with
respect to any pre-funded Series, interests therein and (B)
a reissued Exchangeable Transferor Certificate, (ii) request
the Trustee to issue to it one or more Classes of any newly
issued Series of Investor Certificates which upon payment by
the purchaser thereof of the Initial Invested Amount of such
Certificates to a Defeasance Account, will represent an
interest in the Trust equal to such Initial Invested Amount
(an "Unfunded Certificate") or (iii) take a combination of
the actions specified in clauses (i) and (ii) provided that
the sum of the amount of Transferor Interest which is
tendered under clause (i) and the amount to be paid to the
Defeasance Account under clause (ii) equals the Initial In
vested Amount of the Investor Certificates delivered to the
Holder of the Exchangeable Transferor Certificate (any such
event under clauses (i), (ii) or (iii), a "Transferor
Exchange"). In addition, to the extent permitted for any
Series of Investor Certificates as specified in the related
Supplement, the Investor Certificateholders of such Series
may tender their Investor Certificates and the Holder of the
Exchangeable Transferor Certificate may tender the
Exchangeable Transferor Certificate to the Trustee pursuant
to the terms and conditions set forth in such Supplement in
exchange for (i) one or more newly issued Series of Investor
Certificates and (ii) a reissued Exchangeable Transferor
Certificate (an "Investor Exchange"). Notwithstanding
anything to the contrary herein, the Transferor shall not be
permitted to deposit money into any Defeasance Account. The
Transferor Exchange and Investor Exchange are referred to
collectively herein as an "Exchange." The Holder of the
Exchangeable Transferor Certificate may perform an Exchange
by notifying the Trustee, in writing, at least five Business
Days in advance (an "Exchange Notice") of the date upon
which the Exchange is to occur
(an "Exchange Date"). Any Exchange Notice shall state the
designation of any Series to be issued on the Exchange Date
and, with respect to each such Class or Series: (a) its
Initial Invested Amount (or the method for calculating such
Initial Invested Amount), which at any time may not be
greater than the current principal amount of the
Exchangeable Transferor Certificate at such time (or in the
case of an Investor Exchange, the sum of the Invested Amount
of any Class or Series of Investor Certificates to be
exchanged plus the current principal amount of the
Exchangeable Transferor Certificate) taking into account any
Receivables transferred to the Trust simultaneous with such
Exchange, (b) its Certificate Rate (or the method for
allocating interest payments or other cash flows to such
Series), if any, and (c) the Enhancement Provider, if any,
with respect to such Series. On the Exchange Date, the
Trustee shall authenticate and deliver any such Class or
Classes of Series of Investor Certificates only upon
delivery to it of the following: (a) a Supplement satisfying
the criteria set forth in subsection 6.9(c) and in form
reasonably satisfactory to the Trustee executed by the
Transferor and the Servicer and specifying the Principal
Terms of such Series, (b) the applicable Enhancement, if
any, (c) the agreement, if any, pursuant to which the
Enhancement Provider agrees to provide the Enhancement, if
any, (d) an Opinion of Counsel to the effect that (i) any
Class of the newly issued Series of Investor Certificates
sold to third parties will be characterized as either
indebtedness or partnership interests for Federal and
applicable state income tax purposes or (ii) that the
issuance of the newly issued Series of Investor Certificates
will not adversely affect the Federal, Minnesota or Delaware
income tax characterization of any outstanding Series of
Investor Certificates or the taxability of the Trust under
Federal, Minnesota or Delaware income tax laws, (e) written
confirmation from each Rating Agency that the Exchange will
not result in such Rating Agency's reducing or withdrawing
its rating on any then outstanding Series as to which it is
a Rating Agency, (f) an Officer's Certificate of the
Transferor, that on the Exchange Date (i) after giving
effect to such Exchange, the Transferor Interest would be at
least equal to the Minimum Transferor Interest, (ii) the
Retained Interest would be at least equal to the Minimum
Retained Interest, and (iii) taking into account the
certificates of the newly issued Series, more than 20% (by
Invested Amount and by value) of the outstanding
certificates issued by the Trust with respect to which no
Opinion of Counsel was issued that the applicable class
would be treated as debt for federal income tax purposes
(including the Transferor Certificate and each Transferor
Retained Class) shall, by their terms, be prohibited from
being Transferred, (g) the existing Exchangeable Transferor
Certificate or applicable Investor Certificates, as the case
may be and (h) such other documents, certificates and
Opinions of Counsel as may be required by the applicable
Supplement. Upon satisfaction of such conditions, the
Trustee shall cancel the existing Exchangeable Transferor
Certificate or applicable Investor Certificates, as the case
may be, and issue, as provided above, such Series of
Investor Certificates and a new Exchangeable Transferor
Certificate, dated the Exchange Date. There is no limit to
the number of Exchanges that may be performed under this
Agreement.
(c) In conjunction with an Exchange, the
parties hereto shall execute a Supplement, which shall
specify the relevant terms with respect to any newly issued
Series of Investor Certificates, which may include without
limitation: (i) its name or designation, (ii) the Initial
Invested Amount or the method of calculating the Initial
Invested Amount, (iii) the Certificate Rate (or formula for
the determination thereof), (iv) the Closing Date, (v) the
rating agency or agencies rating such Series, (vi) the name
of the Clearing Agency, if any, (vii) the rights of the
Holder of the Exchangeable Transferor Certificate that have
been transferred to the Holders of such Series pursuant to
such Exchange (including any rights to allocations of
Collections of Imputed Yield Receivables and Principal
Receivables), (viii) the interest payment date or dates and
the date or dates from which interest shall accrue, (ix) the
method of allocating Principal Collections for such Series
and the method by which the principal amount of Investor
Certificates of such Series shall amortize or accrete and
the method for allocating Imputed Yield Collections and
Defaulted Receivables, (x) the names of any accounts to be
used by such Series and the terms governing the operation of
any such account, (xi) the Series Servicing Fee Percentage,
(xii) the Minimum Transferor Interest, (xiii) the Series
Termination Date, (xiv) the terms of any Enhancement with
respect to such Series, (xv) the Enhancement Provider, if
applicable, (xvi) the base rate applicable to such Series,
(xvii) the terms on which the Certificates of such Series
may be repurchased or remarketed to other investors, (xviii)
any deposit into any account provided for such Series, (xix)
the number of Classes of such Series and, if more than one
Class, the rights and priorities of each such Class, (xx)
whether any fees will be included in the funds available to
be paid for such Series, (xxi) the subordination of such
Series to any other Series, (xxii) the Pool Factor, (xxiii)
the Minimum Aggregate Principal Receivables, (xxiv) whether
such Series will be a part of a group or subject to being
paired with any other Series, (xxv) whether such Series will
be prefunded, and (xxvi) any other relevant terms of such
Series (including whether or not such Series will be pledged
as collateral for an issuance of any other securities,
including commercial paper) (all such terms, the "Principal
Terms" of such Series). The terms of such Supplement may
modify or amend the terms of this Agreement solely as
applied to such new Series. If on the date of the issuance
of such Series there is issued and outstanding one or more
Series of Investor Certificates and no Series of Investor
Certificates is currently rated by a Rating Agency, then as
a condition to such Exchange a nationally recognized
investment banking firm or commercial bank shall also
deliver to the Trustee an officer's certificate stating, in
substance, that the Exchange will not have an adverse effect
on the timing or distribution of payments to such other
Series of Investor Certificates then issued and outstanding.
(d) The Transferor may surrender the Exchangeable
Transferor Certificate to the Trustee in exchange for a
newly issued Exchangeable Transferor Certificate and a
second certificate (a "Supplemental Certificate"), the terms
of which shall be defined in a supplement to this Agreement
(which supplement shall be subject to Section 13.01
hereof to the extent that it amends any of
the terms of this Agreement), to be delivered to or upon the
order of the Transferor (or a Person designated by
the Transferor, in the case of the transfer or exchange
thereof, as provided below), upon satisfaction of the
following conditions: (i) following such exchange, the
Transferor Interest (less any interest therein represented
by any Supplemental Certificates) in the Principal
Receivables in the Trust equals or exceeds the greater of
the Minimum Transferor Interest and the Minimum Retained
Interest following such exchange, (ii) following such
exchange the sum of (a) the Transferor Interest (less any
interest therein represented by any Supplemental Certifi
cates) in the Principal Receivables and (b) the interest in
Principal Receivables represented by the Transferor Retained
Certificates equals or exceeds, on the day following such
exchange, 20% of the sum of (x) the Transferor Interest
(including any interest therein represented by any
Supplemental Certificate) and (y) the interest in Principal
Receivables represented by the Transferor Retained
Certificates on such date, and (iii) the Trustee received
prior to such exchange (A) a letter from the Rating Agency
stating that the then current ratings on the Investor
Certificates of each rated class of each Series then
outstanding will not be reduced or withdrawn because of the
issuance of such Supplemental Certificate and (B) an Opinion
of Counsel to the effect that (i) such Supplemental
Certificate will be characterized as either indebtedness or
a partnership interest for Federal and applicable state
income tax purposes or (ii) that such Supplemental
Certificate will not adversely affect the Federal, Minnesota
or Delaware income tax characterization of any outstanding
Series of Investor Certificates or the taxability of the
Trust under Federal, Minnesota or Delaware income tax laws,
transferred or exchanged only upon satisfaction of the
conditions set forth in clause (iii) above.
Section 6.10 Book-Entry Certificates. Unless
otherwise provided in any related Supplement, the Investor
Certificates, upon original issuance, shall be issued in the
form of typewritten Certificates representing the Book-Entry
Certificates, to be delivered to the depositary specified in
such Supplement (the "Depositary") which shall be the
Clearing Agency or Foreign Clearing Agency, by or on behalf
of such Series. The Investor Certificates of each Series
shall, unless otherwise provided in the related Supplement,
initially be registered on the Certificate Register in the
name of the nominee of the Clearing Agency or Foreign
Clearing Agency. No Certificate Owner will receive a
definitive certificate representing such Certificate Owner's
interest in the related Series of Investor Certificates,
except as provided in Section 6.12. Unless and until
definitive, fully registered Investor Certificates of any
Series ("Definitive Certificates") have been issued to
Certificate Owners pursuant to Section 6.12:
(i) the provisions of this Section 6.10
shall be in full force and effect with respect to each such
Series;
(ii) the Transferor, the Servicer, the Paying
Agent, the Transfer Agent and Registrar and the
Trustee may deal with the Clearing Agency and the
Clearing Agency Participants for all purposes
(including the making of distributions on the Investor
Certificates of each such Series) as the authorized
representatives of the Certificate Owners;
(iii) to the extent that the provisions
of this Section 6.10 conflict with any other provisions
of this Agreement, the provisions of this Section 6.10
shall control with respect to each such Series; and
(iv) the rights of Certificate Owners of Investor
Certificates of each such Series shall be exercised
only through the Clearing Agency or Foreign Clearing
Agency and the applicable Clearing Agency Participants
and shall be limited to those established by law and
agreements between such Certificate Owners and the
Clearing Agency or Foreign Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the
Depositary Agreement applicable to a Series, unless and
until Definitive Certificates of such Series are issued
pursuant to Section 6.12, the initial Clearing Agency
will make book-entry transfers among the Clearing
Agency Participants and receive and transmit
distributions of principal and interest on the Investor
Certificates to such Clearing Agency Participants.
Section 6.11 Notices to Clearing Agency. Whenever
notice or other communication to the Certificateholders
is required under this Agreement, unless and until
Definitive Certificates shall have been issued to
Certificate Owners pursuant to Section 6.12, the
Trustee shall give all such notices and communications
specified herein to be given to Holders of the Investor
Certifi-
cates to the Clearing Agency or Foreign Clearing Agency.
Section 6.12 Definitive Certificates. If (i) (A)
the Transferor advises the Trustee in writing that the
Clearing Agency or Foreign Clearing Agency is no longer
willing or able to discharge properly its responsibilities
under the applicable Depositary Agreement, and (B) the
Transferor is unable to locate a qualified successor, (ii)
the Transferor, at its option, advises the Trustee in
writing that it elects to terminate the bookentry system
through the Clearing Agency or Foreign Clearing Agency with
respect to any Series of Certificates or (iii) after the
occurrence of a Servicer Default, Certificate Owners of a
Series representing beneficial interests aggregating not
less than 50% of the Invested Amount of such Series advise
the Trustee and the applicable Clearing Agency or Foreign
Clearing Agency through the applicable Clearing Agency
Participants in writing that the continuation of a book-
entry system through the applicable Clearing Agency or
Foreign Clearing Agency is no longer in the best interests
of the Certificate Owners, the Trustee shall notify all
Certificate Owners of such Series, through the applicable
Clearing Agency Participants, of the occurrence of any such
event and of the availability of Definitive Certificates
to Certificate Owners of such Series requesting the same.
Upon surrender to the Trustee of the Investor Certificates of
such Series by the applicable Clearing Agency or Foreign
Clearing Agency for registration, accompanied by registration
instructions from the applicable Clearing Agency or Foreign
Clearing Agency, the Trustee shall issue the Definitive
Certificates of such Series. Neither the Transferor nor the
Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be
protected in relying on,
such instructions. Upon the issuance of Definitive
Certificates of such Series, all references herein to
obligations imposed upon or to be performed by the appli
cable Clearing Agency or Foreign Clearing Agency shall be
deemed to be imposed upon and performed by the Trustee, to
the extent applicable with respect to such Definitive
Certificates, and the Trustee shall recognize the Holders of
the Definitive Certificates of such Series as Certifi
cateholders of such Series hereunder.
Section 6.13 Global Certificate; Euro-Certifi-
cate Exchange Date. If specified in the related Supplement
for any Series, the Investor Certificates may be initially
issued in the form of a single temporary Global Certificate
(the "Global Certificate") in bearer form, without interest
coupons, in the denomination of the Initial Invested Amount
of such Series and substantially in the form attached to the
related Supplement. Unless otherwise specified in the
related Supplement, the provisions of this Section 6.13
shall apply to such Global Certificate. The Global
Certificate will be authenticated by the Trustee upon the
same conditions, in substantially the same manner and with
the same effect as the Definitive Certificates. The Global
Certificate may be exchanged in the manner described in the
related Supplement for Registered Certificates or Bearer
Certificates in definitive form.
Section 6.14 Meetings of Certificateholders.
To the extent provided by the Supplement for any
Series issued in whole or in part in Bearer Certificates,
the Servicer or the Trustee may at any time call a meeting
of the Certificateholders of such Series, to be held at such
time and at such place as the Servicer or the Trustee, as
the case may be, shall determine, for the purpose of
approving a modification of or amendment to, or obtaining a
waiver of, any covenant or condition set forth in this
Agreement with respect to such Series or in the Certificates
of such Series, subject to Section 13.1 of this Agreement.
[End of Article VI]
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
Section 7.1 Liability of the Transferor. The
Transferor shall be liable in accordance herewith solely to
the extent of the obligations specifically undertaken by
the Transferor.
Section 7.2 Merger or Consolidation of, or
Assumption of the Obligations of, the Transferor.
(a) The Transferor shall not consolidate with or
merge into any other business entity or convey or transfer
its properties and assets substantially as an entirety to
any Person, unless:
(i) the business entity formed by such
consolidation or into which the Transferor is merged or the
Person which acquires by conveyance or transfer the properties
and assets of the Transferor substantially as an entirety shall
be, if the Transferor is not the surviving entity, organized and
existing under the laws of the United States of America or any
State or the District of Columbia and shall expressly assume, by
an agreement supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the performance of
every covenant and obligation of the Transferor, as applicable
hereunder and shall benefit from all the rights granted to the
Transferor, as applicable hereunder. To the extent that any
right, covenant or obligation of the Transferor, as applicable
hereunder, is inapplicable to the successor entity, such
successor entity shall be subject to such covenant or obligation,
or benefit from such right, as would apply, to the extent
practicable, to such successor entity. In furtherance hereof, in
applying this Section 7.2 to a successor entity, Section 9.2
hereof shall be applied by reference to events of involuntary
liquidation, receivership or conservatorship applicable to such
successor entity as shall be set forth in the officer's
certificate described in subsection 7.2(a)(ii);
(ii) the Transferor shall have delivered
to the Trustee an Officer's Certificate signed by a
Vice President (or any more senior officer) of the
Transferor stating that such consolidation, merger,
conveyance or transfer and such supplemental agreement
comply with this Section 7.2 and that all conditions
precedent herein provided for relating to such
transaction have been complied with and an Opinion of
Counsel that such supplemental agreement is legal,
valid and binding and that the entity surviving such
consolidation, conveyance or transfer is organized and
existing under the laws of the United States of America
or any State or the District of Columbia and, subject
to customary limitations and qualifications, such
entity will not be substantively consolidated with
Fingerhut or the Servicer;
(iii) the Transferor shall have delivered notice
to the Rating Agency of such consolidation, merger,
conveyance or transfer and the Rating Agency
shall have provided written confirmation that such
consolidation, merger, conveyance or transfer will not
result in the Rating Agency reducing or withdrawing its
rating on any then outstanding Series as to which it is
a Rating Agency;
(iv) the successor entity shall be a
special purpose bankruptcy remote entity; and
(v) if the Transferor is not the surviv-
ing entity, the surviving entity shall file new UCC1
financing statements with respect to the interest of
the Trust in the Receivables.
(b) The obligations of the Transferor hereun-
der shall not be assignable nor shall any Person succeed to
the obligations of the Transferor hereunder except for
mergers, consolidations, assumptions or transfers in
accordance with the provisions of the foregoing paragraph.
Section 7.3 Limitation on Liability. The directors,
officers, employees or agents of the Transferor shall not be
under any liability to the Trust, the Trustee, the
Certificateholders, any Enhancement Provider or any other
Person hereunder or pursuant to any document delivered
hereunder, it being expressly understood that all such
liability is expressly waived and released as a condition
of, and as consideration for, the execution of this
Agreement and any Supplement and the issuance of the
Certificates; provided, however, that this provision shall
not protect the officers, directors, employees, or agents of
the Transferor against any liability which would otherwise
be imposed upon them by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties
hereunder. Except as provided in Sections 7.1 and 7.4
with respect to the Trust and the
Trustee and its officers, directors, employees and agents,
the Transferor shall not be under any liability to the
Trust, the Trustee, its officers, directors, employees and
agents, the Certificateholders, any Enhancement Provider or
any other Person for any action taken or for refraining from
the taking of any action in its capacity as Transferor
pursuant to this Agreement or any Supplement whether arising
from express or implied duties under this Agreement or any
Supplement or otherwise; provided, however, that this
provision shall not protect the Transferor against any
liability which would otherwise be imposed upon it by reason
of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Transferor and any
director, officer, employee or agent may rely in good faith
on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising
hereunder.
Section 7.4 Liabilities. Notwithstanding Section
7.3, by entering into this Agreement, the Transferor agrees
to be liable, directly to the injured party, for the entire
amount of any losses, claims, damages, penalties or
liabilities (other than those incurred by a
Certificateholder in the capacity of an investor in the
Investor Certificates as a result of the performance of the
Receivables, market fluctuations, a shortfall or
failure by the Enhancement Provider to make payment under
any Enhancement or other similar market or investment risks
associated with ownership of the Investor Certificates)
arising out of or based on the arrangement created by this
Agreement and the actions of the Servicer taken pursuant
hereto as though this Agreement created a partnership under
the Delaware Uniform Partnership Law, in which the
Transferor is a general partner. The Transferor agrees to
pay, indemnify and hold harmless each Investor
Certificateholder against and from any and all such loses,
claims, damages and liabilities (other than those incurred
by a Certificateholder in the capacity of an investor in the
Investor Certificates as a result of the performance of the
Receivables, market fluctuations, a shortfall or failure by
an Enhancement Provider to make payment under an Enhancement
or other similar market or investment risks) except to the
extent that they arise from any action by such Investor
Certificateholder. Subject to Sections 8.3 and 8.4, in the
event of a Service Transfer, the Successor Servicer will
indemnify and hold harmless the Transferor for any losses,
claims, damages and liabilities of the Transferor as
described in this Section 7.4 arising from the actions or
omissions of such Successor Servicer.
[End of Article VII]
ARTICLE VIII
OTHER MATTERS RELATING TO
THE SERVICER
Section 8.1 Liability of the Servicer. The
Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the
Servicer in such capacity herein.
Section 8.2 Merger or Consolidation of, or
Assumption of the Obligations of, the Servicer. Subject to
subsection 3.1(a), the Servicer shall not consolidate
with or merge into any other corporation or convey or
transfer its properties and assets substantially as an
entirety to any Person, unless:
(i) the corporation formed by such con
solidation or into which the Servicer is merged or the Person
which acquires by conveyance or transfer the properties and
assets of the Servicer substantially as an entirety shall be a
corporation organized and existing under the laws of the United
States of America or any State or the District of Columbia and,
if the Servicer is not the surviving entity, shall expressly
assume, by an agreement supplemental hereto, executed and
delivered to the Trustee in form satisfactory to the Trustee, the
performance of every covenant and obligation of the Servicer
hereunder (to the extent that any right, covenant or obligation
of the Servicer, as applicable hereunder, is inapplicable to the
successor entity, such successor entity shall be subject to such
covenant or obligation, or benefit from such right, as would
apply, to the extent practicable, to such successor entity); and
(ii) the Servicer shall have delivered to the
Trustee an Officer's Certificate that such
consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 8.2 and
that all conditions precedent herein provided for
relating to such transaction have been complied with
and an Opinion of Counsel that such supplemental
agreement is legal, valid and binding with respect to
the Servicer and that the entity surviving such
consolidation, conveyance or transfer is organized and
existing under the laws of the United States of America
or any State or the District of Columbia; and
(iii) the Servicer shall have delivered notice to
the Rating Agency of such consolidation, merger,
conveyance or transfer.
Section 8.3 Limitation on Liability of the
Servicer and Others. The directors, officers,
employees or agents of the Servicer shall not be under any liability
to the Trust, the Trustee, the Certificateholders, any
Enhancement Provider or any other Person hereunder or
pursuant to any document delivered hereunder, it being
expressly understood that all such liability is expressly
waived and released as a condition of, and as consideration
for, the execution of this Agreement and any Supplement and
the issuance of the Certificates; provided, however, that
this provision shall not protect the direc-
tors, officers, employees and agents of the Servicer against
any liability which would otherwise be imposed upon them by
reason of willful misfeasance, bad faith or gross negligence
in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. Except as
provided in Sections 8.1 and 8.4 with respect to the
Trustee, its officers, directors, employees and agents, the
Servicer shall not be under any liability to the Trust, the
Trustee, its officers, directors, employees and agents, the
Certificateholders, any Enhancement Provider or any other
Person for any action taken or for refraining from the
taking of any action in its capacity as Servicer pursuant to
this Agreement or any Supplement; provided, however, that
this provision shall not protect the Servicer against any
liability which would otherwise be imposed upon it by reason
of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of its reckless disregard
of its obligations and duties hereunder or under any
Supplement. The Servicer may rely in good faith on any
document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising
hereunder. The Servicer shall not be under any obligation
to appear in, prosecute or defend any legal action which is
not incidental to its duties to service the Receivables in
accordance with this Agreement which in its reasonable
opinion may involve it in any expense or liability.
Section 8.4 Servicer Indemnification of the
Transferor, the Trust and the Trustee. Subject to the
limitations on liability set forth in Section 8.3, the
Servicer shall indemnify and hold harmless the Transferor,
the Trustee and the Trust (each, an "Indemnified Party")
from and against any loss, liability, reasonable expense,
damage or injury, including, but not limited to, any
judgment, award, settlement, reasonable attorneys' fees and
other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or
claim, suffered or sustained by reason of any acts or
omissions or alleged acts or omissions of the Servicer with
respect to activities of the Trust or the Trustee for which
the Servicer is responsible pursuant to this Agreement;
provided, however, that the Servicer shall not indemnify or
hold harmless an Indemnified Party if such acts, omissions
or alleged acts or omissions constitute or are caused by
fraud, gross negligence, or willful misconduct by such
Indemnified Party (or any of such Indemnified Party's
officers, directors, employees or agents) or the Investor
Certificateholders; provided, further, that the Servicer
shall not indemnify or hold harmless the Trust, the Investor
Certificateholders or the Certificate Owners for any losses,
liabilities, expenses, damages or injuries suffered or
sustained by any of them with respect to any action taken by
the Trustee at the request of the Investor Certificatehold
ers; provided further, that the Servicer shall not indemnify
or hold harmless the Trust, the Investor Certificateholders
or the Certificate Owners as to any losses, liabilities,
expenses, damages or injuries suffered or sustained by any
of them in their capacities as investors, including without
limitation losses incurred as a result of Defaulted
Receivables; provided further, that the Servicer shall not
indemnify or hold harmless the Transferor, the Trust, the
Investor Certificateholders or the Certificate Owners for
any losses, liabilities,
expenses, damages or injuries suffered or sustained by the
Trust, the Investor Certificateholders or the Certificate
Owners arising under any tax law, including without
limitation, any federal, state, local or foreign income or
franchise taxes or any other tax imposed on or measured by
income (or any interest, penalties or additions with respect
thereto or arising from a failure to comply therewith)
required to be paid by the Trust, the Investor
Certificateholders or the Certificate Owners in connection
herewith to any taxing authority; and, provided, further,
that in no event will the Servicer be liable, directly or
indirectly, for or in respect of any indebtedness or
obligation evidenced or created by any Certificate, recourse
as to which shall be limited solely to the assets of the
Trust allocated for the payment thereof as
provided in this Agreement and any applicable Supplement. Any
such indemnification shall not be payable from the assets of
the Trust, but the Servicer shall be subrogated to the rights
of the Trust with respect to the foregoing matters if and to
the extent that the Servicer shall have indemnified the Trust
with respect thereto. The Servicer shall indemnify and hold
harmless the Trustee and its officers, directors, employees
or agents from and against any loss, liability, reasonable
expense, damage or injury suffered or sustained by reason of
the acceptance of this Trust by the Trustee, the issuance by
the Trust of the Certificates or any of the other matters
contemplated herein or in any Supplement; provided, however,
that the Servicer shall not indemnify the Trustee or its
officers, directors, employees or agents for any loss,
liability, expense, damage or injury caused by the fraud,
negligence or willful misconduct of any of them. The
provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations
hereof and shall survive the resignation or removal of the
Servicer, the resignation or removal of the Trustee and/or
the termination of the Trust and shall survive the termina
tion of the Agreement.
Section 8.5 The Servicer Not to Resign. Subject to
subsection 3.1(a), the Servicer shall not resign from the
obligations and duties hereby imposed on it except upon
determination that (i) the performance of its duties
hereunder is no longer permissible under applicable law and
(ii) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder
permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced
as to clause (i) above by an Opinion of Counsel to such
effect delivered to the Trustee. No such resignation shall
become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of
the Servicer in accordance with Section 10.2 hereof. If the
Trustee is unable within 120 days of the date of delivery to
it of such Opinion of Counsel to appoint a Successor
Servicer, the Trustee shall serve as Successor Servicer
hereunder (but shall have continued authority to appoint
another Person as Successor Servicer).
Section 8.6 Access to Certain Documentation and
Information Regarding the Receivables. The Servicer shall
provide to the Trustee and its agents (who shall be
reasonably acceptable to the Servicer) access to the
documentation regarding the Receivables in such cases where
the Trustee is required in connection with the
enforcement of the rights of the Investor Certificate
holders, or by applicable statutes or regulations, to review
such documentation, such access being afforded without
charge but only (i) upon reasonable request, (ii) during
normal business hours, (iii) subject to the Servicer's
normal security and confidentiality procedures and (iv) at
offices designated by the Servicer. Nothing in this Section
8.6 shall derogate from the obligation of the Transferor,
the Trustee or the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors
and the failure of the Servicer to provide access as
provided in this Section 8.6 as a result of such obligations
shall not constitute a breach of this Section 8.6.
Section 8.7 Delegation of Duties. In the
ordinary course of business, the Servicer may at any time
delegate any duties hereunder to any Person who agrees to
conduct such duties in accordance with the Credit and
Collection Policies. Any such delegations shall not relieve
the Servicer of its liability and responsibility with
respect to such duties, and shall not constitute a
resignation within the meaning of Section 8.5 hereof and the
Servicer will remain jointly and severally liable with such
Person for any amounts which would otherwise be payable
pursuant to this Article VIII as if the Servicer had
performed such duty; provided, however, that in the case of
any significant delegation to a Person other than an
Affiliate of Fingerhut (i) written notice shall be given to
the Trustee and to each Rating Agency of such delegation,
(ii) Moody's shall have notified the Transferor and the
Trustee in writing that such delegation will not result in
the lowering or withdrawal of its then existing rating of
any Series or Class of Investor Certificates and (iii) the
Transferor shall not have received written notice from
Standard & Poor's that such delegation would result in the
lowering or withdrawal of its then existing rating of any
Series or Class of Investor Certificates.
[End of Article VIII]
ARTICLE IX
PAY OUT EVENTS
Section 9.1 Pay Out Events. If any one of the
following events (each, a "Trust Pay Out Event") shall
occur:
(a) the Transferor or Fingerhut shall consent to
the appointment of a bankruptcy trustee or receiver or
liquidator in any bankruptcy proceeding or any other
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to all or
substantially all of its property; or a decree or order of a
court or agency or supervisory authority having jurisdiction
in the premises for the appointment of a bankruptcy trustee
or receiver or liquidator in any bankruptcy proceeding or
any other insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been
entered against the Transferor, or Fingerhut; or the
Transferor, or Fingerhut shall admit in writing its
inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable
insolvency or reorganization statute including the U.S.
bankruptcy code, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations;
or the Transferor shall become unable for any reason to
transfer Receivables to the Trust in accordance with the
provisions of this Agreement; or
(b) the Trust shall become subject to regulation
by the Securities and Exchange Commission as an "investment
company" within the meaning of the Investment Company Act;
then a Pay Out Event with respect to all Series of Cer
tificates shall occur without any notice or other action on
the part of the Trustee or the Investor Certificateholders
immediately upon the occurrence of such event. The Trustee
shall provide notice of a Pay Out Event in a prompt manner
to each Rating Agency.
Section 9.2 Additional Rights Upon the Occurrence
of Certain Events.
(a) If (x) the Transferor shall consent to the
appointment of a bankruptcy trustee or receiver or liqui
dator for the winding-up or liquidation of its affairs, or a
decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the
appointment of a bankruptcy trustee or receiver or liqui
dator for the winding-up or liquidation of its affairs shall
have been entered against the Transferor (an "Insolvency
Event"), on the day of such Insolvency Event (the
"Appointment Day") or (y) the Retained Percentage shall at
any time be equal to or less than 2% (a "Trigger Event"),
the following actions shall be taken and processes begun:
(i) If an Insolvency Event shall have occurred,
the Transferor shall immediately cease to transfer
Receivables to the Trust and shall promptly give written
notice to the Trustee of such Insolvency Event.
Notwithstanding any cessation of the transfer to the
Trust of additional Receivables, Collections with respect
thereto shall continue to be allocated and paid in accor
dance with Article IV.
(ii) If an Insolvency Event or a Trigger Event
shall have occurred this Agreement and the Trust shall be
deemed to have terminated, subject to the liquidation,
winding-up and dissolution procedures described below;
provided, however, that within 15 days of the date of
written notice to the Trustee, the Trustee shall (i) publish
a notice in an Authorized Newspaper that an Insolvency Event
or a Trigger Event has occurred, that the Trust has
terminated, and that the Trustee intends to sell, dispose of
or otherwise liquidate the Receivables pursuant to this
Agreement in a commercially reasonable manner and on
commercially reasonable terms, which shall include the
solicitation of competitive bids (a "Disposition"), and (ii)
send written notice to the Investor Certificateholders
describing the provisions of this Section 9.2 and requesting
each Investor Certificateholder to advise the Trustee in
writing that it elects one of the following options: (A) the
Investor Certificateholder wishes the Trustee to instruct
the Servicer not to effectuate a Disposition, or (B) the
Investor Certificateholder refuses to advise the Trustee as
to the specific action the Trustee shall instruct the
Servicer to take or (C) the Investor Certificateholder
wishes the Servicer to effect a Disposition. If after 90
days from the day notice pursuant to clause (i) above is
first published (the "Publication Date"), the Trustee shall
not have received the written instruction described in
clause (A) above from Holders of Investor Certificates
representing Undivided Interests aggregating in excess of
50% of the related Invested Amount of each Series (or, in
the case of a Series having more than one Class, each Class
of such Series) and the holders of any Supplemental Certifi
cates or any other interest in the Exchangeable Transferor
Certificate other than the Transferor as provided in Section
6.3(b) for each Series, a "Holders' Majority"), the Trustee
shall instruct the Servicer to effectuate a Disposition, and
the Servicer shall proceed to consummate a Disposition. If,
however, with respect to the portion of the Receivables
allocable to any outstanding Series, a Holders' Majority
instruct the Trustee not to effectuate a Disposition of the
portion of the Receivables allocable to such Series, the
Trust shall be reconstituted and continue with respect to
such Series pursuant to the terms of this Agreement and the
applicable Supplement (as amended in connection with such
reconstitution). The portion of the Receivables allocable
to any Series shall be equal to the sum of (1) the product
of (A) the Transferor Percentage, (B) the aggregate
outstanding Principal Receivables and (C) a fraction the
numerator of which is the related Investor Percentage of
Imputed Yield Collections and the denominator of which is
the sum of all Investor Percentages with respect to Imputed
Yield Collections for all Series outstanding and (2) the
Invested Amount of such Series. The Transferor or any of
its
Affiliates shall be permitted to bid for the Receivables. In
addition, the Transferor or any of its Affiliates shall have
the right to match any bid by a third person and be granted
the right to purchase the Receivables at such matched bid
price. The Trustee may obtain a prior determination from any
such bankruptcy trustee, receiver or liquidator that the
terms and manner of any proposed Distribution are
commercially reasonable. The provisions
of Sections 9.1 and 9.2 shall not be deemed to be mutually
exclusive.
(b) The proceeds from the Disposition pursuant to
subsection (a) above shall be treated as Collections on the
Receivables and shall be allocated and deposited in
accordance with the provisions of Article IV; provided,
however, that the proceeds from a Disposition with respect
to any Series shall be applied solely to make payments to
such Series; provided further, that the Trustee shall
determine conclusively in its sole discretion the amount of
such proceeds that are allocable to Imputed Yield
Collections and the amount of such proceeds that are
allocable to Collections of Principal Receivables. Unless
the Trustee receives written instructions from Investor
Certificateholders of one or more Series to continue the
Trust with respect to such Series as provided in subsection
9.2(a) above, on the day following the last Distribution
Date in the Monthly Period during which such proceeds are
distributed to the Investor Certificateholders of each
Series, the Trust shall terminate.
(c) The Trustee may appoint an agent or agents to
assist with its responsibilities pursuant to this Article IX
with respect to competitive bids.
[End of Article IX]
ARTICLE X
SERVICER DEFAULTS
Section 10.1 Servicer Defaults. If any one of
the following events (a "Servicer Default") shall occur and
be continuing:
(a) any failure by the Servicer to make any
payment, transfer or deposit or to give instructions or
notice to the Trustee pursuant to Article IV or to instruct
the Trustee to make any required drawing, withdrawal, or
payment under any Enhancement on or before the date
occurring five Business Days after the date such payment,
transfer, deposit, withdrawal or drawing or such instruction
or notice is required to be made or given, as the case may
be, under the terms of this Agreement; provided, however,
that any such failure caused by a nonwillful act of the
Servicer shall not constitute a Servicer Default if the
Servicer promptly remedies such failure within five Business
Days after receiving notice of such failure or otherwise
becoming aware of such failure;
(b) failure on the part of the Servicer duly to
observe or perform in any respect any other covenants or
agreements of the Servicer set forth in this Agreement,
which has a material adverse effect on the Investor
Certificateholders of any Series 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 Servicer by the
Trustee, or to the Servicer and the Trustee by the Holders
of Investor Certificates evidencing Undivided Interests
aggregating not less than 50% of the Invested Amount of any
Series materially adversely affected thereby and continues
to materially adversely affect such Investor
Certificateholders for such period; or the Servicer shall
delegate its duties under this Agreement, except as
permitted by Section 8.7;
(c) any representation, warranty or certification
made by the Servicer in this Agreement or in any certificate
delivered pursuant to this Agreement shall prove to have
been incorrect when made, which has a material adverse
effect on the Investor Certificateholders of any Series and
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 Servicer by the Trustee, or to the
Servicer and the Trustee by the Holders of Investor
Certificates evidencing Undivided Interests aggregating not
less than 50% of the Invested Amount of any Series
materially adversely affected thereby and continues to
materially adversely affect such Investor Certificateholders
for such period; or
(d) the Servicer shall consent to the appointment
of a bankruptcy trustee or receiver or liquidator in any
bankruptcy proceeding or any other insolvency, readjustment
of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating
to all or substantially all of its property; or a decree or
order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a
bankruptcy trustee or receiver or liquidator in any
bankruptcy proceeding or any other insolvency, readjustment
of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Servicer, and
such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or the
Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization
statute, make any assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations;
then, so long as such Servicer Default shall not have been
remedied, either the Trustee, or the Holders of Investor
Certificates evidencing Undivided Interests aggregating more
than 50% of the Aggregate Invested Amount, by notice then
given in writing to the Servicer (and to the Trustee if
given by the Investor Certificateholders) (a "Termination
Notice"), may terminate all of the rights and obligations of
the Servicer as Servicer under this Agreement. After
receipt by the Servicer of such Termination Notice, and on
the date that a Successor Servicer shall have been appointed
by the Trustee pursuant to Section 10.2, all authority and
power of the Servicer under this Agreement shall pass to and
be vested in a Successor Servicer; and, without limitation,
the Trustee is hereby authorized and empowered (upon the
failure of the Servicer to cooperate) to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, all documents and other instruments upon the
failure of the Servicer to execute or deliver such documents
or instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of
such transfer of servicing rights and obligations. The
Servicer agrees to cooperate with the Trustee and such
Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer to conduct
servicing hereunder including, without limitation, the
transfer to such Successor Servicer of all authority of the
Servicer to service the Receivables provided for under this
Agreement, including, without limitation, all authority over
all Collections which shall on the date of transfer be held
by the Servicer for deposit, or which have been deposited by
the Servicer, in the Collection Account, the Excess Funding
Account, the Interest Funding Account or the Principal
Account, and any Series Account, or which shall thereafter
be received with respect to the Receivables. The Servicer
shall promptly transfer its electronic records or electronic
copies thereof relating to the Receivables to the Successor
Servicer in such electronic form as the Successor Servicer
may reasonably request and shall promptly transfer to the
Successor Servicer all other records, correspondence and
documents necessary for the continued servicing of the
Receivables in the manner and at such times as the Successor
Servicer shall reasonably request. To the extent that
compliance with this Section 10.1 shall require the Servicer
to disclose to the Successor Servicer information of any
kind which the Servicer deems to be confidential, the
Successor Servicer shall be required to enter into such
customary licensing and confidentiality agreements as the
Servicer shall deem necessary to protect its interests. The
Servicer shall, on the date of any servicing transfer,
transfer all of
its rights and obligations under the Enhancement with
respect to any Series to the Successor Servicer. In
connection with any service transfer, all reasonable costs
and expenses (including attorneys' fees) incurred in
connection with transferring the records, correspondence and
other documents with respect to the Receivables and the
other Trust Property to the Successor Servicer and amending
this Agreement to reflect such succession as Successor
Servicer pursuant to this Section 10.1 and Section 10.2
shall be paid by the Servicer (unless the
Trustee is acting as the Servicer on a temporary basis, in
which case the original Servicer shall be responsible
therefor) upon presentation of reasonable documentation of
such costs and expenses.
Notwithstanding the foregoing, a delay in or
failure of performance referred to in subsection 10.1(a) for
a period of five Business Days or under subsection 10.1(b)
or (c) for a period of 60 days, shall not constitute a
Servicer Default if such delay or failure could not be
prevented by the exercise of reasonable diligence by the
Servicer and such delay or failure was caused by an act of
God or the public enemy, acts of declared or undeclared war,
public disorder, rebellion, riot or sabotage, epidemics,
landslides, lightning, fire, hurricanes, tornadoes,
earthquakes, nuclear disasters or meltdowns, floods, power
outages, bank closings, communications outages, computer
failure or similar causes. 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, any Enhancement Provider, the Transferor and the
Holders of Investor 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 10.2 Trustee to Act; Appointment of
Successor.
(a) On and after the receipt by the Servicer of a
Termination Notice pursuant to Section 10.1, the Servicer
shall continue to perform all servicing functions under this
Agreement until the date specified in the Termination Notice
or as otherwise specified by the Trustee in writing or, if
no such date is specified in such Termination Notice, or
otherwise specified by the Trustee, until a date mutually
agreed upon by the Servicer and Trustee. The Trustee shall
notify each Rating Agency of such removal of the Servicer.
The Trustee shall, as promptly as possible after the giving
of a Termination Notice, appoint a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall
accept its appointment by a written assumption in a form
acceptable to the Trustee. If such Successor Servicer is
unable to accept such appointment, the Trustee may obtain
bids from any potential successor servicer. If the Trustee
is unable to obtain any bids from any potential successor
servicer and the Servicer delivers an Officer's Certificate
to the effect that it cannot in good faith cure the Servicer
Default which gave rise to a transfer of servicing, and if
the Trustee is legally unable to act as Successor Servicer,
then the Trustee shall offer the Transferor the right to
accept reassignment of all of the Receivables for an amount
equal to the Aggregate Invested Amount on the date of such
purchase plus all interest accrued but unpaid on all of the
outstanding Investor Certificates at the applicable Certifi
cate Rate through the date of such purchase; provided,
however, that no such purchase by the Transferor shall occur
unless the Transferor shall deliver an Opinion of Counsel
reasonably acceptable to the Trustee that such purchase
would not constitute a fraudulent conveyance of the
Transferor. The proceeds of such sale shall be deposited in
the Distribution Account or any Series Account, as provided
in the related Supplement, for distribution to the Investor
Certificateholders of each outstanding Series pursuant to
Section 12.3 of the Agreement. In the event that a
Successor Servicer has not been appointed and has not
accepted its appointment at the time when the Servicer
ceases to act as Servicer, the Trustee without further
action shall automatically be appointed the Successor
Servicer (but shall have continued authority to appoint
another Person as Successor Servicer). The Trustee may
delegate any of its servicing obligations to an affiliate or
agent of the Trustee in accordance with Article III hereof.
Any such delegations shall not relieve the Trustee of its
liability and responsibility with respect to such duties.
Notwithstanding the above, the Trustee shall, if it is
legally unable to act, petition a court of competent
jurisdiction to appoint any established financial
institution having, in the case of an entity that is subject
to risk-based capital adequacy requirements, risk-based
capital of at least $50,000,000 or, in the case of an entity
that is not subject to risk-based capital requirements,
having a net worth of not less than $50,000,000 and whose
regular business includes the servicing of receivables
similar to the Receivables as the Successor Servicer
hereunder.
(b) Upon its appointment, the Successor Servicer
shall be the successor in all respects to the Servicer with
respect to servicing functions under this Agreement and
shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the
terms and provisions hereof, and all references in this
Agreement to the Servicer shall be deemed to refer to the
Successor Servicer. Any Successor Servicer, by its
acceptance of its appointment, will automatically agree to
be bound by the terms and provisions of each Enhancement.
(c) In connection with such appointment and
assumption, the Trustee shall be entitled to such compen
sation, or may make such arrangements for the compensation
of the Successor Servicer out of Collections, as it and such
Successor Servicer shall agree; provided, however, that no
such compensation shall be in excess of the Servicing Fee
permitted to the Servicer pursuant to Section 3.2. The
Transferor agrees that if the Servicer is terminated
hereunder, it will agree to deposit a portion of the
Collections in respect of Imputed Yield Receivables that it
is entitled to receive pursuant to Article IV to pay its
ratable share of the compensation of the Successor Servicer.
(d) All authority and power granted to the
Successor Servicer under this Agreement shall automatically
cease and terminate upon termination of the Trust pursuant
to Section 12.1 and shall pass to and be vested in the
Transferor and, without limitation, the Transferor
is hereby authorized and empowered to execute and deliver,
on behalf of the Successor Servicer, as attorney-infact or
otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of
servicing rights. The Successor Servicer agrees to
cooperate with the Transferor in effecting the termination
of the responsibilities and rights of the Successor Servicer
to conduct servicing on the Receivables. The Successor
Servicer shall transfer its electronic records relating to
the Receivables to the Transferor in such electronic form as
the Transferor may reasonably request and shall transfer all
other records, correspondence and documents to the
Transferor in the manner and
at such times as the Transferor shall reasonably request. To
the extent that compliance with this Section 10.2 shall
require the Successor Servicer to disclose to the Transferor
information of any kind which the Successor Servicer deems to
be confidential, the Transferor shall be required to enter
into such customary licensing and confidentiality agreements
as the Successor Servicer shall deem necessary to protect its
interests.
Section 10.3 Notification to Certificateholders.
Upon the Servicer becoming aware of any Servicer Default, the
Servicer shall give prompt written notice thereof to the
Trustee and any Enhancement Provider and, upon receipt of
such written notice, the Trustee shall give notice to the
Investor Certificateholders at their respective addresses
appearing in the Certificate Register. Upon any termination
or appointment of a Successor Servicer pursuant to this
Article X, the Trustee shall give prompt written notice
thereof to Investor Certificateholders at their respective
addresses appearing in the Certificate Register.
Section 10.4 Waiver of Past Defaults. The Holders
of Investor Certificates evidencing Undivided Interests
aggregating not less than 66-2/3% of the Invested Amount of
each Series materially adversely affected by any default by
the Servicer or Transferor may, on behalf of all
Certificateholders of such Series, waive any default by the
Servicer or Transferor in the performance of its obligations
hereunder and its consequences, except a default in the
failure to make any required deposits or payments of interest
or principal relating to such Series pursuant to Article IV,
which default does not result from the failure of the Paying
Agent to perform its obligations to make any required
deposits or payments of interest and principal in accordance
with Article IV. Upon any such waiver of a past default,
such default shall cease to exist, and any default arising
therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.
[End of Article X]
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee.
(a) The Trustee, prior to the occurrence of any
Servicer Default of which a Responsible Officer of the
Trustee has actual knowledge and after the curing of all
Servicer Defaults which may have occurred, undertakes to
perform such duties and only such duties as are specifically
set forth in this Agreement, and no implied covenants or
duties shall be read into this Agreement against the
Trustee. If a Responsible Officer has received written
notice that a Servicer Default has occurred (and such
Servicer Default has not been cured or waived), the Trustee
shall exercise such of the rights and powers vested in it by
this Agreement, and use the same degree of care and skill in
its exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own
affairs; provided, however, that if the Trustee shall assume
the duties of the Servicer pursuant to Section 8.5 or 10.2,
the Trustee in performing such duties shall use the degree
of skill and attention customarily exercised by a servicer
with respect to comparable receivables that it services for
itself or others.
(b) The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents,
orders or other instruments furnished to the Trustee that
are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine
whether they substantially conform to the requirements of
this Agreement. The Trustee shall retain all such items for
at least one year after receipt and shall make such items
available for inspection by any Investor Certificateholder
at the Corporate Trust Office, such inspection to be made
during regular business hours and upon reasonable prior
notice to the Trustee.
(c) Subject to subsection 11.1(a), no provision
of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own
negligent failure to act or its own misconduct; provided,
however, that:
(i) the Trustee shall not be personally
liable for an error of judgment made in good faith by a
Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable
with respect to any action taken, suffered or omitted
to be taken by it in good faith in accordance with the
direction of the Holders of Investor Certificates
evidencing Undivided Interests aggregating more than
50% of the Invested Amount of any Series relating to
the time, method and place of conducting any proceeding
for any remedy available to the Trustee with respect to
such Series, or exercising any trust or power conferred
upon the Trustee with respect to such Series, under
this Agreement; and
(iii) the Trustee shall not be charged
with knowledge of any failure by the Servicer referred
to in clauses (a) and (b) of Section 10.1 or of any
breach by the Servicer contemplated by clause (c) of
Section 10.1 or any Pay Out Event unless a Responsible
Officer of the Trustee obtains actual knowledge of such
failure, breach or Pay-Out Event or the Trustee
receives written notice of such failure, breach or Pay
Out Event from the Servicer or any Holders of Investor
Certificates evidencing Undivided Interests aggregating
not less than 10% of the Invested Amount of any Series
adversely affected thereby.
(d) The Trustee shall not be required to
expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if there
is reasonable ground for believing that the repayment of
such funds or adequate indemnity against such risk or
liability is not reasonably assured to it, and none of the
provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the
manner of performance of, any of the obligations of the
Servicer under this Agreement except during such time, if
any, as the Trustee shall be the successor to, and be vested
with the rights, duties, powers and privileges of, the
Servicer in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by
this Agreement, the Trustee shall take no action reasonably
likely to impair the interests of the Trust in any
Receivable now existing or hereafter created or to impair
the value of any Receivable now existing or hereafter
created.
(f) Except as provided in this Agreement, the
Trustee shall have no power to vary the corpus of the Trust.
(g) If a Responsible Officer of the Trustee, has
received written notice that the Paying Agent or the
Transfer Agent and Registrar shall fail to perform any
obligation, duty or agreement in the manner or on the day
required to be performed by the Paying Agent or the Transfer
Agent and Registrar, as the case may be, under this
Agreement, the Trustee shall be obligated promptly upon its
obtaining knowledge thereof by a Responsible Officer of the
Trustee to perform such obligation, duty or agreement in the
manner so required.
(h) If the Transferor has agreed to transfer any
of its accounts receivable (other than the Receivables) to
another Person, upon the written request of the Transferor,
the Trustee on behalf of the Trust will enter into such
intercreditor agreements with the transferee of such
receivables as are customary and necessary to identify
separately the rights, if any, of the Trust and such other
Person in the Transferor's accounts receivable; provided,
however, that the Trust shall not be required to enter into
any intercreditor agreement that could adversely affect the
interests of the Certificateholders or the Trustee and, upon
the request of the Trustee, the Transferor will deliver an
Opinion of Counsel on any
matters relating to such intercreditor agreement, reasonably
requested by the Trustee.
Section 11.2 Certain Matters Affecting the
Trustee. Except as otherwise provided in Section 11.1:
(a) the Trustee may rely on and shall be
protected in acting on, or in refraining from acting in
accordance with, the initial report, the Daily Report, the
Settlement Statement, the annual Servicer's certificate, the
monthly payment instructions and notification to the
Trustee, the monthly Certificateholder's statement, any
resolution, Officer's Certificate, certificate of auditors
or any other certificate, statement, instrument, opinion,
report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to
have been signed or presented to it pursuant to this
Agreement by the proper party or parties;
(b) the Trustee may consult with counsel, and the
advice or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken
or suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(c) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Agreement or any Enhancement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the
Certificateholders or any Enhancement Provider, pursuant to
the provisions of this Agreement, unless such Certifi
cateholders or Enhancement Provider shall have offered to
the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred
therein or thereby; nothing contained herein shall, however,
relieve the Trustee of the obligations, upon the occurrence
of any Servicer Default (which has not been cured or waived)
of which a Responsible Officer of the Trustee has knowledge,
to exercise such of the rights and powers vested in it by
this Agreement and any Enhancement, and to use the same
degree of care and skill in its exercise as a prudent person
would exercise or use under the circumstances in the conduct
of his own affairs;
(d) the Trustee shall not be personally liable
for any action taken, suffered or omitted by it in good
faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Agreement;
(e) the Trustee shall not be bound to make any
investigation into the facts of matters stated in the
initial report, the Daily Report, the Settlement Statement,
the annual Servicer's certificate, the monthly payment
instructions and notification to the Trustee, the monthly
Certificateholders statement, any resolution, certificate,
statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other paper or document,
unless requested in writing so to do by Holders of Investor
Certificates evidencing Undivided Interests aggregating more
than 50% of the Invested Amount of any Series which could be
adversely affected if the Trustee does not perform such
acts;
(f) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a
custodian, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent,
attorney or custodian appointed with due care by it
hereunder;
(g) except as may be required by subsection
11.1(a), the Trustee shall not be required to make any
initial or periodic examination of any documents or records
related to the Receivables for the purpose of establishing
the presence or absence of defects, the compliance by the
Transferor with its representations and warranties or for
any other purpose;
(h) whenever in the administration of this
Agreement the Trustee shall deem it desirable that a matter
be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officer's
Certificate; and
(i) the right of the Trustee to perform any
discretionary act enumerated in this Agreement or any
Supplement shall not be construed as a duty, and the Trustee
shall not be answerable for performance of any such act.
Section 11.3 Trustee Not Liable for Recitals in
Certificates. The Trustee assumes no responsibility for the
correctness of the recitals contained herein and in the
Certificates (other than the certificate of authentication
on the Certificates). Except as set forth in Section 11.15,
the Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates (other
than the certificate of authentication on the Certificates)
or of any Receivable or related document. The Trustee shall
not be accountable for the use or application by the
Transferor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any
funds paid to the Transferor in respect of the Receivables
or deposited in or withdrawn from the Collection Account,
the Excess Funding Account, the Principal Account or the
Interest Funding Account, or any Series Account or other
accounts now or hereafter established to effectuate the
transactions contemplated herein and in accordance with the
terms hereof. The Trustee shall have no responsibility for
filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the
perfection of any security interest or Lien granted to it
hereunder (unless the Trustee shall have become the
Successor Servicer) or to prepare or file any Securities and
Exchange Commission filing for the Trust or to record this
Agreement or any Supplement.
Section 11.4 Trustee May Own Certificates. The
Trustee in its individual or any other capacity may become
the owner or pledgee of Investor Certificates and may deal
with the Transferor, the Servicer or any Enhancement
Provider with the same rights as it would have if it were
not the Trustee. The Trustee in its capacity as Trustee
shall exercise its duties and responsibilities
hereunder independent of and without reference to its
investment, if any, in Investor Certificates.
Section 11.5 The Servicer to Pay Trustee's Fees
and Expenses. The Servicer covenants and agrees to pay to
the Trustee from time to time, and the Trustee shall be
entitled to receive, reasonable compensation (which shall
not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all
services rendered by the Trustee in the execution of the
trust hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee, and,
subject to Section 8.4, the Servicer will pay or reimburse
the Trustee (without reimbursement from any Investor
Account, any Series Account or otherwise) upon its request
for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of
the provisions of this Agreement (including the reasonable
fees and expenses of its agents and counsel) except any such
expense, disbursement or advance as may arise from its own
negligence or bad faith and except as provided in the
following sentence. If the Trustee is appointed Successor
Servicer pursuant to Section 10.2, the provisions of this
Section 11.5 shall not apply to expenses, disbursements and
advances made or incurred by the Trustee in its capacity as
Successor Servicer (which shall be covered out of the
Servicing Fee).
The obligations of the Servicer under this Section
11.5 shall survive the termination of the Trust and the
resignation or removal of the Trustee.
Section 11.6 Eligibility Requirements for
Trustee. The Trustee hereunder shall at all times (a) be a
corporation organized and doing business under the laws of
the United States of America or any state thereof authorized
under such laws to exercise corporate trust powers, having a
long-term unsecured debt rating of at least Baa3 by Moody's,
having, in the case of an entity that is subject to risk-
based capital adequacy requirements, risk-based capital of
at least $50,000,000 or, in the case of an entity that is
not subject to risk-based capital adequacy requirements,
having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by
federal or state authority and (b) not be a Related Person.
If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the
purpose of this Section 11.6, the combined capital and
surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the
provisions of this Section 11.6, the Trustee shall resign
immediately in the manner and with the effect specified in
Section 11.7.
Section 11.7 Resignation or Removal of
Trustee.
(a) The Trustee may at any time resign and be
discharged from the Trust hereby created by giving written
notice thereof to the Servicer. Upon receiving such notice
of resignation, the Servicer shall promptly ap-
point a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered
to the resigning Trustee and one copy to the successor
trustee. If no successor trustee shall have been so
appointed and have accepted such appointment within 30 days
after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be
eligible in accordance with the provisions of Section 11.6
hereof and shall fail to resign after written request
therefor by the Transferor, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed, or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation, then the Transferor may, but shall not be
required to, remove the Trustee and promptly appoint a
successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee
so removed and one copy to the successor trustee.
(c) If (i) the Trustee shall fail to perform any
of its obligations hereunder, (ii) a Certificateholder shall
deliver written notice of such failure to the Trustee, and
(iii) the Trustee shall not have corrected such failure for
60 days thereafter, then the Holders of Investor
Certificates representing more than 50% of the Invested
Amount (including related commitments of holders of Variable
Funding Certificates) shall have the right to remove the
Trustee and (with the consent of the Transferor, which shall
not be unreasonably withheld) promptly appoint a successor
trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
(d) Any resignation or removal of the Trustee and
appointment of a successor trustee pursuant to any of the
provisions of this Section 11.7 shall not become effective
until acceptance of appointment by the successor trustee as
provided in Section 11.8 hereof and any liability of the
Trustee arising hereunder shall survive such appointment of
a successor trustee. Notice of any resignation or removal
of the Trustee and appointment of a successor trustee shall
be provided to Moody's and Standard & Poor's by the Servicer
in a prompt manner.
Section 11.8 Successor Trustee.
(a) Any successor trustee appointed as provided
in Section 11.7 hereof shall execute, acknowledge and
deliver to the Transferor and to its predecessor Trustee an
instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor
Trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become
fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like
effect as if originally named as Trustee herein. The
predecessor Trustee shall deliver to the successor trustee
all documents and statements held by it hereunder, and the
Transferor and the predecessor Trustee shall
execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly
vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment
as provided in this Section 11.8 unless at the time of such
acceptance such successor trustee shall be eligible under
the provisions of Section 11.6 hereof.
(c) Upon acceptance of appointment by a successor
trustee as provided in this Section 11.8, such successor
trustee shall mail notice of such succession hereunder to
all Certificateholders at their addresses as shown in the
Certificate Register.
Section 11.9 Merger or Consolidation of Trustee.
Any Person into which the Trustee may be merged or converted
or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any Person succeeding
to all or substantially all of the corporate trust business
of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under
the provisions of Section 11.6 hereof, without the execution
or filing of any paper or any further act on the part of any
of the parties hereto, anything herein to the contrary
notwithstanding.
Section 11.10 Appointment of Co-Trustee or
Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement,
at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the
Trust may at the time be located, the Trustee shall have the
power and may execute and deliver all instruments to appoint
one or more Persons to act as a co-trustee or co-trustees,
or separate trustee or separate trustees, of all or any part
of the Trust, and to vest in such Person or Persons, in such
capacity and for the benefit of the Certificateholders, such
title to the trust, or any part thereof, and, subject to the
other provisions of this Section 11.10, such powers, duties,
obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility
as a successor trustee under Section 11.6 and no notice to
Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 11.8
hereof.
(b) Every separate trustee and co-trustee shall,
to the extent permitted by law, be appointed and act subject
to the following provisions and conditions:
(i) all rights, powers, duties and obli
gations conferred or imposed upon the Trustee shall be conferred
or imposed upon and exercised or performed by the Trustee and
such separate trustee or co-trustee jointly (it being understood
that such separate trustee or co-trustee is not authorized to act
separately without the Trustee joining in such act), except to
the extent that under any laws of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee
hereunder or
as successor to the Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be personally
liable by reason of any act or omission of any other
trustee hereunder; and
(iii) the Trustee may at any time accept
the resignation of or remove any separate trustee or co-
trustee.
(c) Any notice, request or other writing given
to the Trustee shall be deemed to have been given to each of
the then separate trustees and co-trustees, as effectively
as if given to each of them. Every instrument appointing
any separate trustee or co-trustee shall refer to this
Agreement and the conditions of this Article XI. Each
separate trustee and co-trustee, upon its acceptance of the
trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to
the Servicer.
(d) Any separate trustee or co-trustee may at any
time constitute the Trustee as its agent or attorneyin-fact
with full power and authority, to the extent not prohibited
by law, to do any lawful act under or in respect to this
Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting,
resign or be removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be exercised
by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.11 Tax Returns. Consistent with
Section 3.7, the Trustee shall not file any Federal tax
returns on behalf of the Trust; provided, however, that if a
class of Certificates is issued that will be characterized
as a partnership for federal income tax purposes,
partnership information returns shall be prepared and signed
by the Transferor, as general partner. In the event the
Trust shall be required to file tax returns, the Servicer
shall at its expense prepare or cause to be prepared any tax
returns required to be filed by the Trust and, to the extent
possible, shall remit such returns to the Trustee for
signature at least five days before such returns are due to
be filed. The Trustee is hereby authorized to sign any such
return on behalf of the Trust. The Servicer shall prepare
or shall cause to be prepared all tax information required
by law to be distributed to Certificateholders and shall
deliver such information to the Trustee at least five days
prior to the date it is required by law to be distributed to
Certificateholders. The Trustee, upon request, will
furnish the Servicer with all such information known to the
Trustee as may be reasonably required in connection with the
preparation of all tax returns of the Trust and shall, upon
request, execute such return. In no event shall the Trustee
be liable for any liabilities, costs or expenses of the
Trust, the Investor Certificateholders or the Certificate
Owners arising under any tax law, including without
limitation federal, state, local or foreign income or excise
taxes or any other tax imposed on or measured by income (or
any interest or penalty or addition with respect thereto or
arising from a failure to comply therewith).
Section 11.12 Trustee May Enforce Claims Without
Possession of Certificates. All rights of action and claims
under this Agreement or any Series of Certificates may be
prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production
thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its
own name as trustee. Any recovery of judgment shall, after
provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its
agents and counsel, be for the ratable benefit of any Series
of Certificateholders in respect of which such judgment has
been obtained.
Section 11.13 Suits for Enforcement. If a
Servicer Default of which a Responsible Officer of the
Trustee has knowledge shall occur and be continuing, the
Trustee, in its discretion may, subject to the provisions of
Section 10.1, proceed to protect and enforce its rights and
the rights of any Series of Certificateholders under this
Agreement by a suit, action or proceeding in equity or at
law or otherwise, whether for the specific performance of
any covenant or agreement contained in this Agreement or in
aid of the execution of any power granted in this Agreement
or for the enforcement of any other legal, equitable or
other remedy as the Trustee, being advised by counsel, shall
deem most effectual to protect and enforce any of the rights
of the Trustee or any Series of Certificateholders.
Section 11.14 Rights of Certificateholders to
Direct Trustee. Holders of Investor Certificates evidencing
Undivided Interests aggregating more than 50% of the
Aggregate Invested Amount (or, with respect to any remedy,
trust or power that does not relate to all Series, 50% of
the aggregate Invested Amount of the Investor Certificates
of all Series to which such remedy, trust or power relates)
shall have the right to direct the time, method, and place
of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that Holders of Investor
Certificates aggregating more than 50% of the aggregate
Invested Amount of any Class may direct the Trustee to
exercise its rights under Section 8.6; provided, further,
that, subject to Section 11.1, the Trustee shall have the
right to decline to follow any such direction if the Trustee
being advised by counsel determines that the action so
directed may not lawfully be taken, or if the Trustee in
good faith shall, by a Responsible Officer or Responsible
Officers of the Trustee, determine that the proceedings so
directed would be illegal or involve it in personal
liability or be unduly prejudicial to the rights of
Certificateholders
not parties to such direction; and provided, further that
nothing in this Agreement shall impair the right of the
Trustee to take any action deemed proper by the Trustee and
which is not inconsistent with such direction of such
Holders of Investor Certificates.
Section 11.15 Representations and Warranties of
Trustee. The Trustee represents and warrants that:
(i) the Trustee is a corporation organized,
existing and authorized to engage in the
business of banking under the laws of the State of its
incorporation;
(ii) the Trustee is an entity that satisfies the
eligibility requirements of Section 11.6;
(iii) the Trustee has full power, authority and
right to execute, deliver and perform this Agreement,
and has taken all necessary action to
authorize the execution, delivery and performance by it of this
Agreement; and
(iv) this Agreement has been duly exe-
cuted and delivered by the Trustee.
Section 11.16 Maintenance of Office or Agency. The
Trustee will maintain at its expense an office or offices, or
agency or agencies, where notices and demands
to or upon the Trustee in respect of the Certificates and
this Agreement may be served. The Trustee initially
appoints its Corporate Trust Office as its office for such
purposes. The Trustee will give prompt written notice to
the Servicer and to Certificateholders (or in the case of
Holders of Bearer Certificates, in the manner provided for
in the related Supplement) of any change in the location of
the Certificate Register or any such office or agency.
[End of Article XI]
ARTICLE XII
TERMINATION
Section 12.1 Termination of Trust.
(a) The respective obligations and responsi
bilities of the Transferor, the Servicer and the Trustee
created hereby (other than the obligation of the Trustee to
make payments to Certificateholders as hereafter set forth)
shall terminate, except with respect to the duties described
in Section 8.4 and 11.5 and subsection 12.3(b), on the Trust
Termination Date; provided, however, that the Trust shall
not terminate on the date specified in clause (i) of the
definition of "Trust Termination Date" if each of the
Servicer and the Holder of the Exchangeable Transferor
Certificate notify the Trustee in writing, not later than
five Business Days preceding such date, that they desire
that the Trust not terminate on such date, which notice
(such notice, a "Trust Extension") shall specify the date on
which the Trust shall terminate (such date, the "Extended
Trust Termination Date"); provided, however, that the
Extended Trust Termination Date shall be not later than June
29, 2034. The Servicer and the Holder of the Exchangeable
Transferor Certificate may, on any date following the Trust
Extension, so long as no Series of Certificates is outstand
ing, deliver a notice in writing to the Trustee changing the
Extended Trust Termination Date.
(b) In the event that (i) the Trust has not
terminated by the Distribution Date occurring in the second
month preceding the Trust Termination Date, and (ii) the
Invested Amount of any Series, exclusive of any Transferor
Retained Class (after giving effect to all transfers,
withdrawals, deposits and drawings to occur on such date and
the payment of principal on any Series of Certificates to be
made on the related Distribution Date during such month
pursuant to Article IV), would be greater than zero, the
Servicer shall sell within 30 days after such Transfer Date
an amount of Receivables up to the remaining Invested Amount
if it can do so in a commercially reasonable manner. The
Servicer shall notify each Enhancement Provider of the
proposed sale of the Receivables and shall provide each
Enhancement Provider an opportunity to bid on the
Receivables. The Transferor shall have the right of first
refusal to purchase the Receivables on terms equivalent to
the best purchase offer as determined by the Trustee in its
sole discretion. The proceeds of any such sale shall be
treated as Collections on the Receivables and shall be
allocated and deposited in accordance with Article IV;
provided, however, that the Trustee shall determine
conclusively in its sole discretion the amount of such
proceeds which are allocable to Imputed Yield Collections
and the amount of such proceeds which are allocable to
Principal Collections. During such thirty-day period, the
Servicer shall continue to collect payments on the
Receivables and allocate and deposit such payments in
accordance with the provisions of Article IV.
(c) All principal or interest with respect to any
Series of Investor Certificates shall be due and payable no
later than the Series Termination Date with respect to such
Series. Unless otherwise provided in a Supplement, in the
event that the Invested Amount of any
Series of Certificates is greater than zero, exclusive of
any Class held by the Transferor, on its Series Termination
Date (the "Affected Series"), after giving effect to all
transfers, withdrawals, deposits and drawings to occur on
such date and the payment of principal to be made on such
Series on such date, and the Trustee will sell or cause to
be sold, and the Trustee will pay the proceeds to all
Certificateholders of such Series pro rata in final payment
of all principal of and accrued interest on such Series of
Certificates or, if any Class of such Series is
subordinated, in order of their respective seniorities, an
amount of Principal Receivables and the related Imputed
Yield Receivables (or interests therein) up to 110% of the
Invested Amount of such Series at the close of business on
such date (but the amount of such Principal Receivables not
to be more than an amount of Receivables equal to the sum of
(1) the product of (A) the Transferor Percentage, (B) the
aggregate outstanding Principal Receivables and (C) a
fraction the numerator of which is the Invested Amount of
such Series on such date and the denominator of which is the
sum of the Invested Amounts of all Series on such Date and
(2) the Invested Amount of such Series). Receivables on
which the Obligor has not made the full monthly payment for
the prior months shall be deemed to be in default for
purposes of this Section 12.1(c) to the extent that the cash
allocated to any Class of Transferor Retained Certificates
of such Series pursuant to a sale under Section 12.1(c) is
less than the amount that would have been allocated to the
Exchangeable Transferor Certificate and the Transferor
Retained Certificates had the proceeds from such sale been
allocated pursuant to Section 4.3. The Servicer shall
notify each Enhancement Provider of the proposed sale of
such Receivables and shall provide each Enhancement Provider
an opportunity to bid on such Receivables. The Transferor
shall be permitted to purchase such Receivables in such case
and shall have a right of first refusal with respect thereto
to the extent of a bona fide offer by an unrelated third
party or to the extent the Receivables represent Defaulted
Receivables. Any proceeds of such sale in excess of such
principal and interest paid shall be paid to the Holder of
the Exchangeable Transferor Certificate. Upon such Series
Termination Date with respect to the applicable Series of
Certificates, final payment of all amounts allocable to any
Investor Certificates of such Series shall be made in the
manner provided in Section 12.3.
Section 12.2 Optional Termination. (a) If so
provided in any Supplement, the Transferor may, but shall
not be obligated to, cause a final distribution to be made
in respect of the related Series of Certificates on a
Distribution Date specified in such Supplement by depositing
into the Distribution Account or the applicable Series
Account, not later than the Transfer Date preceding such
Distribution Date, for application in accordance with
Section 12.3, the amount specified in such Supplement;
provided, however that if the short-term deposits or long-
term unsecured debt obligations of the Transferor are not
rated at the time of such purchase of Receivables at least P-
3 or Baa3, respectively, by Moody's, no such event shall
occur unless the Transferor shall deliver to the Trustee,
with a copy to Moody's, an Opinion of Counsel that such
deposit into the Distribution Account or any Series Account
as provided in the related Supplement would not constitute a
fraudulent
conveyance of the Transferor.
(b) The amount deposited pursuant to subsection
12.2(a) shall be paid to the Investor Certificateholders of
the related Series pursuant to Section 12.3 on the related
Distribution Date following the date of such deposit. All
Certificates of a Series with respect to which a final
distribution has been made pursuant to subsection 12.2(a)
shall be delivered by the Holder to, and be canceled by, the
Transfer Agent and Registrar and be disposed of in a manner
satisfactory to the Trustee and the Transferor. The
Invested Amount of each Series with respect to which a final
distribution has been made pursuant to subsection 12.2(a)
shall, for the purposes of the definition of "Transferor
Interest," be deemed to be equal to zero on the Distribution
Date following the making of the deposit, and the Transferor
Interest shall thereupon be deemed to have been increased by
the Invested Amount of such Series.
Section 12.3 Final Payment with Respect to any
Series.
(a) Written notice of any termination, specifying
the Distribution Date upon which the Investor
Certificateholders of any Series may surrender their
Certificates for payment of the final distribution with
respect to such Series and cancellation, shall be given
(subject to at least four Business Days' prior notice from
the Servicer to the Trustee) by the Trustee to Investor
Certificateholders of such Series mailed not later than the
fifth day of the month of such final distribution (or in the
manner provided by the Supplement relating to such Series)
specifying (i) the Distribution Date (which shall be the
Distribution Date in the month (x) in which the deposit is
made pursuant to subsection 2.4(e), 9.2(a), 10.2(a), or
12.2(a) of the Agreement or such other section as may be
specified in the related Supplement, or (y) in which the
related Series Termination Date occurs) upon which final
payment of such Investor Certificates will be made upon
presentation and surrender of such Investor Certificates at
the office or offices therein designated (which, in the case
of Bearer Certificates, shall be outside the United States),
(ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date
is not applicable, payments being made only upon
presentation and surrender of the Investor Certificates at
the office or offices therein specified. The Servicer's
notice to the Trustee in accordance with the preceding
sentence shall be accompanied by an Officers' Certificate
setting forth the information specified in Article V of this
Agreement covering the period during the then current
calendar year through the date of such notice and setting
forth the date of such final distribution. The Trustee
shall give such notice to the Transfer Agent and Registrar
and the Paying Agent at the time such notice is given to
such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust
pursuant to subsection 12.1(a) or the occurrence of the
Series Termination Date with respect to any Series, all
funds then on deposit in the Excess Funding Account, the
Interest Funding Account, the Principal Account, the
Distribution Account or any Series Account applicable to the
related Series shall continue to be held in trust for
the benefit of the Certificateholders of the related Series
and the Paying Agent or the Trustee shall pay such funds to
the Certificateholders of the related Series upon surrender
of their Certificates (which surrenders and payments, in the
case of Bearer Certificates, shall be made only outside the
United States). In the event that all of the Investor
Certificateholders of any Series shall not surrender their
Certificates for cancellation within six months after the
date specified in the abovementioned written notice, the
Trustee shall give a second written notice (or, in the case
of Bearer Certificates, publication notice) to the remaining
Investor Certificateholders of such Series upon receipt of
the appropriate records from the Transfer Agent and
Registrar to surrender their Certificates for cancellation
and receive the final distribution with respect thereto. If
within one and one half years after the second notice with
respect to a Series, all the Investor Certificates of such
Series shall not have been surrendered for cancellation, the
Trustee may take appropriate steps or may appoint an agent
to take appropriate steps, to contact the remaining Investor
Certificateholders of such Series concerning surrender of
their Certificates, and the cost thereof shall be paid out
of the funds in the Distribution Account or any Series
Account held for the benefit of such Investor
Certificateholders. The Trustee and the Paying Agent shall
pay to the Transferor upon request any monies held by them
for the payment of principal or interest which remains
unclaimed for two years. After payment to the Transferor,
Investor Certificateholders entitled to the money must look
to the Transferor for payment as general creditors unless an
applicable abandoned property law designates another Person.
(c) All Certificates surrendered for payment of
the final distribution with respect to such Certificates and
cancellation shall be canceled by the Transfer Agent and
Registrar and be disposed of in a manner satisfactory to the
Trustee and the Transferor.
Section 12.4 Termination Rights of Holder of
Exchangeable Transferor Certificate. Upon the termination
of the Trust pursuant to Section 12.1, and after payment of
all amounts due hereunder on or prior to such termination
and the surrender of the Exchangeable Transferor
Certificate, the Trustee shall execute a written
reconveyance substantially in the form of Exhibit F pursuant
to which it shall reconvey to the Holder of the Exchangeable
Transferor Certificate (without recourse, representation or
warranty) all right, title and interest of the Trust in the
Receivables, whether then existing or thereafter created,
all moneys due or to become due with respect thereto
(including all amounts theretofore posted as Imputed Yield
Receivables) allocable to the Trust pursuant to any
Supplement, except for amounts held by the Trustee pursuant
to subsection 12.3(b). The Trustee shall execute and
deliver such instruments of transfer and assignment, in each
case prepared by the Transferor and without recourse,
representation or warranty (other than a warranty that such
property is conveyed free and clear of any Lien of any
Person claiming by or through the Trustee) as shall be
reasonably requested by the Holder of the Exchangeable
Transferor Certificate to vest in such Holder all right,
title and interest which the Trust had in the Receivables
and other Trust Property.
[End of Article XII]
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment.
(a) This Agreement (including any Supplement) may
be amended from time to time by the Servicer, the Transferor
and the Trustee, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, to revise any
exhibits or Schedules (other than Schedule 1), to correct or
supplement any provisions herein or thereon which may be
inconsistent with any other provisions herein or thereon or
(ii) to add any other provisions with respect to matters or
questions raised under this Agreement which shall not be
inconsistent with the provisions of this Agreement;
provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material
respect the interests of any of the Investor
Certificateholders. Additionally, this Agreement may be
amended from time to time by the Servicer, the Transferor
and the Trustee, without the consent of any of the
Certificateholders, to add to or change any of the
provisions of this Agreement to provide that Bearer
Certificates may be registrable as to principal, to change
or eliminate any restrictions on the payment of principal of
(or premium, if any) or any interest on Bearer Certificates
to comply with the Bearer Rules, to permit Bearer
Certificates to be issued in exchange for Registered
Certificates (if then permitted by the Bearer Rules), to
permit Bearer Certificates to be issued in exchange for
Bearer Certificates of other authorized denominations or to
permit the issuance of Certificates in uncertificated form.
This Agreement (including any Supplement), and any
schedule or exhibit thereto may also be amended from time to
time by the Servicer, the Transferor and the Trustee,
without the consent of any of the Certificateholders, for
the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the
Holders of Certificates; provided, however, that (i) the
Servicer shall have provided an Officer's Certificate to the
Trustee to the effect that such amendment will not
materially and adversely affect the interests of the
Certificateholders, (ii) such amendment shall not, as
evidenced by an Opinion of Counsel, cause the Trust to be
characterized for Federal income tax purposes as an
association taxable as a corporation or otherwise have any
material adverse impact on the Federal income taxation of
any outstanding Series of Investor Certificates or any
Certificate Owner and (iii) the Servicer shall have provided
at least ten Business Days prior written notice to each
Rating Agency of such amendment and shall have received
written confirmation from each Rating Agency to the effect
that the rating of any Series or any class of any Series
will not be reduced or withdrawn as a result of such
amendment; provided, further, that such amendment shall not
reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor
Certificate of such Series without the consent of the
related Investor Certificateholder, change the definition of
or the manner of calculating the interest of any Investor
Certificateholder of such Series without the
consent of the related Investor Certificateholder or reduce
the percentage pursuant to Subsection 13.1(b) required to
consent to any such amendment, in each case without the
consent of all such Investor Certificateholders; provided,
further, that the transfer of the Receivables to and the
generation of new Receivables by, a credit card bank
established by Fingerhut or any Affiliate thereof and/or the
appointment of a credit card bank established by Fingerhut
as Servicer hereunder in connection with such transfer and
any other transactions related, supplemental or incidental
thereto shall be deemed not to materially and adversely
affect the interests of the Certificateholders.
(b) This Agreement and any Supplement may also be
amended from time to time by the Servicer, the Transferor
and the Trustee with the consent of the Holders of Investor
Certificates evidencing Undivided Interests aggregating not
less than 66-2/3% of the Invested Amount of each and every
Series adversely affected, for the purpose of adding any
provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any
manner the rights of the Investor Certificateholders of any
Series then issued and outstanding; provided, however, that
no such amendment under this subsection shall (i) reduce in
any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor
Certificate of such Series without the consent of all of the
related Investor Certificateholders; (ii) change the
definition of or the manner of calculating the interest of
any Investor Certificateholder of such Series without the
consent of the related Investor Certificateholder or (iii)
reduce the aforesaid percentage required to consent to any
such amendment, in each case without the consent of all such
Investor Certificateholders.
(c) Notwithstanding anything in this Section 13.1
to the contrary, the Supplement with respect to any Series
may be amended on the items and in accordance with the
procedures provided in such Supplement.
(d) Promptly after the execution of any such
amendment (other than an amendment pursuant to paragraph
(a)), the Trustee shall furnish notification of the
substance of such amendment to each Investor Certificate
holder of each Series adversely affected and ten Business
Days prior to the proposed effective date for such amendment
the Servicer shall furnish notification of the substance of
such amendment to each Rating Agency providing a rating for
such Series.
(e) It shall not be necessary to obtain the
consent of Investor Certificateholders under this Section
13.1 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the
execution thereof by Investor Certificateholders shall be
subject to such reasonable requirements as the Trustee may
prescribe.
(f) Any Supplement executed and delivered
pursuant to Section 6.9, executed in accordance with the
provisions hereof, shall not be considered amendments to
this Agreement for the purpose of subsections 13.1(a) and
(b).
(g) In connection with any amendment, the Trustee
may request an Opinion of Counsel from the Transferor or
Servicer to the effect that the amendment complies with all
requirements of this Agreement. The Trustee may, but shall
not be obligated to, enter into any amendment which affects
the Trustee's rights, duties or immunities under this
Agreement or otherwise.
Section 13.2 Protection of Right, Title and
Interest to Trust.
(a) The Servicer shall cause this Agreement, all
amendments hereto and/or all financing statements and
continuation statements and any other necessary documents
covering the Certificateholders and the Trustee's right,
title and interest to the Trust to be promptly recorded,
registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places
as may be required by law fully to preserve and protect the
right, title and interest of the Certificateholders or the
Trustee, as the case may be, hereunder to all property
comprising the Trust. The Servicer shall deliver to the
Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as
soon as available following such recording, registration or
filing. The Transferor shall cooperate fully with the
Servicer in connection with the obligations set forth above
and will execute any and all documents reasonably required
to fulfill the intent of this subsection 13.2(a).
(b) Within 30 days after the Transferor makes any
change in its name, identity or corporate structure which
would make any financing statement or continuation statement
filed in accordance with paragraph (a) above materially
misleading within the meaning of Section 9402(7) of the UCC
as in effect in the Relevant UCC State, the Transferor shall
give the Trustee written notice of any such change and shall
file such financing statements or amendments as may be
necessary to continue the perfection of the Trust's security
interest in the Receivables and the proceeds thereof.
(c) Each of the Transferor and the Servicer will
give the Trustee prompt written notice of any relocation of
any office from which it services Receivables or keeps
records concerning the Receivables or of its principal
executive office and whether, as a result of such
relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing
statement and shall file such financing statements or
amendments as may be necessary to continue the perfection of
the Trust's security interest in the Receivables and the
proceeds thereof. Each of the Transferor and the Servicer
will at all times maintain each office from which it
services Receivables and its principal executive office
within the United States of America.
(d) The Servicer will deliver to the Trustee on
or before March 31 of each year, beginning with March 31,
1995, an Opinion of Counsel, substantially in the form of
Exhibit E.
Section 13.3 Limitation on Rights of Certifi
cateholders.
(a) The death or incapacity of any Investor
Certificateholder shall not operate to terminate this
Agreement or the Trust, nor shall such death or incapacity
entitle such Certificateholder's legal representatives or
heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of
them.
(b) No Investor Certificateholder shall have any
right to vote (except with respect to the Investor
Certificateholders as provided in Section 13.1 hereof) or in
any manner otherwise control the operation and management of
the Trust, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the
Certificateholders from time to time as members of an
association; nor shall any Investor Certificateholder be
under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to
any provision hereof.
(c) No Certificateholder shall have any right by
virtue of any provisions of this Agreement to institute any
suit, action or proceeding in equity or at law upon or under
or with respect to this Agreement, unless such
Certificateholder previously shall have given written notice
to the Trustee, and unless the Holders of Certificates
evidencing Undivided Interests aggregating more than 50% of
the Invested Amount of any Series which may be adversely
affected but for the institution of such suit, action or
proceeding, shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name
as Trustee hereunder and shall have offered to the Trustee
such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every
other Certificateholder and the Trustee, that no one or more
Certificateholders shall have the right in any manner
whatever by virtue or by availing itself or themselves of
any provisions of this Agreement to affect, disturb or
prejudice the rights of the Certificateholders of any other
of the Certificates, or to obtain or seek to obtain priority
over or preference to any other such Certificateholder, or
to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common
benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 13.3, each and
every Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Section 13.4 Governing Law. THIS AGREEMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCOR-
DANCE WITH SUCH LAWS.
Section 13.5 Notices. All demands, notices and
communications hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered at,
sent by facsimile to, sent by courier at or mailed by
registered mail, return receipt requested, to (a) in the
case of the Transferor to 4400 Baker Road, Suite F480,
Minnetonka, Minnesota, 55343, Attention: Chief Financial
Officer, with a copy to the Servicer as provided below, (b)
in the case of the Servicer, 4400 Baker Road, Minnetonka,
Minnesota 55343, Attention: Chief Financial Officer and
General Counsel, (c) in the case of the Trustee, to the
Corporate Trust Office, (d) in the case of the Enhancement
Provider for a particular Series, the address, if any,
specified in the Supplement relating to such Series and (e)
in the case of the Rating Agency for a particular Series,
the address, if any, specified in the Supplement relating to
such Series; or, as to each party, at such other address as
shall be designated by such party in a written notice to
each other party. Unless otherwise provided with respect to
any Series in the related Supplement any notice required or
permitted to be mailed to a Certificateholder shall be given
by first class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register, or
with respect to any notice required or permitted to be made
to the Holders of Bearer Certificates, by publication in the
manner provided in the related Supplement. If and so long
as any Series or Class is listed on the Luxembourg Stock
Exchange and such Exchange shall so require, any Notice to
Investor Certificateholders shall be published in an
authorized newspaper of general circulation in Luxembourg
within the time period prescribed in this Agreement. Any
notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly
given, whether or not the Certificateholder receives such
notice.
Section 13.6 Severability of Provisions. If any
one or more of the covenants, agreements, provisions or
terms of this Agreement shall for any reason whatsoever be
held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement
and shall in no way affect the validity or enforceability of
the other provisions of this Agreement or of the
Certificates or rights of the Certificateholders thereof.
Section 13.7 Assignment. Notwithstanding
anything to the contrary contained herein, except as
provided in Section 8.2, this Agreement may not be assigned
by the Servicer without the prior consent of Holders of
Investor Certificates evidencing Undivided Interests
aggregating not less than 66 2/3% of the Invested Amount of
each Series on a Series by Series basis. Upon such
assignment, the Trustee shall provide notice to Moody's in a
prompt manner.
Section 13.8 Certificates Non-Assessable and
Fully Paid. Except to the extent otherwise expressly
provided in Section 7.4 with respect to the Transferor, it
is the intention of the parties to this Agreement that the
Investor Certificateholders shall not be personally liable
for obligations of the Trust, that the Undivided
Interests represented by the Certificates shall be non
assessable for any losses or expenses of the Trust or for
any reason whatsoever, and that Certificates upon authen
tication thereof by the Trustee pursuant to Sections 2.1 and
6.2 are and shall be deemed fully paid.
Section 13.9 Further Assurances. The Transferor
and the Servicer agree to do and perform, from time to time,
any and all acts and to execute any and all further
instruments required or reasonably requested by the Trustee
more fully to effect the purposes of this Agreement,
including, without limitation, the execution of any
financing statements or continuation statements relating to
the Receivables and the other Trust Property for filing
under the provisions of the UCC of any applicable
jurisdiction.
Section 13.10 No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part
of the Trustee, any Enhancement Provider or the Investor
Certificateholders, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 13.11 Counterparts. This Agreement may
be executed in two or more counterparts (and by different
parties on separate counterparts), each of which shall be an
original, but all of which together shall constitute one and
the same instrument.
Section 13.12 Third-Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon
the parties hereto, the Certificateholders and, to the
extent provided in the related Supplement, to the
Enhancement Provider named therein, and their respective
successors and permitted assigns. Except as otherwise
provided in this Article XIII, no other Person will have any
right or obligation hereunder.
Section 13.13 Actions by Certificateholders.
(a) Wherever in this Agreement a provision is
made that an action may be taken or a notice, demand or
instruction given by Investor Certificateholders, such
action, notice or instruction may be taken or given by any
Investor Certificateholder, unless such provision requires a
specific percentage of Investor Certificateholders.
(b) Any request, demand, authorization, direc
tion, notice, consent, waiver or other act by a Certifi
cateholder shall bind such Certificateholder and every
subsequent holder of such Certificate issued upon the
registration of transfer thereof or in exchange therefor or
in lieu thereof in respect of anything done or omitted to be
done by the Trustee or the Servicer in reliance thereon,
whether or not notation of such action is made upon such
Certificate.
(c) Any request, demand, authorization, direc-
tion, notice, consent, waiver or other action provided by
this Agreement or any Supplement to be given or taken by
Certificateholders may be embodied in and evidenced by one
or more instruments of substantially similar tenor signed by
such Certificateholders in person or by agent duly appointed
in writing; and except as herein otherwise expressly
provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and,
when required, to the Transferor or the Servicer. Proof of
execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this
Agreement or any Supplement and conclusive in favor of the
Trustee, the Transferor and the Servicer, if made in the
manner provided in this Section.
(d) The fact and date of the execution by any
Certificateholder of any such instrument or writing may be
proved in any reasonable manner which the Trustee deems
sufficient.
Section 13.14 Rule 144A Information. For so long
as any of the Investor Certificates of any Series or any
Class are "restricted securities" within the meaning of Rule
144(a)(3) under the Securities Act, each of the Transferor,
the Servicer, the Trustee and the Enhancement Provider for
such Series agree to cooperate with each other to provide to
any Investor Certificateholders of such Series or Class and
to any prospective purchaser of Certificates designated by
such an Investor Certificateholder upon the request of such
Investor Certificateholder or prospective purchaser, any
information required to be provided to such holder or
prospective purchaser to satisfy the condition set forth in
Rule 144A(d)(4) under the Securities Act.
Section 13.15 Merger and Integration. Except as
specifically stated otherwise herein, this Agreement sets
forth the entire understanding of the parties relating to
the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This
Agreement may not be modified, amended, waived or
supplemented except as provided herein.
Section 13.16 Headings. The headings herein are
for purposes of reference only and shall not otherwise
affect the meaning or interpretation of any provision
hereof.
[End of Article XIII]
IN WITNESS WHEREOF, the Transferor, the Servicer
and the Trustee have caused this Agreement to be duly
executed by their respective officers as of the day and year
first above written.
FINGERHUT RECEIVABLES, INC.
Transferor
By:
Name:
Title:
FINGERHUT CORPORATION Servicer
By:
Name:
Title:
THE BANK OF NEW YORK (DELAWARE)
Trustee
By: Name:
Title:
_________________________________________________________
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT CORPORATION
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1994-1 Certificateholders
SERIES 1994-1 SUPPLEMENT
Dated as of June 29, 1994
to
POOLING AND SERVICING AGREEMENT
Dated as of June 29, 1994
____________________________________
FINGERHUT MASTER TRUST
$715,900,000 Floating Rate Accounts Receivable Trust
Certificates, Series 1994-1, Class A
$92,050,000 Floating Rate Accounts Receivable Trust
Certificates, Series 1994-1, Class B
$92,050,000 Floating Rate Accounts Receivable Trust
Certificates, Series 1994-1, Class C
$122,728,000 0% Accounts Receivable Trust
Certificates, Series 1994-1, Class D
_________________________________________________________
TABLE OF CONTENTS
SECTION 1. Designation . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. Reassignment Terms. . . . . . . . . . . . . . . . . . . . . 23
SECTION 4. Delivery and Payment for the Series
1994-1 Certificates . . . . . . . . . . . . . . . . . . . 23
SECTION 5. Form of Delivery of Series 1994-1 Cer-
tificates . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6. Article IV of Agreement . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS . . . . . . . 24
Section 4.4 Rights of Certificateholders. . . . . . . . . . 24
Section 4.5 Collections and Allocation;
Payments on Exchangeable
Transferor Certificate. . . . . . . . . . . . 24
Section 4.6 Determination of Monthly
Interest for the Series
1994-1 Certificates . . . . . . . . . . . . . 26
Section 4.7 Determination of Principal
Amounts . . . . . . . . . . . . . . . . . . . 28
Section 4.8 Shared Principal Collections. . . . . . . . . . 31
Section 4.9 Application of Funds on Depos-
it in the Collection Ac-
count for the Certificates. . . . . . . . . . 32
Section 4.10 Coverage of Required Amount
for the Series 1994-1 Cer-
tificates . . . . . . . . . . . . . . . . . . 43
Section 4.11 Payment of Certificate Inter-
est . . . . . . . . . . . . . . . . . . . . . 44
Section 4.12 Payment of Certificate Princi-
pal . . . . . . . . . . . . . . . . . . . . . 45
Section 4.13 Investor Charge-Offs. . . . . . . . . . . . . . 46
Section 4.14 Pre-Funding Account . . . . . . . . . . . . . . 47
Section 4.15 Increases in Invested Amount. . . . . . . . . . 49
Section 4.16 Reallocated Principal Collec-
tions for the Series 1994-1
Certificates. . . . . . . . . . . . . . . . . 49
Section 4.17 Determination of LIBOR. . . . . . . . . . . . . 51
Section 4.18 Class C Trigger . . . . . . . . . . . . . . . . 52
Section 4.19 Establishment of Class C Re-
serve Account . . . . . . . . . . . . . . . . 53
Section 4.20 Expense Reserve . . . . . . . . . . . . . . . . 54
Section 4.21 Establishment of Expense Re-
serve Account . . . . . . . . . . . . . . . . 54
SECTION 7. Article V of the Agreement. . . . . . . . . . . . . . . . . 56
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS . . . . . . . . . . . . . 56
Section 5.1 Distributions . . . . . . . . . . . . . . . . . 56
Section 5.2 Certificateholders' Statement . . . . . . . . . 58
SECTION 8. Series 1994-1 Pay Out Events. . . . . . . . . . . . . . . . 60
SECTION 9. Series 1994-1 Termination . . . . . . . . . . . . . . . . . 62
SECTION 10. Legends; Transfer and Exchange;
Restrictions on Transfer of Series
1994-1 Certificates; Tax Treatment. . . . . . . . . . . . 62
SECTION 11. Ratification of Agreement . . . . . . . . . . . . . . . . . 66
SECTION 12. Registration of the Class A Certifi-
cates under the Securities Exchange
Act of 1934 . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 14. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 15. Instructions in Writing . . . . . . . . . . . . . . . . . . 67
SERIES 1994-1 SUPPLEMENT, dated as of
June 29, 1994 (this "Series Supplement") by and among
FINGERHUT RECEIVABLES, INC., a corporation organized and
existing under the laws of the State of Delaware, as
Transferor (the "Transferor"), FINGERHUT CORPORATION, a
corporation organized and existing under the laws of
Minnesota, as Servicer (the "Servicer"), and THE BANK OF
NEW YORK (DELAWARE), a Delaware banking corporation orga-
nized and existing under the laws of Delaware, as trustee
(together with its successors in trust thereunder as
provided in the Agreement referred to below, the "Trust-
ee") under the Pooling and Servicing Agreement dated as
of June 29, 1994 (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, of one or
more Series of Certificates.
Pursuant to this Series Supplement, the Trans-
feror and the Trustee shall create a new Series of Inves-
tor 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 1994-1 Certificates."
The Series 1994-1 Certificates shall be issued in four
Classes, which shall be designated generally as the
Floating Rate Accounts Receivable Trust Certificates,
Series 1994-1, Class A (the "Class A Certificates"), the
Floating Rate Accounts Receivable Trust Certificates,
Series 1994-1, Class B (the "Class B Certificates"), the
Floating Rate Accounts Receivable Trust Certificates,
Series 1994-1, Class C (the "Class C Certificates") and
the Floating Rate Accounts Receivable Trust Certificates,
Series 1994-1, Class D (the "Class D 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 Sup-
plement shall govern with respect to the Series 1994-1
Certificates. All Article, Section or subsection refer-
ences herein shall mean Article, Section or subsections
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 1994-1 Certifi-
cates and no other Series of Certificates issued by the
Trust.
"ABC Fixed/Floating Allocation Percentage"
shall mean for any Business Day the percentage equivalent
of a fraction, the numerator of which is the sum of the
Class A Invested Amount, the Class B Invested Amount and
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 aggregate amount of Princi-
pal Receivables and the amount on deposit in the Excess
Funding Account at the end of the preceding Business Day
and (b) the sum of the numerators used to calculate the
allocation percentages with respect to Principal Receiv-
ables for all Series.
"ABC Investor Default Amount" shall mean an
amount equal to the product of (a) the sum of the Class A
Floating Allocation Percentage, the Class B Floating
Allocation Percentage and the Class C Floating Allocation
Percentage applicable on such Business Day and (b) the
aggregate Default Amount identified since the prior re-
porting date.
"Additional Interest" shall mean, at any time
of determination, the sum of Class A Additional Interest,
Class B Additional Interest and Class C Additional Inter-
est.
"Amortization Period Commencement Date" shall
mean the earlier of the first day of the December 1996
Monthly Period and the Pay Out Commencement Date.
"Available Series 1994-1 Imputed Yield Collect-
ions" shall have the meaning specified in subsection
4.9(a) of the Agreement.
"Base Rate" shall mean the sum of (i) the
average of the Class A Certificate Rate, the Class B
Certificate Rate and the Class C Certificate Rate weight-
ed by the unpaid principal amount of each respective
class of Certificates plus (ii) 2% per annum.
"Carryover Class A Interest" shall mean (a) any
Class A Interest due but not paid on any previous Dis-
tribution Date plus (b) any Class A Additional Interest.
"Carryover Class B Interest" shall mean (a) any
Class B Interest due but not paid on any previous Dis-
tribution Date plus (b) any Class B Additional Interest.
"Carryover Class C Interest" shall mean (a) any
Class C Interest due but not paid on any previous Distri-
bution Date plus (b) any Class C Additional Interest.
"Class A Additional Interest" shall have the
meaning specified in subsection 4.6(a) of the Agreement.
"Class A Certificateholder" shall mean the
Person in whose name a Class A Certificate is registered
in the Certificate Register.
"Class A Certificateholders' Interest" shall
mean the portion of the Series 1994-1 Certificateholders'
Interest evidenced by the Class A Certificates.
"Class A Certificate Rate" shall mean .30% per
annum above LIBOR determined on June 27, 1994 for the
period from June 29, 1994 through July 19, 1994, and from
July 20, 1994, through August 21, 1994 and with respect
to each Interest Period thereafter, a per annum rate .30%
in excess of LIBOR as determined on the related LIBOR
Determination Date, but in no event in excess of 12% per
annum.
"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 A Controlled Amortization Amount" shall
mean $59,658,333.34.
"Class A Controlled Distribution Amount" shall
mean, with respect to any Distribution Date, an amount
equal to the Class A Controlled Amortization Amount plus
the Class A Deficit Controlled Amortization Amount deter-
mined on the preceding Distribution Date, if any.
"Class A Deficit Controlled Amortization
Amount" shall mean zero on the initial Distribution Date
and, on any subsequent Distribution Date, the excess, if
any, of (i) the Class A Controlled Distribution Amount
over (ii)(a) any amount on deposit in the Excess Funding
Account allocated to the Class A Certificates on such day
pursuant to Section 4.9(d) of the Agreement, (b) any
amounts in respect of ABC Investor Default Amounts and
Class A Investor Charge-Offs, Class B Investor Charge-
Offs, Class C Investor Charge-Offs and Class D Investor
Charge-Offs paid on such day and (c) Shared Principal
Collections allocable to the Class A Certificates, if
any, and (d) the product of the ABC Fixed/Floating Allo-
cation Percentage and the aggregate amount of Principal
Collections collected during the preceding Monthly Peri-
od.
"Class A Expected Final Payment Date" shall
mean the December 1997 Distribution Date.
"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 Invested Amount as of the end of the preceding
Business Day and the denominator of which is the greater
of (a) the total amount of Principal Receivables in the
Trust and the amounts on deposit in the Excess Funding
Account as of the end of the preceding Business Day and
(b) when used with respect to Principal Collections only,
the sum of the numerators with respect to all Classes of
all Series then outstanding used to calculate the appli-
cable allocation percentage.
"Class A Initial Invested Amount" shall mean
the aggregate initial principal amount of the Class A
Certificates, which is $715,900,000.
"Class A Interest" shall mean the interest
distributable in respect of the Class A Certificates as
calculated in accordance with subsection 4.6(a) of the
Agreement.
"Class A Interest Shortfall" shall have the
meaning specified in subsection 4.6(a) of the Agreement.
"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 less the Class A
Percentage of the initial deposit to the Pre-Funding
Account plus the Class A Percentage of any withdrawals
from the Pre-Funding Account (i) during the Funding
Period in connection with the addition of Receivables to
the Trust or (ii) at the end of the Funding Period for
deposit into the Excess Funding Account, minus (b) the
aggregate amount of principal payments (except principal
payments made from the Pre-Funding Account) made to Class
A Certificateholders prior to such Business Day, minus
(c) the aggregate amount of Class A Investor Charge-Offs
for all prior Distribution Dates, and plus (d) the sum of
the aggregate amount allocated with respect to Class A
Investor Charge-Offs and available on all prior Distribu-
tion Dates pursuant to subsection 4.9(a)(viii) of the
Agreement and, with respect to such subsection and pursu-
ant to subsections 4.10(a) and (b) of the Agreement, for
the purpose of reinstating amounts reduced pursuant to
the foregoing clause (c).
"Class A Investor Charge-Offs" shall have the
meaning specified in subsection 4.13(d) of the Agreement.
"Class A Investor Percentage" shall mean, for
any Business Day, (a) with respect to Imputed Yield
Receivables and Defaulted Receivables at any time or
Principal Receivables during the Revolving Period, the
Class A Floating Allocation Percentage and (b) with
respect to Principal Receivables during the Amortization
Period, the ABC Fixed/Floating Allocation Percentage.
"Class A Percentage" shall mean a fraction the
numerator of which is the Class A Invested Amount and the
denominator of which is the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C
Invested Amount.
"Class A Pool Factor" shall mean, with respect
to any Record Date, a number carried out to seven decimal
places representing the ratio of the Class A Invested
Amount as of such Record Date (determined after taking
into account any increases or decreases in the Class A
Invested Amount which will occur on the following Distri-
bution Date) to the Class A Initial Invested Amount.
"Class A Pre-Funded Amount" shall mean the
product of the Pre-Funded Amount and the Class A Percent-
age.
"Class A Principal" shall mean the principal
distributable in respect of the Class A Certificates as
calculated in accordance with subsection 4.7(a) of the
Agreement.
"Class A Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to
the excess, if any, of (x) the sum of (i) Class A Inter-
est for the then current Monthly Period, (ii) any Carry-
over Class A Interest previously due but not paid to the
Class A Certificateholders on a prior Distribution Date,
(iii) if Fingerhut or an Affiliate of Fingerhut is no
longer the Servicer, the Class A Floating Allocation
Percentage of the Servicing Fee for the then current
Monthly Period, (iv) the Class A Floating Allocation
Percentage of the Default Amount, if any, for such Busi-
ness Day and, to the extent not previously paid, for any
previous Business Day in such Monthly Period and (v) the
Class A Percentage of the Series Allocation Percentage of
the Adjustment Payment required to be made by the Trans-
feror but not made on the related Transfer Date over (y)
the Available Series 1994-1 Imputed Yield Collections
plus any Excess Imputed Yield Collections from other
Series and any Transferor Imputed Yield Collections
allocated with respect to the amounts described in claus-
es (x)(i) through (v).
"Class B Additional Interest" shall have the
meaning specified in subsection 4.6(b) of the Agreement.
"Class B Certificateholder" shall mean the
Person in whose name a Class B Certificate is registered
in the Certificate Register.
"Class B Certificateholders' Interest" shall
mean the portion of the Series 1994-1 Certificateholders'
Interest evidenced by the Class B Certificates.
"Class B Certificate Rate" shall mean .60% per
annum above LIBOR determined on June 27, 1994 for the
period from June 29, 1994 through July 19, 1994, and from
July 20, 1994, through August 21, 1994 and with respect
to each Interest Period thereafter, a per annum rate .60%
in excess of LIBOR, as determined on the related LIBOR
Determination Date, but not in excess of 12% per annum.
"Class B Certificates" shall mean any of the
certificates executed by the Transferor and authenticated
by or on behalf of the Trustee, substantially in the form
of Exhibit A-2 hereto.
"Class B Controlled Amortization Amount" shall
mean $46,025,000.
"Class B Controlled Distribution Amount" shall
mean, with respect to any Distribution Date, an amount
equal to the Class B Controlled Amortization Amount plus
the Class B Deficit Controlled Amortization Amount deter-
mined on the preceding Distribution Date, if any.
"Class B Daily Principal Amount" shall have the
meaning specified in subsection 4.9(c)(ii) of the Agree-
ment.
"Class B Deficit Controlled Amortization
Amount" shall mean zero on the initial Distribution Date
and, on any subsequent Distribution Date, the excess, if
any, of (i) the Class B Controlled Distribution Amount
over (ii) (a) any amount on deposit in the Excess Funding
Account allocated to the Class B Certificates on such day
pursuant to Section 4.9(d) of the Agreement, (b) any
amounts in respect of ABC Investor Default Amounts or
Class B Investor Charge-Offs, Class C Investor Charge-
Offs and Class D Investor Charge-Offs paid on such day
and (c) Shared Principal Collections allocable to the
Class B Certificates, if any, and (d) the product of the
ABC Fixed/Floating Allocation Percentage and the aggre-
gate amount of Principal Collections collected during the
preceding Monthly Period.
"Class B Expected Final Payment Date" means the
February 1998 Distribution Date.
"Class B Fixed/Floating 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 Revolv-
ing Period and the denominator of which is the greater of
(a) the sum of the aggregate amount of Principal Receiv-
ables and the amount on deposit in the Excess Funding
Account at the end of the preceding Business Day and (b)
the sum of the numerators used to calculate the alloca-
tion 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 Invested Amount as of the end of the preceding
Business Day and the denominator of which is the greater
of (a) the total amount of Principal Receivables in the
Trust and the amount on deposit in the Excess Funding
Account as of the end of the preceding Business Day and
(b) when used with respect to Principal Collections only,
the sum of the numerators with respect to all Classes of
all Series then outstanding used to calculate the appli-
cable allocation percentage.
"Class B Initial Invested Amount" shall mean
the aggregate initial principal amount of the Class B
Certificates, which is $92,050,000.
"Class B Interest" shall mean the interest
distributable in respect of the Class B Certificates as
calculated in accordance with subsection 4.6(b) of the
Agreement.
"Class B Interest Shortfall" shall have the
meaning specified in subsection 4.6(b) of the Agreement.
"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 less the Class B
Percentage of the initial deposit to the Pre-Funding
Account plus the Class B Percentage of any withdrawals
from the Pre-Funding Account (i) during the Funding
Period in connection with the addition of Receivables to
the Trust or (ii) at the end of the Funding Period for
deposit into the Excess Funding Account, minus (b) the
aggregate amount of principal payments (except principal
payments made from the Pre-Funding Account) made to Class
B Certificateholders prior to such Business Day, minus
(c) the aggregate amount of Class B Investor Charge-Offs
for all prior Distribution Dates, minus (d) the aggregate
amount of Reallocated Class B Principal Collections for
which neither the Class D Invested Amount nor the Class C
Invested Amount has been reduced for all prior Business
Days, and plus (e) the sum of the aggregate amount allo-
cated and available on all prior Business Days pursuant
to subsection 4.9(a)(xi) of the Agreement and, with
respect to such subsection and pursuant to subsections
4.10(a) and (b) of the Agreement, for the purpose of
reinstating amounts reduced pursuant to the foregoing
clauses (c) and (d).
"Class B Investor Charge-Offs" shall have the
meaning specified in subsection 4.13(c) of the Agreement.
"Class B Investor Percentage" shall mean, for
any Distribution Date, (a) with respect to Imputed Yield
Receivables and Defaulted Receivables at any time or
Principal Receivables during the Revolving Period, the
Class B Floating Allocation Percentage and (b) with
respect to Principal Receivables during the Amortization
Period, the ABC Fixed/Floating Allocation Percentage.
"Class B Percentage" shall mean a fraction the
numerator of which is the Class B Invested Amount and the
denominator of which is the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C
Invested Amount.
"Class B Pool Factor" shall mean, with respect
to any Record Date, a number carried out to seven decimal
places representing the ratio of the Class B Invested
Amount as of such Record Date (determined after taking
into account any increases or decreases in the Class B
Invested Amount which will occur on the following Distri-
bution Date) to the Class B Initial Invested Amount.
"Class B Pre-Funded Amount" shall mean the
product of the Pre-Funded Amount and the Class B Percent-
age.
"Class B Principal" shall mean the principal
distributable in respect of the Class B Certificates as
calculated in accordance with subsection 4.7(b) of the
Agreement.
"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 1994-1 Investor Certificates
remaining after payments have been made to the Class A
Certificates on such Distribution Date, the Distribution
Date following the Distribution Date on which the Class A
Invested Amount is paid in full and (b) the Distribution
Date following a sale or repurchase of the Receivables as
set forth in Sections 2.4(e), 9.2, 10.2, 12.1 or 12.2 of
the Agreement and Section 3 of this Series Supplement.
"Class B Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to
the excess, if any, of (x) the sum of (i) Class B Inter-
est for the then current Monthly Period, (ii) any Carry-
over Class B Interest previously due but not paid to the
Class B Certificateholders on a prior Distribution Date,
(iii) if Fingerhut or an Affiliate of Fingerhut is no
longer the Servicer, the Class B Floating Allocation
Percentage of the Servicing Fee for the then current
Monthly Period, (iv) the Class B Floating Allocation
Percentage of the Default Amount, if any, for such Busi-
ness Day and, to the extent not previously paid, for any
previous Business Day in such Monthly Period and (v) the
Class B Percentage of the Series Allocation Percentage of
the Adjustment Payment required to be made by the Trans-
feror but not made on the related Transfer Date over (y)
the Available Series 1994-1 Imputed Yield Collections
plus any Excess Imputed Yield Collections from other
Series and any Transferor Imputed Yield Collections
allocated with respect to the amounts described in claus-
es (x)(i) through (v).
"Class C Additional Interest" shall have the
meaning specified in subsection 4.6(c) of the Agreement.
"Class C Certificateholder" shall mean the
Person in whose name a Class C Certificate is registered
in the Certificate Register.
"Class C Certificateholders' Interest" shall
mean the portion of the Series 1994-1 Certificateholders'
Interest evidenced by the Class C Certificates.
"Class C Certificate Rate" shall mean 5.50% per
annum from June 29, 1994 through July 19, 1994, and from
July 20, 1994 through August 21, 1994 and with respect to
each Interest Period thereafter, a per annum rate 1.0% in
excess of LIBOR as determined on the related LIBOR Deter-
mination Date, but in no event in excess of 12% per
annum.
"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.
"Class C Daily Principal Amount" shall have the
meaning specified in subsection 4.9(c)(iii) of the Agree-
ment.
"Class C Expected Final Payment Date" means the
April 1998 Distribution Date.
"Class C Fixed/Floating Allocation Percentage"
shall mean for any Business Day the percentage equivalent
of a fraction, the numerator of which is the Class C
Invested Amount at the end of the last day of the Revolv-
ing Period and the denominator of which is the greater of
(a) the sum of the aggregate amount of Principal Receiv-
ables and the amount on deposit in the Excess Funding
Account at the end of the preceding Business Day and (b)
the sum of the numerators used to calculate the alloca-
tion 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 of 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 total amount of Principal Receivables in the
Trust and the amount on deposit in the Excess Funding
Account as of the end of the preceding Business Day and
(b) when used with respect to Principal Collections only,
the sum of the numerators with respect to all Classes of
all Series then outstanding used to calculate the appli-
cable allocation percentage.
"Class C Initial Invested Amount" shall mean
the aggregate initial principal amount of the Class C
Certificates, which is $92,050,000.
"Class C Interest" shall mean the interest
distributable in respect of the Class C Certificates as
calculated in accordance with subsection 4.6(c) of the
Agreement.
"Class C Interest Shortfall" shall have the
meaning specified in subsection 4.6(c) of the Agreement.
"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 less the Class C
Percentage of the initial deposit to the Pre-Funding
Account plus the Class C Percentage of any withdrawals
from the Pre-Funding Account (i) during the Funding
Period in connection with the addition of Receivables to
the Trust or (ii) at the end of the Funding Period for
deposit into the Excess Funding Account, minus (b) the
aggregate amount of principal payments (except principal
payments made from the Pre-Funding Account) made to Class
C Certificateholders prior to such Business Day, minus
(c) the aggregate amount of Class C Investor Charge-Offs
for all prior Distribution Dates, minus (d) the aggregate
amount of Reallocated Class C Principal Collections for
which the Class D Invested Amount has not been reduced
for all prior Business Days and plus (e) the sum of the
aggregate amount allocated and available on all prior
Business Days pursuant to subsection 4.9(a)(xii) of the
Agreement and, with respect to such subsection, pursuant
to subsections 4.10(a) and (b) and 4.18(b) of the Agree-
ment, for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (c) and (d).
"Class C Investor Charge-Offs" shall have the
meaning specified in subsection 4.13(b) of the Agreement.
"Class C Investor Percentage" shall mean, for
any Distribution Date, (a) with respect to Imputed Yield
Receivables and Defaulted Receivables at any time or
Principal Receivables during the Revolving Period, the
Class C Floating Allocation Percentage and (b) with
respect to Principal Receivables during the Amortization
Period, the ABC Fixed/Floating Allocation Percentage.
"Class C Percentage" shall mean a fraction the
numerator of which is the Class C Invested Amount and the
denominator of which is the sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C
Invested Amount.
"Class C Pool Factor" shall mean, with respect
to any Record Date, a number carried out to seven decimal
places representing the ratio of the Class C Invested
Amount as of such Record Date (determined after taking
into account any increases or decreases in the Class C
Invested Amount which will occur on the following Distri-
bution Date) to the Class C Initial Invested Amount.
"Class C Principal" shall mean the principal
distributable in respect of the Class C Certificates as
calculated in accordance with subsection 4.7(c) of the
Agreement.
"Class C Principal Payment Commencement Date"
shall mean the earlier of (a) the Distribution Date in an
Amortization Period on which the Class B Invested Amount
is paid in full or, if there are no Principal Collections
allocable to the Series 1994-1 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, 12.1 or 12.2 of
the Agreement and Section 3 of this Series Supplement.
"Class C Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to
the excess, if any, of (x) the sum of (i) Class C Inter-
est for the then current Monthly Period, (ii) any Carry-
over Class C Interest previously due but not paid to the
Class C Certificateholders on a prior Distribution Date,
(iii) if Fingerhut or an Affiliate of Fingerhut is no
longer the Servicer, the Class C Floating Allocation
Percentage of the Servicing Fee for the then current
Monthly Period, (iv) the Class C Floating Allocation
Percentage of the Default Amount, if any, for such Busi-
ness Day and, to the extent not previously paid, for any
previous Business Day in such Monthly Period and (v) the
Class C Percentage of the Series Allocation Percentage of
the Adjustment Payment required to be made by the Trans-
feror but not made on the related Transfer Date over (y)
the Available Series 1994-1 Imputed Yield Collections
plus any Excess Imputed Yield Collections from other
Series and any Transferor Imputed Yield Collections
allocated with respect to the amounts described in claus-
es (x)(i) through (v).
"Class C Trigger Event" shall have the meaning
specified in subsection 4.18(a).
"Class D Certificateholder" shall mean the
Person in whose name a Class D Certificate is registered
in the Certificate Register.
"Class D Certificateholders' Interest" shall
mean the portion of the Series 1994-1 Certificateholders'
Interest evidenced by the Class D Certificates.
"Class D Certificates" shall mean any of the
certificates executed by the Transferor and authenticated
by or on behalf of the Trustee, substantially in the form
of Exhibit A-4 hereto.
"Class D Fixed/Floating Allocation Percentage"
shall mean for any Business Day the percentage equivalent
of a fraction, the numerator of which is the Class D
Invested Amount at the end of the last day of the Revolv-
ing Period and the denominator of which is the greater of
(a) the sum of the aggregate amount of Principal Receiv-
ables and the amount on deposit in the Excess Funding
Account as of the end of the preceding Business Day and
(b) the sum of the numerators used to calculate the allo-
cation percentages with respect to Principal Collections
for all Series.
"Class D Floating Allocation Percentage" shall
mean with respect to any Business Day the percentage
equivalent of a fraction, the numerator of which is the
Class D Invested Amount as of the end of the preceding
Business Day and the denominator of which is the greater
of (a) the total amount of Principal Receivables and the
amount on deposit in the Excess Funding Account at the
end of the preceding Business Day and (b) when used with
respect to Principal Collections only, the sum of the
numerators with respect to all Classes of all Series then
outstanding used to calculate the applicable allocation
percentage.
"Class D Initial Invested Amount" shall mean
the aggregate initial principal amount of the Class D
Certificates, which is $122,728,000
"Class D Invested Amount" shall mean, when used
with respect to any Business Day, an amount equal to (a)
the Class D Initial Invested Amount, minus (b) the aggre-
gate amount of principal payments made to Class D Certif-
icateholders prior to such Business Day, minus (c) the
aggregate amount of Class D Investor Charge-Offs for all
prior Distribution Dates, minus (d) the aggregate amount
of Reallocated Principal Collections for all prior Busi-
ness Days, plus (e) the sum of the aggregate amount allo-
cated and available on all prior Business Days pursuant
to subsection 4.9(a)(xiii) of the Agreement and, with re-
spect to such subsection, pursuant to subsections 4.10(a)
and (b) of the Agreement, for the purpose of reinstating
amounts reduced pursuant to the foregoing clauses (c) and
(d).
"Class D Investor Charge-Offs" shall have the
meaning specified in subsection 4.13(a) of the Agreement.
"Class D Investor Default Amount" shall mean an
amount equal to the product of (a) the Class D Floating
Allocation Percentage applicable on such Business Day and
(b) the aggregate Default Amount identified since the
prior reporting date.
"Class D Investor Percentage" shall mean, for
any Business Day, (a) with respect to Imputed Yield Re-
ceivables and Defaulted Receivables at any time or Prin-
cipal Receivables during the Revolving Period, the Class
D Floating Allocation Percentage and (b) with respect to
Principal Receivables during the Amortization Period, the
Class D Fixed/Floating Allocation Percentage.
"Class D Principal" shall mean the principal
distributable in respect of the Class D Certificates as
calculated in accordance with subsection 4.7(d) of the
Agreement.
"Class D Pool Factor" shall mean, with respect
to any Record Date, a number carried out to seven decimal
places representing the ratio of the Class D Invested
Amount as of such Record Date (determined after taking
into account any increases or decreases in the Class D
Invested Amount which will occur on the following Distri-
bution Date) to the Class D Initial Invested Amount.
"Class D Principal Payment Commencement Date"
shall mean the earlier of (a) the Distribution Date on
which the Class C Invested Amount is paid in full or, if
there are no Principal Collections allocable to the
Series 1994-1 Investor Certificates remaining after
payments have been made to the Class C Certificates on
such Distribution Date, the Distribution Date following
the Distribution Date on which the Class C 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, 12.1 and 12.2 of the
Agreement and Section 3 of this Series Supplement.
"Closing Date" shall mean June 29, 1994.
"Controlled Amortization Period" shall mean,
with respect to the Series 1994-1 Certificates, unless a
Pay Out Event shall have occurred with respect to such
Series prior thereto, the period commencing on the Amor-
tization Period Commencement Date and ending upon the
earliest to occur of (x) the payment in full to the
Investor Certificateholders of the Invested Amount, and
(y) the Series 1994-1 Termination Date.
"Distribution Date" shall mean July 20, 1994
and the twentieth day of each month thereafter, or if
such day is not a Business Day, the next succeeding
Business Day.
"Early Amortization Period" shall mean the
period beginning on the earlier of (a) the day on which a
Pay Out Event occurs or is deemed to have occurred and
(b) the Class A Expected Final Payment Date if the Class
A Invested Amount has not been paid in full on such date,
or the Class B Expected Final Payment Date if the Class B
Invested Amount has not been paid in full on such date,
and ending on the earlier of (i) the date on which the
Class A Invested Amount, the Class B Invested Amount, the
Class C Invested Amount and the Class D Invested Amount
have been paid in full and (ii) the Termination Date.
"Enhancement" shall mean, with respect to the
Class A Certificates, the subordination of the Class B
Invested Amount, the Class C Invested Amount, and the
Class D Invested Amount, with respect to the Class B Cer-
tificates, the subordination of the Class C Invested
Amount and the Class D Invested Amount, and with respect
to the Class C Certificates, the subordination of the
Class D Invested Amount.
"Excess Imputed Yield Collections" shall mean,
with respect to any Business Day, as the context re-
quires, either (x) the amount described in subsection
4.9(a)(xv) of the Agreement allocated to the Series 1994-
1 Certificates but available to cover shortfalls in
amounts paid from Imputed Yield Collections for other
Series, if any or (y) the aggregate amount of Imputed
Yield 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 1994-1 Certifi-
cates.
"Expense Reserve Account" shall have the mean-
ing specified in subsection 4.21(a) of the Agreement.
"Expense Reserve Trigger" shall have the mean-
ing specified in Section 4.20 of the Agreement.
"Fixed/Floating 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 and the
amount on deposit in the Excess Funding Account as of the
end of the preceding Business Day and (b) the sum of the
numerators used to calculate allocation percentages with
respect to Principal Receivables for all Series.
"Floating Allocation Percentage" shall mean for
any Business Day the sum of the applicable Class A Float-
ing Allocation Percentage, Class B Floating Allocation
Percentage, Class C Floating Allocation Percentage, and
Class D Floating Allocation Percentage for such Business
Day.
"Full Invested Amount" shall mean
$1,022,728,000.
"Funding Period" shall mean the period from and
including the Closing Date to but excluding the earlier
of (x) the first day for which the Invested Amount equals
the Full Invested Amount; (y) the first day on which a
Pay Out Event is deemed to occur and (z) the first day of
January 1995 Monthly Period.
"Initial Invested Amount" shall mean the aggre-
gate initial principal amount of the Investor Certifi-
cates of Series 1994-1, which is $886,453,716.86.
"Initial Pre-Funded Amount" shall mean
$136,274,283.14.
"Interest Accrual Period" shall mean, with
respect to a Distribution Date, the period from and
including the preceding Distribution Date to and exclud-
ing such Distribution Date; provided, however, that the
initial Interest Accrual Period shall be the period from
the Closing Date to and excluding the first Distribution
Date.
"Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to the sum
of (a) the Class A Invested Amount as of such Business
Day, (b) the Class B Invested Amount as of such Business
Day, (c) the Class C Invested Amount as of such Business
Day and (d) the Class D Invested Amount as of such Busi-
ness Day.
"Investor Certificateholder" shall mean the
Holder of record of an Investor Certificate of Series
1994-1.
"Investor Certificates" shall mean the Class A
Certificates, the Class B Certificates, the Class C
Certificates and the Class D Certificates.
"Investor Charge-Offs" shall mean the sum of
Class A Investor Charge-Offs, Class B Investor Charge-
Offs, Class C Investor Charge-Offs and Class D Investor
Charge-Offs.
"Investor Default Amount" shall mean, with
respect to each Business Day, an amount equal to the
product of the Default Amount identified since the prior
reporting date and the Floating Allocation Percentage
applicable for such Business Day.
"Investor Percentage" shall mean for any Busi-
ness Day, (a) with respect to Imputed Yield Receivables
and Defaulted Receivables at any time or Principal Re-
ceivables during the Revolving Period, the Floating
Allocation Percentage and (b) with respect to Principal
Receivables during the Amortization Period, the
Fixed/Floating Allocation Percentage.
"Issuance Date" shall mean the Closing Date.
"LIBOR" shall mean, for any Interest Period,
the London interbank offered quotations for one-month
Dollar deposits determined by the Trustee for each Inter-
est Accrual Period in accordance with the provisions of
Section 4.17 of the Agreement.
"LIBOR Determination Date" shall mean the
second Business Day prior to the commencement of the
second and each subsequent Interest Accrual Period. For
purposes of this definition, a Business Day is any day on
which banks in London and New York are open for the
transaction of international business.
"Minimum Retained Percentage" shall mean 2%.
"Minimum Transferor Percentage" shall mean 0%;
provided, however, that in certain circumstances such
percentage may be increased.
"Monthly Period" shall have the meaning speci-
fied in the Agreement, except that the first Monthly
Period with respect to the Series 1994-1 Certificates
shall begin on and include the Closing Date and shall end
on and include July 1, 1994.
"Negative Carry Amount" shall have the meaning
specified in subsection 4.10(a) of the Agreement.
"Paying Agent" shall mean, for the Series
1994-1 Certificates, The Bank of New York and Banque de
Luxembourg.
"Pay Out Commencement Date" shall mean the date
on which a Trust Pay Out Event is deemed to occur pursu-
ant to Section 9.1 of the Agreement or a Series 1994-1
Pay Out Event is deemed to occur pursuant to Section 8 of
this Series Supplement.
"Portfolio Yield" shall mean for the Series
1994-1 Certificates, with respect to any Monthly Period,
the annualized percentage equivalent of a fraction, the
numerator of which is an amount equal to the sum of the
aggregate amount of Available Series 1994-1 Imputed Yield
Collections for such Monthly Period (minus the Floating
Allocation Percentage of the portion of Imputed Yield
Collections for such period described in clause (D) of
the definition thereof), calculated on a cash basis,
minus the aggregate Investor Default Amount for such
Monthly Period and the Series Allocation Percentage of
any Adjustment Payments which the Transferor is required
but fails to make pursuant to the Pooling and Servicing
Agreement for such Monthly Period, and the denominator of
which is the average daily Invested Amount plus the Pre-
Funded Amount during the preceding Monthly Period.
"Pre-Funded Amount" shall mean (a) the Initial
Pre-Funded Amount, minus (b) the amount of any increases
in the Invested Amount during the Funding Period pursuant
to Section 4.14(a) of the Agreement, minus (c) the amount
of any principal losses on funds on deposit in the Pre-
Funding Account and minus (d) the amount withdrawn from
the Pre-Funding Account and deposited in the Excess
Funding Account.
"Pre-Funding Account" shall mean the account
established and maintained pursuant to subsection 4.14(a)
of the Agreement.
"Principal Shortfalls" shall mean on any Busi-
ness Day (x) for Series 1994-1, (i) during the Controlled
Amortization Period on or prior to the Class C Principal
Payment Commencement Date, the excess of the Class A
Controlled Distribution Amount or the Class B Controlled
Distribution Amount, as applicable, over the aggregate
amount applied with respect thereto for such Business Day
and for each prior Business Day in such Monthly Period,
and (ii) at all other times, the Invested Amount of the
class then receiving principal payments after the appli-
cation 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.
"Rating Agency" shall mean Standard & Poor's
Ratings Group, a division of McGraw-Hill, and Moody's
Investors Service, Inc.
"Reallocated Class B Principal Collections"
shall have the meaning specified in subsection 4.16(c) of
the Agreement.
"Reallocated Class C Principal Collections"
shall have the meaning specified in subsection 4.16(b) of
the Agreement.
"Reallocated Class D Principal Collections"
shall have the meaning specified in subsection 4.16(a) of
the Agreement.
"Reallocated Principal Collections" shall mean
the sum of Reallocated Class B Principal Collections,
Reallocated Class C Principal Collections and Reallocated
Class D Principal Collections.
"Required Amount" shall have the meaning speci-
fied in Section 4.10 of the Agreement.
"Revolving Period" shall mean the period from
and including the Closing Date to, but not including, the
Amortization Period Commencement Date.
"Scheduled Series 1994-1 Termination Date"
shall mean the June 2001 Distribution Date.
"Series 1994-1" shall mean the Series of the
Fingerhut Master Trust represented by the Series 1994-1
Certificates.
"Series 1994-1 Certificateholder" shall mean
the holder of record of any Series 1994-1 Investor Cer-
tificate.
"Series 1994-1 Certificateholders' Interest"
shall have the meaning specified in Section 4.4 of the
Agreement.
"Series 1994-1 Pay Out Event" shall have the
meaning specified in Section 8 of this Series Supplement.
"Series 1994-1 Termination Date" shall mean the
earlier to occur of (i) the day after the Distribution
Date on which the Series 1994-1 Certificates are paid in
full, or (ii) the Scheduled Series 1994-1 Termination
Date.
"Series Servicing Fee Percentage" shall mean
2.00% per annum.
"Servicing Fee" shall mean for any Monthly
Period, an amount equal to the product of (i) one-
twelfth, (ii) the applicable Series Servicing Fee Per-
centage and (iii) the Invested Amount as of the preceding
Record Date, or, in the case of the first Distribution
Date, the Initial Invested Amount.
"Shared Principal Collections" shall mean, as
the context requires, either (a) the amount allocated to
the Series 1994-1 Investor Certificates which, in accor-
dance with subsections 4.9(b) and 4.9(c)(v) of the Agree-
ment, may be applied in accordance with Section 4.3(e) of
the Agreement or (b) the amounts allocated to the inves-
tor certificates (other than Transferor Retained Certifi-
cates) 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 1994-1
Investor Certificates.
"Specified Class C Reserve Amount" shall mean
the amount, if any, which if added to the numerator of
the Target Percentage would cause such percentage to be
equal to 5%.
"Target Percentage" shall have the meaning
specified in subsection 4.18(a).
"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 1994-1 Termination Date.
"Transferor Imputed Yield Collections" shall
mean on any Business Day the product of (a) the Imputed
Yield Collections for such Business Day, (b) the Trans-
feror Percentage and (c) the Series Allocation Percent-
age.
"Transferor Retained Certificates" shall mean
investor certificates of any Series, including the Class
D Certificates, which the Transferor retains, but only to
the extent that and for so long as the Transferor is the
Holder of such Certificates.
SECTION 3. Reassignment Terms. The Series
1994-1 Certificates shall be subject to termination by
the Transferor at its option, in accordance with the
terms specified in subsection 12.2(a) of the Agreement,
on any Distribution Date on or after the Distribution
Date on which the sum of the Class A Invested Amount, the
Class B Invested Amount and the Class C Invested Amount
is reduced to an amount less than or equal to 10% of the
sum of the Class A Initial Invested Amount, the Class B
Initial Invested Amount and the Class C Initial Invested
Amount. The deposit required in connection with any such
termination and final distribution shall be equal to the
sum of the Class A Invested Amount, the Class B Invested
Amount and the Class C Invested Amount plus accrued and
unpaid interest on the Series 1994-1 Certificates through
the day prior to the Distribution Date on which the final
distribution occurs.
SECTION 4. Delivery and Payment for the Series
1994-1 Certificates. The Transferor shall execute and
deliver the Series 1994-1 Certificates to the Trustee for
authentication in accordance with Section 6.1 of the
Agreement. The Trustee shall deliver the Series 1994-1
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 1994-1
Certificates. The Class A Certificates, the Class B
Certificates, the Class C Certificates and the Class D
Certificates, shall be delivered as Registered Certifi-
cates as provided in Section 6.1 of the Agreement.
SECTION 6. Article IV of Agreement. Sections
4.1 and 4.3 of the Agreement shall read in their entirety
as provided in the Agreement. Section 4.2 of the Agree-
ment shall read in its entirety as provided in the Agree-
ment except that the following additional sentence shall
be added at the end of subsection 4.2(b): "On the Ini-
tial Closing Date the Transferor shall make an initial
deposit to the Interest Funding Account in the amount of
$2,573,695.83." Article IV of the Agreement (except for
Sections 4.1, 4.2 and 4.3 thereof) shall read in its
entirety as follows and shall be applicable only to the
Series 1994-1 Certificates:
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.4 Rights of Certificateholders. The
Series 1994-1 Certificates shall represent undivided
interests in the Trust, consisting of the right to re-
ceive, to the extent necessary to make the required
payments with respect to such Series 1994-1 Certificates
at the times and in the amounts specified in this Agree-
ment, (a) the Floating Allocation Percentage and the
Fixed/Floating Allocation Percentage (as applicable from
time to time) of Collections available in the Collection
Account, (b) funds allocable to the Series 1994-1 Cer-
tificates on deposit in the Excess Funding Account and
(c) funds on deposit in the Interest Funding Account, the
Principal Account, the Distribution Account and the Pre-
Funding Account (for such Series, the "Series 1994-1 Cer-
tificateholders' Interest"). The Class B Invested
Amount, the Class C Invested Amount and the Class D
Invested Amount shall be subordinated to the Class A Cer-
tificates, the Class C Invested Amount and the Class D
Invested Amount shall be subordinated to the Class B Cer-
tificates, and the Class D Invested Amount shall be
subordinated to the Class C Certificates, in each case to
the extent provided in this Article IV. The Class B
Certificates will not have the right to receive payments
of principal until the Class A Invested Amount has been
paid in full. The Class C Certificates will not have the
right to receive payments of principal until the Class A
Invested Amount and the Class B Invested Amount have been
paid in full. The Class D Certificates will not have the
right to receive payments of principal until the Class A
Invested Amount, the Class B Invested Amount and the
Class C Invested Amount have been paid in full.
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 depos-
it in the Collection Account and the Excess Funding
Account allocable to the Series 1994-1 Certificates, and
all funds on deposit in the Interest Funding Account, the
Principal Account, the Pre-Funding Account and the Dis-
tribution Account maintained for this Series, as de-
scribed in this Article IV.
(b) Payments to the Holder of the Ex-
changeable Transferor Certificate. On each Business Day,
the Servicer shall determine whether a Pay Out Event is
deemed to have occurred with respect to the Series 1994-1
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 Ex-
changeable 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 Transfer-
or Certificate or pursuant to subsection 4.3(b) of
the Agreement, an amount equal (x) to the product of
the Class D Floating Allocation Percentage and the
amount of Principal Collections on such Business
Day, minus (y) the Reallocated Class D Principal
Collections;
(ii) For each Business Day with respect to the
Amortization Period prior to the Business Day on
which an amount equal to the Class C Invested Amount
has been deposited in the Principal Account to be
applied to the payment of Class C Principal, 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 (x) the product of the Class D
Fixed/Floating Allocation Percentage and the amount
of Principal Collections on such Business Day minus
(y) the Reallocated Class D Principal Collections;
and
(iii) For each Business Day on and after the
day on which Principal Collections are being depos-
ited in the Principal Account pursuant to Section
4.9(c)(iv), the amount of payments of Principal
Collections 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 Transferor pursuant to subsection 4.5(b)(i) or
(ii) shall instead be deposited in the Excess Funding
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 Col-
lection Account that are treated as Collections, includ-
ing Adjustment Payments, payment of the reassignment
price pursuant to Section 2.4(d) of the Agreement and
proceeds from the sale, disposition or liquidation of the
Receivables pursuant to Section 9.2, 10.2, 12.1 or 12.2
of the Agreement and Section 3 of this Series Supplement.
Such deposits to be treated as Collections will be allo-
cated as Imputed Yield Receivables or Principal Receiv-
ables as provided in the Agreement.
Section 4.6 Determination of Monthly Interest
for the Series 1994-1 Certificates. (a) The amount of
monthly interest (the "Class A Interest") allocable to
the Class A Certificates with respect to any Interest
Accrual Period shall be an amount equal to the product of
(i) the Class A Certificate Rate and (ii) a fraction the
numerator of which is the actual number of days in the
related Interest Accrual Period and the denominator of
which is 360 and (iii) the principal balance of the Class
A Certificates as of the close of business on the first
day of such Interest Accrual Period.
On the Determination Date preceding each Dis-
tribution Date, the Servicer shall determine an amount
(the "Class A Interest Shortfall") equal to the excess,
if any, of (x) the Class A Interest for the Interest
Accrual Period applicable to the Distribution Date over
(y) the amount available to be paid to the Class A Certi-
ficateholders in respect of interest on such Distribution
Date. If there is a Class A Interest Shortfall with
respect to any Distribution Date, an additional amount
("Class A Additional Interest") shall be payable as
provided herein with respect to the Class A Certificates
on each Distribution Date following such Distribution
Date, to and including the Distribution Date on which
such Class A Interest Shortfall is paid to Class A Certi-
ficateholders, equal to the product of (i) the Class A
Certificate Rate plus 2% per annum and (ii) such Class A
Interest Shortfall remaining unpaid calculated on the
basis of a fraction the numerator of which is the actual
number of days in the related Interest Accrual Period and
the denominator of which is 360. Notwithstanding any-
thing to the contrary herein, Class A Additional Interest
shall be payable or distributed to Class A Certificate-
holders only to the extent permitted by applicable law.
(b) The amount of monthly interest (the
"Class B Interest") allocable to the Class B Certificates
with respect to any Interest Accrual Period shall be an
amount equal to the product of (i) the Class B Certifi-
cate Rate and (ii) a fraction the numerator of which is
the actual number of days in the related Interest Accrual
Period and the denominator of which is 360 and (iii) the
Class B Invested Amount as of the close of business on
the first day of such Interest Accrual Period; provided,
however that with respect to any Distribution Date relat-
ed to the Funding Period the amount described in clause
(iii) shall be the outstanding principal balance of the
Class B Certificates on the first day of such Interest
Accrual Period.
On the Determination Date preceding each Dis-
tribution Date, the Servicer shall determine an amount
(the "Class B Interest Shortfall") equal to the excess,
if any, of (x) the aggregate Class B Interest for the
Interest Accrual Period applicable to the Distribution
Date over (y) the amount available to be paid to the
Class B Certificateholders in respect of interest on such
Distribution Date. If there is a Class B Interest Short-
fall with respect to any Distribution Date, an additional
amount ("Class B Additional Interest") shall be payable
as provided herein with respect to the Class B Certifi-
cates on each Distribution Date following such Distribu-
tion Date, to and including the Distribution Date on
which such Class B Interest Shortfall is paid to Class B
Certificateholders, equal to the product of (i) the Class
B Certificate Rate plus 2% per annum and (ii) such Class
B Interest Shortfall remaining unpaid calculated on the
basis of a fraction the numerator of which is the actual
number of days in the related Interest Accrual Period and
the denominator of which is 360. Notwithstanding any-
thing to the contrary herein, Class B Additional Interest
shall be payable or distributed to Class B Certificate-
holders only to the extent permitted by applicable law.
(c) The amount of monthly interest (for the
Series 1994-1 Certificates, the "Class C Interest")
allocable to the Class C Certificates of the Series 1994-
1 Certificates with respect to any Interest Accrual
Period shall be an amount equal to the product of (i) the
Class C Certificate Rate and (ii) a fraction the numera-
tor of which is the actual number of days in the related
Interest Accrual Period and the denominator of which is
360 and (iii) the Class C Invested Amount as of the close
of business on the first day of such Interest Accrual
Period; provided, however, that with respect to any
Distribution Date related to the Funding Period the
amount described in clause (iii) shall be the outstanding
principal balance of the Class C Certificates on the
first day of such Interest Accrual Period.
On the Determination Date preceding each Dis-
tribution Date, the Servicer shall determine an amount
(the "Class C Interest Shortfall") equal to the excess,
if any, of (x) the aggregate Class C Interest for the
Interest Accrual Period applicable to the Distribution
Date over (y) the amount available to be paid to the
Class C Certificateholders in respect of interest on such
Distribution Date. If there is a Class C Interest Short-
fall with respect to any Distribution Date, an additional
amount ("Class C Additional Interest") shall be payable
as provided herein with respect to the Class C Certifi-
cates on each Distribution Date following such Distribu-
tion Date, to and including the Distribution Date on
which such Class C Interest Shortfall is paid to Class C
Certificateholders, equal to the product of (i) the Class
C Certificate Rate plus 2% per annum and (ii) such Class
C Interest Shortfall remaining unpaid calculated on the
basis of a fraction the numerator of which is the actual
number of days in the related Interest Accrual Period and
the denominator of which is 360. Notwithstanding any-
thing to the contrary herein, Class C Additional Interest
shall be payable or distributed to Class C Certificate-
holders only to the extent permitted by applicable law.
Section 4.7 Determination of Principal
Amounts. (a) The amount of principal (the "Class A
Principal") distributable from the Distribution Account
with respect to the Class A Certificates on each Distri-
bution Date with respect to the Amortization Period shall
be equal to an amount calculated as follows: the sum of
(i) an amount equal to the product of the ABC Fixed/Floa-
ting Allocation Percentage and the aggregate amount of
Principal Collections (less the amount of Reallocated
Class B Principal Collections and Reallocated Class C
Principal Collections) with respect to the preceding
Monthly Period, (ii) any amount on deposit in the Excess
Funding Account or the Pre-Funding Account allocated to
the Class A Certificates pursuant to subsection 4.9(d) or
Section 4.15 of the Agreement, respectively, with respect
to the preceding Monthly Period, (iii) the amount, if
any, allocated to the Class A Certificates pursuant to
subsections 4.9(a)(v), (vii), (viii), (xi), (xii) and
(xiii) of the Agreement and, with respect to such subsec-
tions, pursuant to subsections 4.10(a) and (b) and
4.16(a), (b) and (c) of the Agreement, and (iv) the
amount of Shared Principal Collections allocated to the
Class A Certificates with respect to the preceding Month-
ly Period pursuant to Section 4.3(e) of the Agreement;
provided, however, that with respect to any Distribution
Date during the Controlled Amortization Period, Class A
Principal may not exceed the Class A Controlled Distribu-
tion Amount for such Distribution Date; provided, fur-
ther, that with respect to any Distribution Date, Class A
Principal may not exceed the Class A Invested Amount;
provided, further, that with respect to the Scheduled
Series 1994-1 Termination Date, the Class A Principal
shall be an amount equal to the Class A Invested Amount.
(b) The amount of principal (the "Class B
Principal") distributable from the Distribution Account
with respect to the Class B Certificates on each Distri-
bution Date, beginning with the Class B Principal Payment
Commencement Date, shall equal an amount calculated as
follows: the sum of (i) an amount equal to the product
of the ABC Fixed/Floating Allocation Percentage and the
aggregate amount of Principal Collections (less the
amount of Reallocated Class B Principal Collections and
Reallocated Class C Principal Collections) with respect
to the preceding Monthly Period (or, in the case of the
first Distribution Date following the date on which an
amount equal to the Class A Invested Amount is deposited
in the Principal Account to be applied to the payment of
Class A Principal, the ABC Fixed/Floating Allocation Per-
centage of Principal Collections from the date on which
such deposit is made), (ii) any amount on deposit in the
Excess Funding Account or the Pre-Funding Account allo-
cated to the Class B Certificates pursuant to subsection
4.9(d) or Section 4.15, respectively, with respect to the
preceding Monthly Period, (iii) the amount, if any, allo-
cated to the Class B Certificates pursuant to subsections
4.9(a)(v), (vii), (xi), (xii) and (xiii) of the Agreement
and, with respect to such subsections, pursuant to sub-
sections 4.10(a) and (b) and 4.16(a) and (b) of the
Agreement with respect to such Distribution Date and (iv)
the amount of Shared Principal Collections allocated to
the Class B Certificates with respect to the preceding
Monthly Period pursuant to Section 4.3(e) of the Agree-
ment on and after the Class B Principal Payment Commence-
ment Date; provided, however, that, with respect to any
Distribution Date during the Controlled Amortization
Period, Class B Principal may not exceed the Class B
Controlled Distribution Amount for such Distribution
Date; provided, further, that with respect to any Distri-
bution Date, Class B Principal may not exceed the Class B
Invested Amount; provided, further, that with respect to
the Scheduled Series 1994-1 Termination Date, the Class B
Principal shall be an amount equal to the Class B Invest-
ed Amount.
(c) The amount of principal (the "Class C
Principal") distributable from the Distribution Account
with respect to the Class C Certificates on each Distri-
bution Date, beginning with the Class C Principal Payment
Commencement Date, shall be an amount equal to and calcu-
lated as follows: the sum of (i) an amount equal to the
product of the ABC Fixed/Floating Allocation Percentage
and the aggregate amount of Principal Collections (less
the amount of Reallocated Class C Principal Collections)
with respect to the preceding Monthly Period (or, in the
case of the first Distribution Date following the date on
which an amount equal to the Class B Invested Amount is
deposited in the Principal Account to be applied to the
payment of Class B Principal, the ABC Fixed/Floating
Allocation Percentage of Principal Collections from the
date on which such deposit is made), (ii) any amounts on
deposit in the Excess Funding Account or the Pre-Funding
Account allocated to the Class C Certificates pursuant to
subsection 4.9(d) or Section 4.15 of the Agreement, re-
spectively, with respect to the preceding Monthly Period,
(iii) the amount, if any, allocated to the Class C Cer-
tificates pursuant to subsections 4.9(a)(v), (vii), (xii)
and (xiii) of the Agreement with respect to such Distri-
bution Date and (iv) the amount of Shared Principal
Collections allocated to the Class C Certificates with
respect to the preceding Monthly Period pursuant to
Section 4.3(e) of the Agreement on and after the Class C
Principal Payment Commencement Date; provided that with
respect to any Distribution Date, Class C Principal may
not exceed the Class C Invested Amount; provided, fur-
ther, that with respect to the Scheduled Series 1994-1
Termination Date, the Class C Principal shall be an
amount equal to the Class C Invested Amount.
(d) The amount of principal (the "Class D
Principal") distributable from the Distribution Account
with respect to the Class D Certificates on each Distri-
bution Date, beginning with the Class D Principal Payment
Commencement Date, shall be an amount equal to and calcu-
lated as follows: the sum of (i) an amount equal to the
product of the Class D Fixed/Floating Allocation Percent-
age of Principal Collections (less the amount of Reallo-
cated Class D Principal Collections) with respect to the
preceding Monthly Period (or, in the case of the first
Distribution Date following the date on which an amount
equal to the Class C Invested Amount is deposited in the
Principal Account to be applied to the payment of Class C
Principal, the Class D Fixed/Floating Allocation Percent-
age of Principal Collections from the date on which such
deposit is made), (ii) any amount on deposit in the
Excess Funding Account allocated to the Class D Certifi-
cates pursuant to subsection 4.9(d) with respect to the
preceding Monthly Period, and (iii) the amount, if any,
allocated to the Class D Certificates pursuant to subsec-
tions 4.9(a)(vi), (vii) and (xiii) of the Agreement and,
with respect to such subsections, pursuant to subsection
4.10(a) and (b) of the Agreement with respect to such
Distribution Date; provided, however, that with respect
to the Scheduled Series 1994-1 Termination Date, the
Class D Principal shall be an amount equal to the Class D
Invested Amount.
Section 4.8 Shared Principal Collections.
Shared Principal Collections allocated to the Series
1994-1 Certificates and to be applied pursuant to subsec-
tions 4.9(c)(i)(z), 4.9(c)(ii)(z), 4.9(c)(iii)(z) and
4.9(c)(iv)(z) for any Business Day with respect to the
Amortization Period shall mean an amount equal to the
product of (x) Shared Principal Collections for all
Series for such Business Day and (y) a fraction, the
numerator of which is the Principal Shortfall for the
Series 1994-1 Certificates for such Business Day and the
denominator of which is the aggregate amount of Principal
Shortfalls for all Series for such Business Day. For any
Business Day with respect to the Revolving Period, Shared
Principal Collections allocated to the Series 1994-1
Certificates shall be zero.
Section 4.9 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 accor-
dance with such instructions, shall withdraw, to the
extent of the sum of (x) the Floating Allocation Percent-
age of Imputed Yield Collections available in the Collec-
tion Account and (y) investment earnings on amounts on
deposit in the Pre-Funding Account deposited into the
Collection Account pursuant to subsection 4.14(b) (the
"Available Series 1994-1 Imputed Yield Collections") the
amounts required to be withdrawn from the Collection
Account pursuant to subsections 4.9(a)(i) through
4.9(a)(xv).
(i) Class A Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer,
shall withdraw from the Collection Account and
deposit into the Interest Funding Account for dis-
tribution on the next Distribution Date to the Class
A Certificateholders, to the extent of the Available
Series 1994-1 Imputed Yield Collections for such
Business Day, an amount equal to the lesser of (x)
the Available Series 1994-1 Imputed Yield Collect-
ions and (y) the excess of (1) the sum of Class A
Interest and Carryover Class A Interest over (2) any
amounts with respect thereto previously deposited
into the Interest Funding Account on any prior
Business Day during such Monthly Period. Notwith-
standing anything to the contrary herein, the por-
tion of Carryover Class A Interest that constitutes
Class A Additional Interest shall be payable or dis-
tributable to Class A Certificateholders only to the
extent permitted by applicable law.
(ii) Class B Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer,
shall withdraw from the Collection Account and
deposit into the Interest Funding Account for dis-
tribution on the next Distribution Date to the Class
B Certificateholders, to the extent of any Available
Series 1994-1 Imputed Yield Collections remaining
after giving effect to the withdrawal pursuant to
subsection 4.9(a)(i), an amount equal to the lesser
of (x) any such remaining Available Series 1994-1
Imputed Yield Collections and (y) the excess of (1)
the sum of Class B Interest and Carryover Class B
Interest over (2) any amounts with respect thereto
previously deposited into the Interest Funding
Account on any prior Business Day during such Month-
ly Period. Notwithstanding anything to the contrary
herein, the portion of Carryover Class B Interest
that constitutes Class B Additional Interest shall
be payable or distributable to Class B Certificate-
holders only to the extent permitted by applicable
law.
(iii) Class C Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer,
shall withdraw from the Collection Account and
deposit into the Interest Funding Account for dis-
tribution on the next Distribution Date to the Class
C Certificateholders, to the extent of any Available
Series 1994-1 Imputed Yield Collections remaining
after giving effect to the withdrawal pursuant to
subsections 4.9(a)(i) and (ii), an amount equal to
the lesser of (x) any such remaining Available
Series 1994-1 Imputed Yield Collections and (y) the
excess of (1) the sum of Class C Interest and Carry-
over Class C Interest over (2) any amounts with re-
spect thereto previously deposited into the Interest
Funding Account on any prior Business Day during
such Monthly Period. Notwithstanding anything to
the contrary herein, the portion of Carryover
Class C Monthly Interest that constitutes Class C
Additional Interest shall be payable or distribut-
able to Class C Certificateholders only to the
extent permitted by applicable law.
(iv) Investor Servicing Fee. On each
Business Day on which Fingerhut or an Affiliate of
Fingerhut 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 1994-1 Imputed Yield Collections
remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (iii), an
amount equal to the lesser of (x) any such remaining
Available Series 1994-1 Imputed Yield Collections
and (y) the excess of (i) the Servicing Fee for such
Monthly Period plus any unpaid Servicing Fees from
prior Monthly Periods over (ii) any amounts with re-
spect thereto previously distributed to the Servicer
during such Monthly Period.
(v) ABC 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 Avail-
able Series 1994-1 Imputed Yield Collections re-
maining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (iv), an
amount equal to the lesser of (x) any such remaining
Available Series 1994-1 Imputed Yield Collections
and (y) the sum of (1) the aggregate ABC Investor
Default Amount for such Business Day plus (2) the
unpaid ABC Investor Default Amount for each previous
Business Day during such Monthly Period, such amount
to be (A) treated as Shared Principal Collections
during the Revolving Period, and (B) to the extent
allocated to Class A Principal, Class B Principal or
Class C Principal pursuant to Section 4.7 during the
Amortization Period, deposited in the Principal Ac-
count for distribution to the applicable Class or
Classes of Certificateholders on the next Distribu-
tion Date.
(vi) Class D 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 1994-1 Imputed Yield Collections
remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (v), an
amount equal to the lesser of (x) any such remaining
Available Series 1994-1 Imputed Yield Collections
and (y) the sum of (1) the aggregate Class D Inves-
tor Default Amount for such Business Day plus (2)
the unpaid Class D Investor Default Amount for each
previous Business Day during such Monthly Period,
such amount to be (A) paid to the Transferor during
the Revolving Period and the Amortization Period
prior to the payment in full of the Class C Invested
Amount, and (B) to the extent allocated to Class D
Principal pursuant to Section 4.7 during the Amorti-
zation Period following the payment in full of the
Class C Invested Amount, deposited in the Principal
Account for distribution to the Class D Certificate-
holders on the next Distribution Date.
(vii) Adjustment Payment Shortfalls. 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 1994-1 Imputed Yield Collections
remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (vi), an
amount equal to the lesser of (x) any such remaining
Available Series 1994-1 Imputed Yield Collections
and (y) an amount equal to the Series Allocation
Percentage of any Adjustment Payment which the
Transferor is required but fails to make pursuant to
subsection 3.8(a) of the Agreement, such amount, (i)
during the Revolving Period, to be treated as Shared
Principal Collections, (ii) 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 Princi-
pal Account for distribution to the Class A Certifi-
cateholders on the next Distribution Date, (iii)
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 Ac-
count for payment to the Class B Certificateholders
on the next Distribution Date, (iv) during the
Amortization Period on and after the day on which
such deposit to the Principal Account with respect
to the Class B Invested Amount has been made on and
prior to the day on which an amount equal to the
Class C Invested Amount is deposited in the Princi-
pal Account, deposited in the Principal Account for
payment to the Class C Certificateholders on the
next Distribution Date and (v) on and after the day
such deposit to the Principal Account with respect
to Class C Invested Amount has been made, paid to
the Class D Certificateholders.
(viii) 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 Ac-
count, to the extent of any Available Series 1994-1
Imputed Yield Collections remaining after giving
effect to the withdrawals pursuant to subsections
4.9(a)(i) through (vii), an amount equal to the
lesser of (x) any such remaining Available Series
1994-1 Imputed Yield Collections and (y) the
unreimbursed Class A Investor Charge-Offs, if any,
will be applied to reimburse Class A Investor
Charge-Offs, such amount during the Revolving Period
to be treated as Shared Principal Collections, and
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 Dis-
tribution Date.
(ix) Unpaid Class B Interest. On each
Business Day, the Trustee, acting in accordance with
the instructions from the Servicer, shall withdraw
from the Collection Account and deposit in the
Interest Funding Account for distribution to the
Class B Certificateholders on the next Distribution
Date, to the extent of any Available Series 1994-1
Imputed Yield Collections remaining after giving
effect to the withdrawals pursuant to subsections
4.9(a)(i) through (viii), an amount equal to the
lesser of (x) any such remaining Available Series
1994-1 Imputed Yield Collections and (y) the sum of
(1) the amount of interest which has accrued with
respect to the outstanding aggregate principal
amount of the Class B Certificates at the Class B
Certificate Rate but which has not been deposited
into the Interest Funding Account or paid to the
Class B Certificateholders and (2) any additional
interest (to the extent permitted by applicable law)
at the Class B Certificate Rate plus 2% for interest
that has accrued on interest that was due during a
prior Monthly Period pursuant to this subsection but
was not deposited in the Interest Funding Account or
paid to the Class B Certificateholders.
(x) Unpaid Class C Interest. On each
Business Day, the Trustee, acting in accordance with
the instructions from the Servicer, shall withdraw
from the Collection Account and deposit in the
Interest Funding Account for distribution to the
Class C Certificateholders on the next Distribution
Date, to the extent of any Available Series 1994-1
Imputed Yield Collections remaining after giving
effect to the withdrawals pursuant to subsections
4.9(a)(i) through (ix), an amount equal to the
lesser of (x) any such remaining Available Series
1994-1 Imputed Yield Collections and (y) 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 deposited
into the Interest Funding Account or paid to the
Class C Certificateholders and (2) any additional
interest (to the extent permitted by applicable law)
at the Class C Certificate Rate plus 2% for interest
that has accrued on interest that was due during a
prior Monthly Period pursuant to this subsection but
was not deposited in the Interest Funding Account or
paid to the Class C Certificateholders.
(xi) 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 Ac-
count, to the extent of any Available Series 1994-1
Imputed Yield Collections remaining after giving
effect to the withdrawals pursuant to subsections
4.9(a)(i) through (x), an amount equal to the lesser
of (x) any such remaining Available Series 1994-1
Imputed Yield Collections and (y) the unreimbursed
amount by which the Class B Invested Amount has been
reduced on prior Business Days pursuant to clauses
(c) and (d) of the definition of Class B Invested
Amount, if any, such amount, (i) during the Revolv-
ing Period, to be treated as Shared Principal Col-
lections, (ii) 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 Princi-
pal Account, to be deposited in the Principal Ac-
count for distribution to the Class A Certificate-
holders on the next Distribution Date, and (iii)
during the Amortization Period, on and after the day
on which such deposit has been made and on and prior
to the day on which the Class B Invested Amount has
been deposited in the Principal Account, to be
deposited in the Principal Account for payment to
the Class B Certificateholders on the next Distribu-
tion Date.
(xii) 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 Ac-
count, to the extent of any Available Series 1994-1
Imputed Yield Collections remaining after giving
effect to the withdrawals pursuant to subsections
4.9(a)(i) through (xi), an amount equal to the
lesser of (x) any such remaining Available Series
1994-1 Imputed Yield Collections and (y) the
unreimbursed amount by which the Class C Invested
Amount has been reduced on prior Business Days
pursuant to clauses (c) and (d) of the definition of
Class C Invested Amount, if any, such amount,
(i) during the Revolving Period, to be treated as
Shared Principal Collections, (ii) during the Amor-
tization 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, (iii) during the Amortization Period, on and
prior to the day on which an amount equal to the
Class B Invested Amount is deposited in the Princi-
pal Account, to be deposited in the Principal Ac-
count for distribution to the Class B Certificate-
holders on the next Distribution Date and (iv)
during the Amortization Period, on and after the day
on which such deposit 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 Ac-
count, to be deposited in the Principal Account for
payment to the Class C Certificateholders on the
next Distribution Date.
(xiii) Reimbursement of Class D Investor
Charge-Offs. On each Business Day, the Trustee,
acting in accordance with instructions from the
Servicer, shall withdraw from the Collection Ac-
count, to the extent of any Available Series 1994-1
Imputed Yield Collections remaining after giving
effect to the withdrawals pursuant to subsections
4.9(a)(i) through (xii), an amount equal to the
lesser of (x) any such remaining Available Series
1994-1 Imputed Yield Collections and (y) the
unreimbursed amount by which the Class D Invested
Amount has been reduced on prior Business Days
pursuant to clauses (c) and (d) of the definition of
Class D Invested Amount, if any, such amount, (i)
during the Revolving Period, and during the Amorti-
zation Period on and prior to the day on which an
amount equal to the Class C Invested Amount is
deposited in the Principal Account, paid to the
Transferor and (ii) on and after the day such depos-
it to the Principal Account with respect to Class C
Invested Amount has been made, deposited in the
Principal Account for payment to the Class D Certif-
icateholders.
(xiv) Investor Servicing Fee. On each
Business Day, if Fingerhut or an Affiliate of
Fingerhut 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 Avail-
able Series 1994-1 Imputed Yield Collections for
such Business Day (after giving effect to the with-
drawals pursuant to subsections 4.9(a)(i) through
(xiii) of the Agreement), the Investor Servicing Fee
accrued since the preceding Business Day plus any
Investor Servicing Fee due with respect to any prior
Business Day but not distributed to the Servicer.
(xv) Excess Imputed Yield Collections.
Any amounts remaining in the Collection Account to
the extent of any Available Series 1994-1 Imputed
Yield Collections remaining after giving effect to
the withdrawals pursuant to subsection 4.9(a)(i)
through (xiv), first, following the occurrence of an
Expense Reserve Trigger be deposited in the Expense
Reserve Account in the amount specified in subsec-
tion 4.21(b) of the Agreement and second shall, fol-
lowing the occurrence of a Class C Trigger Event, be
deposited in the Class C Reserve Account in an
amount not to exceed the Specified Class C Reserve
Account Amount and third shall be treated as Excess
Imputed Yield Collections, and the Servicer shall
direct the Trustee in writing on each Business Day
to withdraw such amounts from the Collection Account
and to first make such amounts available to pay to
Certificateholders of other Series to the extent of
shortfalls, if any, in amounts payable to such
certificateholders from Imputed Yield Collections
allocated to such other Series, then to pay any
unpaid commercially reasonable costs and expenses of
a Successor Servicer, if any, and then pay any
remaining Excess Imputed Yield Collections to the
Transferor.
(b) For each Business Day with respect to the
Revolving Period, the funds on deposit in the Collection
Account to the extent of the product of (i) the sum of
the Class A Floating Allocation Percentage, the Class B
Floating Allocation Percentage and the Class C Floating
Allocation Percentage and (ii) Principal Collections with
respect to such Business Day (less the amount of Reallo-
cated Class C Principal Collections and Reallocated Class
B Principal Collections on 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 Sec-
tion 4.3(e) of the Agreement.
(c) For each Business Day on and after the
Amortization Period Commencement Date, the amount of
funds on deposit in the Collection Account as described
below will be distributed, pursuant to the written direc-
tion of the Servicer in the Daily Report for such Busi-
ness 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 (v) the product of the ABC Fixed/Floating
Allocation Percentage and Principal Collections in
the Collection Account at the end of the preceding
Business Day (less the amount thereof to be applied
as Reallocated Class B Principal Collections or
Reallocated Class C Principal Collections on such
Business Day), (w) any amount on deposit in the
Excess Funding Account allocated to the Class A Cer-
tificates on such Business Day pursuant to subsec-
tion 4.9(d), (x) amounts to be paid pursuant to sub-
sections 4.9(a)(v), (vii), (viii), (xi), (xii) and
(xiii) of the Agreement from Available Series Imput-
ed Yield Collections and from amounts available
pursuant to subsections 4.10(a) and (b) and 4.16(a),
(b) and (c) of the Agreement on such Business Day,
(y) any amount on deposit in the Pre-Funding Account
on such Business Day (less investment earnings
thereon) and (z) the amount of Shared Principal Col-
lections allocated to the Series 1994-1 Certificates
in accordance with Section 4.8 on such Business Day,
will be deposited into the Principal Account;
(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 (v) an amount equal to the product of the ABC
Fixed/Floating Allocation Percentage and Principal
Collections in the Collection Account at the end of
the preceding Business Day (less the amount thereof
to be applied as Reallocated Class B Principal
Collections or Reallocated Class C Principal Col-
lections on such Business Day), (w) any amount on
deposit in the Excess Funding Account allocated to
the Class B Certificates on such Business Day pursu-
ant to subsection 4.9(d), (x) the amount, if any,
allocated to be paid to the Class B Certificates
pursuant to subsections 4.9(a)(v), (vii), (xi),
(xii) and (xiii) of the Agreement from Available
Series Imputed Yield Collections and from amounts
available pursuant to subsections 4.10(a) and (b)
and 4.16(a) and (b) of the Agreement with respect to
such Business Day, (y) any amount on deposit in the
Pre-Funding Account on such Business Day (less
investment earnings thereon) and (z) the amount of
Shared Principal Collections allocated to the Series
1994-1 Certificates in accordance with Section 4.8
on such Business Day (such sum, the "Class B Daily
Principal Amount") will be deposited into the Prin-
cipal Account;
(iii) on and after the day on which an
amount equal to the Class B Invested Amount has been
deposited in the Principal Account to be applied to
the payment of Class B Principal, an amount (not in
excess of the Class C Invested Amount) equal to the
sum of (v) an amount equal to the product of the ABC
Fixed/Floating Allocation Percentage and Principal
Collections in the Collection Account at the end of
the preceding Business Day (less the amount thereof
to be applied as Reallocated Class C Principal
Collections on such Business Day), (w) any amount on
deposit in the Excess Funding Account allocated to
the Class C Certificates on such Business Day pursu-
ant to subsection 4.9(d), (x) the amount, if any,
allocated to be paid to the Class C Certificates
pursuant to subsections 4.9(a)(v), (vii), (xii) and
(xiii) of the Agreement from Available Series Imput-
ed Yield Collections and from amounts available
pursuant to subsections 4.10(a) and (b) and 4.16(a)
of the Agreement with respect to such Business Day,
(y) any amount on deposit in the Pre-Funding Account
on such Business Day (less investment earnings
thereon) and (z) the amount of Shared Principal Col-
lections allocated to the Series 1994-1 Certificates
in accordance with Section 4.8 on such Business Day
(such sum, the "Class C Daily Principal Amount")
will be deposited into the Principal Account;
(iv) on and after the day on which an
amount equal to the Class C Invested Amount has been
deposited in the Principal Account to be applied to
the payment of Class C Principal, an amount equal to
the sum of (w) an amount equal to the product of the
Class D Fixed/Floating Allocation Percentage and
Principal Collections in the Collection Account at
the end of the preceding Business Day (less the
amount thereof to be applied as Reallocated Class D
Principal Collections on such Business Day), (x) any
amount on deposit in the Excess Funding Account
allocated to the Class D Certificates on such Busi-
ness Day pursuant to subsection 4.9(d), (y) the
amount, if any, allocated to be paid to the Class D
Certificates pursuant to subsections 4.9(a)(vi),
(vii) and (xiii) of the Agreement from Available
Series Imputed Yield Collections and from amounts
available pursuant to subsections 4.10(a) and (b) of
the Agreement with respect to such Business Day and
(z) the amount of Shared Principal Collections
allocated to the Series 1994-1 Certificates in
accordance with Section 4.8 on such Business Day
(such sum, the "Class D Daily Principal Amount")
will be distributed to the Class D Certificatehold-
ers; and
(v) an amount equal to the excess, if
any, of (A) the sum of the amounts described in
clauses (i)(v) and (x), (ii)(v) and (x) and (iii)(v)
and (x) above over (B) the sum of Class A Principal,
Class B Principal and Class C Principal will be
treated as Shared Principal Collections and applied
as provided in subsection 4.3(e) of the Agreement.
(d) On the first Business Day of the Amortiza-
tion Period funds on deposit in the Excess Funding Ac-
count will be deposited in the Principal Account. Such
amounts will be allocated in the following order of
priority (i) to the Class A Certificates in an amount not
to exceed the Class A Principal after subtracting there-
from any amounts to be deposited in the Principal Account
with respect thereto pursuant to subsections
4.9(c)(i)(v), (x), (y) and (z), (ii) to the Class B Cer-
tificates in an amount not to exceed the Class B Princi-
pal after subtracting therefrom any amounts to be depos-
ited in the Principal Account with respect thereto pursu-
ant to subsections 4.9(c)(ii)(v), (x), (y) and (z), and
(iii) to the Class C Certificates in an amount not to
exceed the Class C Principal after subtracting therefrom
any amounts to be deposited in the Principal Account with
respect thereto pursuant to subsections 4.9(c)(iii)(v),
(x), (y) and (z). On and after the Class D Principal
Payment Commencement Date any amounts remaining on depos-
it in the Excess Funding Account and allocated to the
Series 1994-1 Certificates will be deposited in the
Principal Account in an amount not to exceed the Class D
Invested Amount after subtracting therefrom any amounts
to be deposited in the Principal Account with respect
thereto pursuant to subsections 4.9(c)(iv)(v), (x), (y)
and (z).
Section 4.10 Coverage of Required Amount for
the Series 1994-1 Certificates. (a) To the extent that
any amounts are on deposit in the Pre-Funding Account or
the Excess Funding Account on any Business Day, the
Servicer shall apply Transferor Imputed Yield Collections
in an amount equal to the excess of (x) the product of
(a) the Base Rate, (b) the amounts on deposit in the Pre-
Funding Account and the Excess Funding Account and (c)
the number of days elapsed since the previous Business
Day divided by the actual number of days in such year
over (y) the aggregate amount of all earnings since the
previous Business Day available from the Cash Equivalents
in which funds on deposit in the Pre-Funding Account and
the Excess Funding Account are invested (the "Negative
Carry Amount") in the manner specified for application of
Available Series 1994-1 Imputed Yield Collections in
subsections 4.9(a)(i) through (xiv).
(b) To the extent that on any Business Day
payments are being made pursuant to any of subsections
4.9(a)(i) through (xiv), respectively, and the full
amount to be paid pursuant to any such subsection receiv-
ing payments on such Business Day is not paid in full on
such Business Day, the Servicer shall apply all or a
portion of the Excess Imputed Yield Collections from
other Series with respect to such Business Day allocable
to the Series 1994-1 Certificates in an amount equal to
the excess of the full amount to be allocated or paid
pursuant to the applicable subsection over the amount
applied with respect thereto from Available Series 1994-1
Imputed Yield Collections and Transferor Imputed Yield
Collections on such Business Day (the "Required Amount").
Excess Imputed Yield Collections allocated to the Series
1994-1 Certificates for any Business Day shall mean an
amount equal to the product of (x) Excess Imputed Yield
Collections available from all other Series for such
Business Day and (y) a fraction, the numerator of which
is the Required Amount for such Business Day and the
denominator of which is the aggregate amount of short-
falls in required amounts or other amounts to be paid
from Imputed Yield Collections for all Series for such
Business Day.
Section 4.11 Payment of Certificate Interest.
On each Transfer Date, the Trustee, acting in accordance
with instructions from the Servicer set forth in the
Daily Report for such day, shall withdraw the amount on
deposit in the Interest Funding Account with respect to
the prior Monthly Period allocable to the Series 1994-1
Certificates and deposit such amount in the Distribution
Account. On each Distribution Date, the Paying Agent
shall pay in accordance with Section 5.1 of the Agreement
to (x) the Class A Certificateholders from the Distribu-
tion Account such amount deposited into the Distribution
Account on the related Transfer Date allocable thereto
pursuant to subsection 4.9(a)(i), (y) the Class B Certi-
ficateholders from the Distribution Account the amount
deposited into the Distribution Account allocable thereto
pursuant to subsections 4.9(a)(ii) and (ix) and (z) the
Class C Certificateholders from the Distribution Account
the amount deposited into the Distribution Account allo-
cable thereto pursuant to subsections 4.9(a)(iii) and
(x).
Section 4.12 Payment of Certificate Principal.
(a) On the Transfer Date preceding each Distribution
Date with respect to the Amortization Period, the Trust-
ee, 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, to the extent of funds avail-
able, an amount equal to the Class A Principal for such
Distribution Date. On each Distribution Date with re-
spect to the Amortization Period, the Paying Agent shall
pay in accordance with Section 5.1 to the Class A Certi-
ficateholders from the Distribution Account such amount
deposited into the Distribution Account on the related
Transfer Date.
(b) 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, to the
extent of funds available, an amount equal to the Class B
Principal for such Distribution Date. On the Class B
Principal Payment Commencement Date, after the payment of
any principal amounts 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.
(c) On the Transfer Date preceding the Class C
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 C Invested Amount and
the amount on deposit in the Principal Account allocable
to the Series 1994-1 Certificates (after giving effect to
transfers pursuant to subsection 4.12(a) and (b)). On
the Class C Principal Payment Commencement Date, after
the payment of any principal amounts to the Class B Cer-
tificates on such day, and on each Distribution Date
thereafter until the Class C Invested Amount is paid in
full, the Paying Agent shall pay in accordance with
Section 5.1 to the Class C Certificateholders from the
Distribution Account such amount deposited into the
Distribution Account on the related Transfer Date.
(d) On the Transfer Date preceding the Class D
Principal Payment Commencement Date and each Business Day
thereafter, the Trustee, acting in accordance with in-
structions from the Servicer set forth in the Daily
Report for such day, shall make payments of principal to
the Class D Certificateholders in accordance with subsec-
tion 4.9(c)(iv) of the Agreement.
Any amounts remaining in the Principal Account
and allocable to the Series 1994-1 Certificates, after
the Class D Invested Amount has been paid in full, will
be treated as Shared Principal Collections and applied in
accordance with Section 4.3(e) of the Agreement.
Section 4.13 Investor Charge-Offs. (a) If,
on any Determination Date, the aggregate Investor Default
Amount and the Series Allocation Percentage of unpaid
Adjustment Payments, if any, for each Business Day in the
preceding Monthly Period exceeded the Available Series
1994-1 Imputed Yield Collections applied to the payment
thereof pursuant to subsections 4.9(a)(v), (vi) and (vii)
of the Agreement and the amount of Transferor Imputed
Yield Collections and Excess Imputed Yield Collections
allocated thereto pursuant to Section 4.10 of the Agree-
ment, and the amount of Reallocated Principal Collections
applied with respect thereto pursuant to Section 4.16 of
the Agreement, the Class D Invested Amount will be re-
duced by the amount by which the remaining aggregate
Investor Default Amount and Series Allocation Percentage
of unpaid Adjustment Payments exceed the amount applied
with respect thereto during such preceding Monthly Period
(a "Class D Investor Charge-Off").
(b) In the event that any such reduction of
the Class D Invested Amount would cause the Class D In-
vested Amount to be a negative number, the Class D In-
vested Amount will be reduced to zero, and, the Class C
Invested Amount will be reduced by the amount by which
the Class D Invested Amount would have been reduced below
zero, but not more than the aggregate Investor Default
Amount and Series Allocation Percentage of unpaid Adjust-
ment Payments for such Monthly Period (a "Class C Inves-
tor Charge-Off").
(c) In the event that any such reduction of
the Class C Invested Amount would cause the Class C In-
vested Amount to be a negative number, the Class C In-
vested 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 remaining aggregate Investor
Default Amount and Series Allocation Percentage of unpaid
Adjustment Payments for such Monthly Period (a "Class B
Investor Charge-Off").
(d) In the event that any such reduction of
the Class B Invested Amount would cause the Class B
Invested Amount to be a negative number, the Class B
Invested Amount will be reduced to zero, and the Class A
Invested Amount will be reduced by the amount by which
the Class B Invested Amount would have been reduced below
zero, but not more than the remaining aggregate Investor
Default Amount and Series Allocation Percentage of unpaid
Adjustment Payments for such Monthly Period (a "Class A
Investor Charge-Off").
Section 4.14 Pre-Funding Account. (a) Estab-
lishment of the Pre-Funding Account. The Transferor
hereby directs the Servicer, for the benefit of the
Series 1994-1 Certificateholders, to establish and main-
tain or cause to be established and maintained in the
name of the Trustee, on behalf of the Series 1994-1
Certificateholders, with a Qualified Institution (which
initially shall be The Bank of New York) a segregated
trust account (the "Pre-Funding Account"), bearing a
designation clearly indicating that the funds deposited
therein are held for the benefit of the Series 1994-1
Certificateholders. The Transferor does hereby transfer,
assign, set over and otherwise convey to the Trust for
the benefit of the Series 1994-1 Certificateholders,
without recourse, all of its right, title and interest
in, to and under the Pre-Funding Account, any Cash Equiv-
alent on deposit therein and any proceeds of the forego-
ing, including the investment earnings. The Pre-Funding
Account shall be under the sole dominion and control of
the Trustee for the benefit of the Series 1994-1 Certifi-
cateholders. If, at any time, the institution holding
the Pre-Funding Account ceases to be a Qualified Institu-
tion, the Transferor shall direct the Servicer to estab-
lish within 10 Business Days a new Pre-Funding Account
meeting the conditions specified above with a Qualified
Institution, transfer any cash and/or any investments to
such new Pre-Funding Account and from the date such new
Pre-Funding Account is established, it shall be the "Pre-
Funding Account." In addition, after five days notice to
the Trustee, the Transferor may direct the Servicer to
establish a new Pre-Funding Account meeting the condi-
tions specified above with a different Qualified Institu-
tion, transfer any cash and/or investments to such new
Pre-Funding Account and from the date such new Pre-Fund-
ing Account is established, it shall be, for the Series
1994-1 Certificates, the "Pre-Funding Account." Pursuant
to the authority granted to the Servicer in subsection
3.1(b) of the Agreement, the Servicer shall have the
power, revocable by the Trustee, to make withdrawals and
payments or to instruct the Trustee to make withdrawals
and payments from the Pre-Funding Account for the purpos-
es of carrying out the Servicer's or Trustee's duties
hereunder.
(b) Administration of Pre-Funding Account.
The Transferor shall on the Closing Date deposit in the
Pre-Funding Account the initial Pre-Funded Amount. On
the Business Day preceding each Transfer Date, the Ser-
vicer shall withdraw from the Pre-Funding Account and
deposit in the Collection Account all interest and other
investment income on the Pre-Funded Amount. Interest
(including reinvested interest) and other investment
income on funds on deposit in the Pre-Funded Account
shall not be considered part of the Pre-Funded Amount for
purposes of this Agreement. Funds on deposit in the Pre-
Funding Account shall be withdrawn by the Servicer and
paid to the Transferor to the extent of any increases in
the Invested Amount pursuant to Section 4.15. The Ser-
vicer shall withdraw the remaining Pre-Funded Amount, if
any, on deposit in the Pre-Funding Account on the first
business day of the January 1995 Monthly Period and
deposit such amount into the Excess Funding Account.
(c) Investment on Funds in Pre-Funding Ac-
count. Funds on deposit in the Pre-Funding Account shall
be invested in Cash Equivalents by the Trustee (or, at
the direction of the Trustee, by the Servicer on behalf
of the Trustee) at the direction of the Servicer. Funds
on deposit in the Pre-Funding Account on any Distribution
Date, after giving effect to any withdrawals from the
Pre-Funding Account, shall be invested in Cash Equiva-
lents that will mature so that such funds will be avail-
able for withdrawal on or prior to the following Transfer
Date. The proceeds of any such investments shall be
invested in Cash Equivalents that will mature so that
such funds will be available for withdrawal on or prior
to the following Transfer Date.
Section 4.15 Increases in Invested Amount.
The Transferor may at any time during the Funding Period
determine to increase the Invested Amount up to the Full
Invested Amount to the extent there are sufficient Prin-
cipal Receivables in the Trust to permit such increase in
the Invested Amount without causing a Pay Out Event to
occur with respect to any outstanding Series. Upon
determining to increase the Invested Amount pursuant to
this Section 4.15, the Transferor shall deliver to the
Servicer, the Trustee and each Rating Agency an Officers'
Certificate specifying the amount of the increase in the
Invested Amount the Transferor has determined to make and
certifying that no Pay Out Event with respect to any
outstanding Series will occur as a result of or in con-
nection with such increase in the Invested Amount. Upon
receipt of such Officer's Certificate by the Trustee, the
Class A Invested Amount, the Class B Invested Amount and
the Class C Invested Amount shall be increased pro rata
by the amount specified in such Officers' Certificate,
whereupon the Trustee shall instruct the Servicer to
withdraw from the Pre-Funding Account and pay to the
Transferor an amount equal to the amount of such increase
in the Class A Invested Amount, the Class B Invested
Amount and the Class C Invested Amount.
Section 4.16 Reallocated Principal Collections
for the Series 1994-1 Certificates. (a) On each Busi-
ness Day, the Servicer will determine an amount equal to
the lesser of (i) the Class D Invested Amount, (ii) the
product of (x)(I) during the Revolving Period, the Class
D Floating Allocation Percentage or (II) during an Amor-
tization Period, the Class D Fixed/Floating Allocation
Percentage and (y) the amount of Principal Collections
with respect to such Business Day and (iii) an amount
equal to the sum of (a) the Class A Required Amount for
such Business Day, (b) the Class B Required Amount for
such Business Day and (c) the Class C Required Amount for
such Business Day (such amount called "Reallocated Class
D Principal Collections") and shall apply Principal
Collections in an amount equal to such amount first to
the components of the Class A Required Amount, then to
the components of the Class B Required Amount and then to
the components of the Class C Required Amount in the same
priority as amounts are applied to such components from
Available Series 1994-1 Imputed Yield Collections pursu-
ant to subsection 4.9(a).
(b) On each Business Day, the Servicer will
apply or cause the Trustee to apply an amount equal to
the lesser of (i) the Class C Invested Amount, (ii) the
product of (x)(I) during the Revolving Period, the Class
C Floating Allocation Percentage or (II) during an Amor-
tization Period, the Class C Fixed/Floating Allocation
Percentage and (y) the amount of Principal Collections
for such Business Day and (iii) an amount equal to the
sum of (a) the Class A Required Amount for such Business
Day over the amount of Reallocated Class D Principal
Collections applied with respect thereto for such Busi-
ness Day and (b) the Class B Required Amount for such
Business Day over the amount of Reallocated Class D
Principal Collections applied for such Business Day (such
amount called "Reallocated Class C Principal Collec-
tions") and shall apply Principal Collections in an
amount equal to such amount first to the remaining compo-
nents of the Class A Required Amount and then to the
remaining components of the Class B Required Amount in
the same priority as amounts are applied to such compo-
nents from Available Series 1994-1 Imputed Yield Collec-
tions pursuant to subsection 4.9(a).
(c) On each Business Day, the Servicer will
apply or cause the Trustee to apply an amount equal to
the lesser of (i) the Class B Invested Amount, (ii) the
product of (x)(I) during the Revolving Period, the Class
B Floating Allocation Percentage or (II) during an Amor-
tization Period, the Class B Fixed/Floating Allocation
Percentage and (y) the amount of Principal Collections
for such Business Day and (iii) an amount equal to the
excess, if any, of the Class A Required Amount for such
Business Day over the sum of the amount of Reallocated
Class D Principal Collections and Reallocated Class C
Principal Collections applied with respect thereto for
such Business Day (such amount called "Reallocated Class
B Principal Collections") shall apply Principal Collec-
tions equal to such amount to the remaining components of
the Class A Required Amount in the same priority as
amounts are applied to such components from Available
Series 1994-1 Imputed Yield Collections pursuant to
subsection 4.9(a).
Section 4.17 Determination of LIBOR. (a) On
each LIBOR Determination Date, the Trustee will determine
LIBOR on the basis of quotations of the offered rates for
one-month United States Dollar deposits provided by four
major banks in the London interbank market selected by
the Servicer (the "Reference Banks") as of 11:00 A.M.
(London time) on such LIBOR Determination Date as such
quotations appear on Telerate Page 3875 of the Dow Jones
Telerate Service (or such other page as may replace
Telerate Page 3875 on that service for the purpose of
displaying London interbank offered rates of major
banks). LIBOR as determined by the Trustee is the arith-
metic mean of such quotations (rounded, if necessary, to
the nearest whole multiple of 0.0625% per annum).
(b) If, on any LIBOR Determination Date, at
least two but fewer than all of the Reference Banks
provide quotations, LIBOR will be determined in accor-
dance with (a) above on the basis of the offered quota-
tions of those Reference Banks providing such quotations.
(c) If, on the LIBOR Determination Date, only
one or none of the Reference Banks provides such offered
quotations, LIBOR shall be:
(i) the rate per annum (rounded, as
aforesaid) that the Trustee determines to be either
(x) the arithmetic mean of the offered quotations
that leading banks in The City of New York selected
by the Servicer are quoting at or about 11:00 A.M.
London time on the relevant LIBOR Determination Date
for one month United States Dollar deposits to the
principal London office of each of the Reference
Banks or those of them (being at least two in num-
ber) to which such offered quotations are, in the
opinion of the Servicer, being so quoted or (y) in
the event that the Trustee can determine no such
arithmetic mean, the arithmetic mean of the offered
quotations that leading banks in The City of New
York selected by the Servicer are quoting at or
about 11:00 A.M. London time on such LIBOR Determi-
nation Date to leading European banks for one-month
Dollar deposits; or
(ii) if the banks selected as aforesaid
by the Servicer are not quoting as described in
clause (i) above, LIBOR for such Interest Accrual
Period will be LIBOR as determined on the previous
LIBOR Determination Date.
(d) The Class A Certificate Rate, the Class B
Certificate Rate and the Class C Certificate Rate appli-
cable to the then current and the immediately preceding
Interest Accrual Periods may be obtained by any Series
1994-1 Certificateholder by telephoning the Trustee at
its Corporate Trust Office at (302) 451-2500.
(e) On each LIBOR Determination Date, the
Trustee shall send to the Servicer by facsimile notifica-
tion of LIBOR for the following Interest Accrual Period.
Following the listing of the Class A Certificates and the
Class B Certificates on the Luxembourg Stock Exchange and
for so long as such Certificates are so listed, the
Trustee shall cause the Class A Certificate Rate and the
Class B Certificate Rate as well as the amount of Class A
Monthly Interest and Class B Monthly Interest applicable
to an Interest Period to be provided to the Luxembourg
Stock Exchange as soon as possible after its determina-
tion but in no event later than the first day of such
Interest Accrual Period.
Section 4.18 Class C Trigger. If (i) the
private letter rating from Standard & Poor's of Fingerhut
Companies, Inc.'s senior secured notes is reduced below
BBB (a "Class C Trigger Event"), and (ii) the percentage
equivalent of a fraction the numerator of which is the
Series Allocation Percentage of the Transferor Interest
and the denominator of which is the sum of the Invested
Amount and the Series Allocation Percentage of the Trans-
feror Interest (the "Target Percentage") is less than 5%,
the Transferor shall, in connection with increases in the
aggregate amount of Principal Receivables in the Trust,
the scheduled paydown of other Series or, with respect to
any Series of Variable Funding Certificates, an optional
payment of principal, allow the Transferor Interest to
increase such that the Target Percentage shall be equal
to or in excess of 5%. The Servicer shall provide to
Standard & Poor's prompt written notice of any downgrad-
ing of the private letter rating of Fingerhut Companies,
Inc.'s senior secured notes.
Section 4.19 Establishment of Class C Reserve
Account.
(a) The Servicer, for the benefit of the
Class C Certificateholders, shall, upon the occurrence of
a Class C Trigger Event, establish and maintain or cause
to be established and maintained with a Qualified Insti-
tution, which may be the Trustee, in the name of the
Trustee, on behalf of the Class C Certificateholders, the
"Class C Reserve Account," which shall be a segregated
trust account with the corporate trust department of such
Qualified Institution, bearing a designation clearly
indicating that the funds deposited therein are held for
the benefit of the Class C Certificateholders. The
Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Class C
Reserve Account and in all proceeds thereof. The Class C
Reserve Account shall be under the sole dominion and
control of the Trustee for the benefit of the Class C
Certificateholders. If, at any time, the institution
holding the Class C Reserve Account ceases to be a Quali-
fied Institution, the Trustee shall within 10 Business
Days establish a new Class C Reserve Account meeting the
conditions specified above with a Qualified Institution,
and shall transfer any cash or any investments to such
new Class C Reserve Account. From the date such new
Class C Reserve Account is established, it shall be the
"Class C Reserve Account."
(b) Administration of Class C Reserve Account.
The Servicer shall on each Business Day following the
occurrence of a Class C Trigger Event, deposit in the
Class C Reserve Account an amount equal to the excess of
the Specified Class C Reserve Amount over the amount on
deposit in the Class C Reserve Account to the extent of
funds available therefor pursuant to subsection
4.9(a)(xv). Funds on deposit in the Class C Reserve
Account shall be withdrawn by the Servicer and applied in
accordance with subsection 4.9(a)(xii) to the extent of
the aggregate amount of Class C Charge-Offs resulting
from unpaid Adjustment Payments, if any. Amounts on
deposit in the Class C Reserve Account may be subsequent-
ly released therefrom and paid to the Transferor to the
extent that such amounts exceed the Specified Class C
Reserve Amount. The amount on deposit in the Reserve
Account may also be released therefrom and paid to the
Transferor, and the Series Allocation Percentage of the
Transferor Interest may equal zero, if the rating of
Fingerhut Companies, Inc.'s senior secured notes is
subsequently increased to BBB or higher or the Class C
Invested Amount has been paid in full.
(c) Investment on Funds in Class C Reserve
Account. Funds on deposit in the Class C Reserve Account
shall be invested in Cash Equivalents by the Trustee (or,
at the direction of the Trustee, by the Servicer on
behalf of the Trustee) at the direction of the Servicer.
Funds on deposit in the Class C Reserve Account on any
Distribution Date, after giving effect to any withdrawals
from the Class C Reserve Account, shall be invested in
Cash Equivalents that will mature so that such funds will
be available for withdrawal on or prior to the following
Business Day. The proceeds of any such investments shall
be invested in Cash Equivalents that will mature so that
such funds will be available for withdrawal on or prior
to the following Business Day.
Section 4.20 Expense Reserve.
If with respect to any Monthly Period the
amount by which the Portfolio Yield exceeds the Base Rate
is less than 2% (the "Expense Reserve Trigger") the
Trustee shall deposit on each Business Day and after the
Determination Date related to such Monthly Period in the
Expense Reserve Account from amounts available therefor
pursuant to subsection 4.9(a)(xv) of the Agreement, an
aggregate amount equal to $50,000.
Section 4.21 Establishment of Expense Reserve
Account.
(a) The Servicer shall, upon the occurrence of
an Expense Reserve Trigger, establish and maintain or
cause to be established and maintained with a Qualified
Institution, which may be the Trustee, in the name of the
Trustee, on behalf of the Certificateholders, the "Ex-
pense Reserve Account," which shall be a segregated trust
account with the corporate trust department of such
Qualified Institution, bearing a designation clearly
indicating that the funds deposited therein are held for
the benefit of the Certificateholders. The Trustee shall
possess all right, title and interest in all funds on
deposit from time to time in the Expense Reserve Account
and in all proceeds thereof. The Expense Reserve Account
shall be under the sole dominion and control of the
Trustee for the benefit of the Certificateholders. If,
at any time, the institution holding the Expense Reserve
Account ceases to be a Qualified Institution, the Trustee
shall within 20 Business Days establish a new Expense
Reserve Account meeting the conditions specified above
with a Qualified Institution, and shall transfer any cash
or any investments to such new Expense Reserve Account.
From the date such new Expense Reserve Account is estab-
lished, it shall be the "Expense Reserve Account."
(b) Administration of Expense Reserve Account.
The Servicer shall on each Business Day following the
occurrence of an Expense Reserve Trigger, deposit in the
Expense Reserve Account an amount equal to the excess of
$50,000 over the amount on deposit in the Expense Reserve
Account to the extent of funds available therefor pursu-
ant to subsection 4.9(a)(xv). Funds on deposit in the
Expense Reserve Account shall be withdrawn by the
Servicer or the Trustee and applied solely to the payment
of expenses incurred by the Transferor. Amounts on
deposit in the Expense Reserve Account may be subsequent-
ly released therefrom and paid to the Transferor to the
extent that such amounts exceed $50,000. The amount on
deposit in the Reserve Account may also be released
therefrom and paid to the Transferor on the Series 1994-1
Termination Date.
(c) Investment on Funds in Expense Reserve Ac-
count. Funds on deposit in the Expense Reserve Account
shall be invested in Cash Equivalents by the Trustee (or,
at the direction of the Trustee, by the Servicer on
behalf of the Trustee) at the direction of the Servicer.
Funds on deposit in the Expense Reserve Account on any
Distribution Date, after giving effect to any withdrawals
from the Expense Reserve Account, shall be invested in
Cash Equivalents that will mature so that such funds will
be available for withdrawal on or prior to the following
Transfer Date. The proceeds of any such investments
shall be invested in Cash Equivalents that will mature so
that such funds will be available for withdrawal on or
prior to the following Transfer Date.
SECTION 7. Article V of the Agreement. Arti-
cle V of the Agreement shall read in its entirety as
follows and shall be applicable only to the Series 1994-1
Certificates:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS
Section 5.1 Distributions. (a) On each Dis-
tribution 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)) to each Class A Certificateholder of
record on the preceding Record Date (other than as pro-
vided in subsection 2.4(e) or in Section 12.3 respecting
a final distribution) such Certificateholder's pro rata
share (based on the aggregate Undivided Interests repre-
sented by Class A Certificates held by such Certificate-
holder) of amounts on deposit in the Distribution Account
as are payable to the Class A Certificateholders pursuant
to Sections 4.11 and 4.12 of the Agreement by check
mailed to each Class A Certificateholder at such
Certificateholder's address as it appears on the Certifi-
cate Register or, in the case of Class A Certificatehold-
ers holding Class A Certificates evidencing Undivided
Interests aggregating not less than 80% of the Invested
Amount, by wire transfer, at the expense of such 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 Certificates
will be made only upon presentation and surrender of the
Class A Certificates at the office or offices specified
in the notice of such final distribution delivered by the
Trustee pursuant to Section 12.3.
(b) On each 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)) to each
Class B Certificateholder of record on the preceding
Record Date (other than as provided in subsection 2.4(e)
or in Section 12.3 respecting a final distribution) such
Certificateholder's pro rata share (based on the aggre-
gate Undivided Interests represented by Class B Certifi-
cates held by such Certificateholder) of amounts on
deposit in the Distribution Account as are payable to the
Class B Certificateholders pursuant to Section 4.11 and
4.12 of the Agreement by check mailed to each Class B
Certificateholder at such Certificateholder's address as
it appears on the Certificate Register or, in the case of
Class B Certificateholders holding Class B Certificates
evidencing Undivided Interest aggregating not less than
80% of the Invested Amount, by wire transfer, at the
expense of such 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 Distributed Date; pro-
vided, however, that the final payment in retirement of
the Class B Certificates will be made only upon presenta-
tion and surrender of the Class B Certificates 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, 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)) to each
Class C Certificateholder of record on the preceding
Record Date (other than as provided in subsection 2.4(e)
or in Section 12.3 respecting a final distribution) such
Certificateholder's pro rata share (based on the aggre-
gate Undivided Interests represented by Class C Certifi-
cates held by such Certificateholder) of amounts on
deposit in the Distribution Account as are payable to the
Class C Certificateholders pursuant to Section 4.11 and
4.12 of the Agreement 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 Certificates
will be made only upon presentation and surrender of the
Class C Certificates at the office or offices specified
in the notice of such final distribution delivered by the
Trustee pursuant to Section 12.3.
Section 5.2 Certificateholders' Statement.
(a) On the 15th day of each calendar month (or if such
day is not a Business Day the next succeeding Business
Day), the Paying Agent shall forward to each Certificate-
holder and the Rating Agencies a statement substantially
in the form of Exhibit C prepared by the Servicer and
delivered to the Trustee and the Paying Agent on the
preceding Determination Date setting forth the following
information (which, in the case of (i), (ii) and (iii)
below, shall be stated on the basis of an original prin-
cipal amount of $1,000 per Certificate and, in the case
of (ix) and (x), shall be stated on an aggregate basis
and on the basis of an original principal amount of
$1,000 per Certificate):
(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 Principal Collections
received in the Collection Account during the pre-
ceding Monthly Period and allocated in respect of
the Class A Certificates, the Class B Certificates,
the Class C Certificates and the Class D Certifi-
cates, respectively;
(v) the amount of Imputed Yield Collect-
ions processed during the preceding Monthly Period
and allocated in respect of the Class A Certifi-
cates, the Class B Certificates, the Class C Cer-
tificates and the Class D Certificates, respective-
ly;
(vi) the aggregate amount of Principal
Receivables, the Invested Amount, the Class A In-
vested Amount, the Class B Invested Amount, the
Class C Invested Amount, the Class D Invested
Amount, the Floating Allocation Percentage and,
during the Amortization Period, the ABC
Fixed/Floating Allocation Percentage, Class B
Fixed/Floating Allocation Percentage, or Class C
Fixed/Floating 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 Receivables which are current, 29, 59, 89, 119,
120 days and over delinquent as of the end of the
day on the Record Date;
(viii) the aggregate Investor Default
Amount for the preceding Monthly Period;
(ix) the aggregate amount of Class A
Investor Charge-Offs, Class B Investor Charge-Offs,
Class C Investor Charge-Offs and Class D Investor
Charge-Offs for the preceding Monthly Period;
(x) the amount of the Servicing Fee for
the preceding Monthly Period;
(xi) the Class A Pool Factor, the Class B
Pool Factor and the Class C Pool Factor as of the
end of the last day of the Monthly Period immediate-
ly preceding the Determination Date;
(xii) the amount of Reallocated Class B
Principal Collections, Reallocated Class C Principal
Collections and Reallocated Class D Principal Col-
lections for the related Monthly Period;
(xiii) the aggregate amount of funds in
the Excess Funding Account and the Pre-Funding
Account as of the last day of the Monthly Period
immediately preceding the Distribution Date; and
(xiv) whether a Class C Trigger Event has
occurred and if so the Specified Class C Reserve
Amount.
(b) Annual Certificateholders' Tax State-
ment. On or before January 15 of each calendar year,
beginning with calendar year 1995, the Paying Agent shall
distribute to each Person who at any time during the
preceding calendar year was a Series 1994-1 Certificate-
holder, a statement prepared by the Servicer containing
the information required to be contained in the regular
report to Series 1994-1 Certificateholders, as set forth
in subclauses (i), (ii) and (iii) above, aggregated for
such calendar year or the applicable portion thereof
during which such Person was a Series 1994-1 Certificate-
holder, together with, on or before January 31 of each
year, beginning in 1995, 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 1994-1 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 1994-1 Pay Out Events. If
any one of the following events shall occur with respect
to the Series 1994-1 Certificates:
(a) failure on the part of the Transferor
(i) to make any payment or deposit required to be made by
the Transferor by the terms of (A) the Agreement or (B)
this Series Supplement, on or before the date occurring
five Business Days after the date such payment or deposit
is required to be made herein, (ii) to perform in all
material respects the Transferor's covenant not to sell,
pledge, assign, or transfer to any person, or grant any
unpermitted lien on, any Receivable; or (iii) duly to ob-
serve or perform in any material respect any covenants or
agreements of the Transferor set forth in the Agreement
or this Series Supplement, which failure has a material
adverse effect on the Series 1994-1 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 by the Trustee, or to the Transferor
and the Trustee by the Holders of Series 1994-1 Certifi-
cates evidencing Undivided Interests aggregating not less
than 50% of the Invested Amount of this Series 1994-1,
and continues to affect materially and adversely the
interests of the Series 1994-1 Certificateholders for
such period;
(b) any representation or warranty made
by the Transferor in the Agreement or this Series Supple-
ment, (i) shall prove to have been incorrect in any mate-
rial respect when made, which continues to be incorrect
in any material respect for a period of 60 days after the
date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the
Trustee by the Holders of the Series 1994-1 Certificates
evidencing Undivided Interests aggregating more than 50%
of the Invested Amount of this Series 1994-1, and (ii) as
a result of which the interests of the Series 1994-1 Cer-
tificateholders are materially and adversely affected and
continue to be materially and adversely affected for such
period; provided, however, that a Series 1994-1 Pay Out
Event pursuant to this subsection 9(b) shall not be
deemed to have occurred hereunder if the Transferor has
accepted reassignment of the related Receivable, or all
of such Receivables, if applicable, during such period in
accordance with the provisions of the Agreement;
(c) the average of the Portfolio Yields
for any three consecutive Monthly Periods is reduced to a
rate which is less than the weighted average of the Base
Rates for such three consecutive Monthly Periods;
(d) (i) the Transferor Interest shall be
less than the Minimum Transferor Interest, (ii)(A) the
sum of the amount on deposit in the Pre-Funding Account
plus the Series Allocation Percentage of the sum of the
total amount of Principal Receivables plus amounts on
deposit in the Excess Funding Account shall be less than
(B) the sum of the aggregate outstanding principal
amounts of the Class A Certificates, the Class B Certifi-
cates, the Class C Certificates and the Class D Certifi-
cates or (iii) the total amount of Principal Receivables
and the amount on deposit in the Excess Funding Account
and the Pre-Funding Account shall be less than the Mini-
mum Aggregate Principal Receivables, in each case as of
any Determination Date;
(e) any Servicer Default shall occur
which would have a material adverse effect on the Series
1994-1 Certificateholders; or
(f) the amount on deposit in the Excess
Funding Account as a percentage of the sum of the aggre-
gate amount of Principal Receivables plus the amount on
deposit in the Excess Funding Account shall equal or
exceed 30% on the last day of three consecutive Monthly
Periods;
then, in the case of any event described in subparagraph
(a), (b) or (e), after the applicable grace period, if
any, set forth in such subparagraphs, the Holders of
Series 1994-1 Certificates evidencing Undivided Interests
aggregating more than 50% of the Invested Amount of this
Series 1994-1 by notice then given in writing to the
Trustee, the Transferor and the Servicer may declare that
a pay out event (a "Series 1994-1 Pay Out Event") has
occurred as of the date of such notice, and in the case
of any event described in subparagraphs (c), (d) or (f),
a Series 1994-1 Pay Out Event shall occur without any
notice or other action on the part of the Trustee or the
Series 1994-1 Certificateholders immediately upon the
occurrence of such event.
SECTION 9. Series 1994-1 Termination. The
right of the Series 1994-1 Certificateholders to receive
payments from the Trust will terminate on the first Busi-
ness Day following the Series 1994-1 Termination Date
unless such Series is an Affected Series as specified in
Section 12.1(c) of the Agreement and the sale contem-
plated therein has not occurred by such date, in which
event the Series 1994-1 Certificateholders shall remain
entitled to receive proceeds of such sale when such sale
occurs.
SECTION 10. Legends; Transfer and Exchange;
Restrictions on Transfer of Series 1994-1 Certificates;
Tax Treatment.
(a) Each Class B Certificate, Class C Certifi-
cate and Class D Certificate will bear a legend substan-
tially in the following form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT, UNLESS
SUCH PURCHASER, AT ITS EXPENSE, DELIVERS TO THE
TRUSTEE, THE SERVICER AND THE TRANSFEROR AN OPINION
OF COUNSEL SATISFACTORY TO THEM TO THE EFFECT THAT
THE PURCHASE OR HOLDING OF A CLASS B CERTIFICATE,
CLASS C CERTIFICATE OR CLASS D CERTIFICATE BY SUCH
PURCHASER WILL NOT RESULT IN THE ASSETS OF THE TRUST
BEING DEEMED TO BE "ASSETS OF THE BENEFIT PLAN" AND
SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF
ERISA AND THE CODE AND WILL NOT SUBJECT THE TRUSTEE,
THE TRANSFEROR OR THE SERVICER TO ANY OBLIGATION IN
ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND
SERVICING AGREEMENT, 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 PROVI-
SIONS 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 UNDERLY-
ING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY.
(b) Each Class C Certificate will bear a
legend substantially in the following form:
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURI-
TIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS
CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS AND ONLY PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT TO AN INSTITUTIONAL INVESTOR THAT
THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTI-
TUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
("QIB") PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RE-
SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR TO THE TRANSFEROR. EACH
CERTIFICATE OWNER BY ACCEPTING A BENEFICIAL INTEREST
IN THIS CERTIFICATE IS DEEMED TO REPRESENT THAT IT
IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
(c) Each Class D 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. FINGERHUT RECEIV-
ABLES, INC. SHALL BE PROHIBITED FROM TRANSFERRING
ANY INTEREST IN OR PORTION OF THIS CERTIFICATE
UNLESS, PRIOR TO SUCH TRANSFER, IT SHALL HAVE DELIV-
ERED TO THE TRUSTEE AN OPINION OF COUNSEL TO THE
EFFECT THAT SUCH PROPOSED TRANSFER WILL NOT ADVERSE-
LY AFFECT THE FEDERAL, MINNESOTA OR DELAWARE INCOME
TAX CHARACTERIZATION OF ANY OUTSTANDING SERIES OF
INVESTOR CERTIFICATES OR THE TAXABILITY (OR TAX
CHARACTERIZATION) OF THE TRUST UNDER FEDERAL, MINNE-
SOTA OR DELAWARE INCOME TAX LAWS. IN NO EVENT SHALL
THE TRANSFEROR BE PERMITTED TO TRANSFER ANY INTEREST
IN OR PORTION OF THIS CERTIFICATE IF, AFTER GIVING
EFFECT TO SUCH PROPOSED TRANSFER, TAKING INTO AC-
COUNT THE CERTIFICATES WHOSE TRANSFER IS PROPOSED,
MORE THAN 20% (BY INVESTED AMOUNT AND BY VALUE) OF
THE OUTSTANDING CERTIFICATES ISSUED BY THE TRUST
WITH RESPECT TO WHICH NO OPINION OF COUNSEL WAS
ISSUED THAT THE APPLICABLE CLASS WOULD BE TREATED AS
DEBT FOR FEDERAL INCOME TAX PURPOSES (INCLUDING THE
EXCHANGEABLE TRANSFEROR CERTIFICATE AND EACH TRANS-
FEROR RETAINED CLASS) WOULD NOT BE BENEFICIALLY
OWNED BY THE FINGERHUT RECEIVABLES, INC.
(d) Upon surrender for registration of trans-
fer of a Class C Certificate at the office of the Trans-
fer Agent and Registrar, accompanied by a certification
by the Class C Certificateholder substantially in the
form attached as Exhibit D if the new purchaser is a
"qualified institutional buyer" as defined in Rule 144A
under the Securities Act of 1933 and by a written instru-
ment of transfer in the form approved by the Transferor
and the Trustee (it being understood that, until notice
to the contrary is given to Class C 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 Class C Certificate), executed
by the registered owner, in person or by such Class C
Certificateholder's attorney thereunto duly authorized in
writing, such Class C 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
Class C Certificates of any authorized denominations and
of a like aggregate principal amount and tenor. Trans-
fers and exchanges of Class C Certificates shall be sub-
ject to such restrictions as shall be set forth in the
text of the Class C 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 regis-
ter.
(e) Fingerhut Receivables, Inc. shall be
prohibited from Transferring any interest in or portion
of the Class D Certificates unless, prior to such trans-
fer, it shall have delivered to the Trustee an Opinion of
Counsel to the effect that such proposed Transfer will
not adversely affect the Federal, Minnesota or Delaware
income tax characterization of any outstanding Series of
Investor Certificates or the taxability (or tax charac-
terization) of the Trust under Federal, Minnesota or
Delaware income tax laws. In no event shall the Trans-
feror be permitted to Transfer any interest in or portion
of the Class D Certificates if, after giving effect to
such proposed Transfer, taking into account the certifi-
cates whose Transfer is proposed, more than 20% (by
Invested Amount and by value) of the outstanding certifi-
cates issued by the Trust with respect to which no Opin-
ion of Counsel was issued that the applicable class would
be treated as debt for federal income tax purposes (in-
cluding the Exchangeable Transferor Certificate and each
Transferor Retained Class) would not be beneficially
owned by Fingerhut Receivables Inc. In no event shall
any interest in or portion of the Class D Certificates be
transferred to Fingerhut. As a condition to transfer of
an interest in or portion of the Class D Certificates the
transferee shall be required to agree not to institute
against, or joint any other Person in instituting
against, the Trust any bankruptcy, reorganization, ar-
rangement, insolvency or liquidation proceeding, or other
proceeding under any federal or state bankruptcy or
similar law, for one year and one day after all Investor
Certificates are paid in full. The Transferor shall
provide prompt written notice to the Rating Agencies of
any such transfer.
(f) No transfer of a Class B Certificate,
Class C Certificate or Class D Certificate will be per-
mitted to be made to a Benefit Plan unless such Benefit
Plan, at its expense, delivers to the Trustee, the
Servicer and the Transferor an opinion of counsel satis-
factory to them to the effect that the purchase or hold-
ing of a Class B Certificate, Class C Certificate or
Class D Certificate by such Benefit Plan will not result
in the assets of the Trust being deemed to be "assets of
the Benefit Plan" and subject to the prohibited transac-
tion provisions of ERISA and the Code and will not sub-
ject the Trustee, the Transferor or the Servicer to any
obligation in addition to those undertaken in the Agree-
ment. Unless such opinion is delivered, each person
acquiring a Class B Certificate, Class C Certificate or
Class D Certificate or the beneficial ownership of a
Class B Certificate, Class C Certificate or Class D
Certificate will be deemed to represent to the Trustee,
the Transferor and the Servicer that it is not (i) an em-
ployee 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.
(g) The Class C Certificateholders shall
comply with their obligations under Section 3.7 of the
Agreement with respect to the tax treatment of the
Class C Certificates, except to the extent that a rele-
vant taxing authority has disallowed such treatment.
SECTION 11. Ratification of Agreement. (a)
As supplemented by this Series Supplement, the Agreement
is in all respects ratified and confirmed and the Agree-
ment as so supplemented by this Series Supplement shall
be read, taken, and construed as one and the same instru-
ment.
(b) For so long as any of the Class C
Certificates are outstanding, each of the Transferor, the
Servicer and the Trustee agree to cooperate with each
other to provide to any Class C Certificateholders and to
any prospective purchaser of Class C Certificates desig-
nated by such a Class C Certificateholder upon the re-
quest of such Class C Certificateholder or prospective
purchaser, any information required to be provided to
such holder or prospective purchaser to satisfy the
condition set forth in Rule 144A(d)(4) under the Securi-
ties Act.
SECTION 12. Registration of the Class A Cer-
tificates under the Securities Exchange Act of 1934. The
Transferor shall cause the Class A Certificates to be
registered under the Securities Exchange Act, as amended,
on or before April 30, 1995 and thereafter maintain such
registration until the Class A Invested Amount has been
reduced to zero.
SECTION 13. Counterparts. This Series Supple-
ment 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 14. GOVERNING LAW. THIS SERIES SUP-
PLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS CONFLICT
OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REME-
DIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 15. Instructions in Writing. All in-
structions 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.
IN WITNESS WHEREOF, the Transferor, the
Servicer and the Trustee have caused this Series 1994-1
Supplement to be duly executed by their respective offi-
cers as of the day and year first above written.
FINGERHUT RECEIVABLES, INC.
Transferor
By:_______________________
Name:
Title:
FINGERHUT CORPORATION
Servicer
By:_________________________
Name:
Title:
THE BANK OF NEW YORK (DELAWARE)
Trustee
By:_________________________
Name:
Title:
Exhibit A-1
[FORM OF CLASS A INVESTOR CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRE-
SENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.
No. ___ $_________
FINGERHUT MASTER TRUST
FLOATING RATE ACCOUNTS RECEIVABLE TRUST
CERTIFICATE, SERIES 1994-1, CLASS A
Evidencing an undivided interest in a trust, the corpus
of which consists of receivables generated from time to
time in the ordinary course of business from a portfolio
of installment sale contracts generated or to be generat-
ed by Fingerhut Corporation ("Fingerhut" or the
"Servicer") and other assets and interests constituting
the Trust under the Agreement described below.
(Not an interest in or a recourse obligation
of Fingerhut Receivables, Inc., Fingerhut or any affili-
ate of either of them.)
This certifies that _________ (the "Certifi-
cateholder") is the registered owner of a fractional
undivided interest in the Fingerhut Master Trust (the
"Trust") issued pursuant to the Pooling and Servicing
Agreement, dated as of June 29, 1994 (the "Pooling and
Servicing Agreement"; such term to include any amendment
thereto) by and between Fingerhut Receivables, Inc., as
Transferor (the "Transferor"), Fingerhut, as the
Servicer, and The Bank of New York (Delaware) as Trustee
(the "Trustee"), and the Series 1994-1 Supplement, dated
as of June 29, 1994 (the "Series 1994-1 Supplement"),
among the Transferor, Fingerhut as Servicer and the
Trustee. The Pooling and Servicing Agreement, as supple-
mented by the Series 1994-1 Supplement, is herein re-
ferred to as the "Agreement"). The corpus of the Trust
consists of all of the Transferor's right, title and
interest in, to and under the Trust Property (as defined
in the Agreement).
This Certificate does not purport to summarize
the Agreement and reference is made to that Agreement for
information with respect to the interests, rights, bene-
fits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee.
To the extent not defined herein, the capitalized terms
used herein have the meanings ascribed to them in the
Agreement. This Certificate is one of a series of Cer-
tificates entitled "Fingerhut Master Trust Floating Rate
Accounts Receivable Trust Certificates, Series 1994-1,
Class A" (the "Class A Certificates"), each of which
represents a fractional undivided interest in the Trust,
and is issued under and is subject to the terms, provi-
sions and conditions of the Agreement, to which Agree-
ment, as amended from time to time, the Certificateholder
by virtue of the acceptance hereof assents and by which
the Certificateholder is bound.
The Transferor has structured the Agreement,
the Class A Certificates, the Fingerhut Master Trust
Floating Rate Accounts Receivable Trust Certificates,
Series 1994-1, Class B (the "Class B Certificates" and
collectively with the Class A Certificates the "Offered
Certificates") and the Fingerhut Master Trust Accounts
Receivable Trust Certificates, Series 1994-1, Class C
(the "Class C Certificates") with the intention that the
Offered Certificates and the Class C Certificates will
qualify under applicable tax law as indebtedness, and
both the Transferor and each holder of a Class A Certifi-
cate (a "Class A Certificateholder") or any interest
therein by acceptance of its Certificate or any interest
therein, agrees to treat the Class A Certificates for
purposes of federal, state and local income or franchise
taxes and any other tax imposed on or measured by income,
as indebtedness.
No principal will be payable to the Class A
Certificateholders until the first Distribution Date in
the Amortization Period. No principal will be payable to
the Class B Certificateholders, Class C Certificatehold-
ers or Class D Certificateholders until all principal
payments have been made to the Class A Certificatehold-
ers.
Each Class A Certificate represents the right
to receive interest at the rate of .30% per annum above
LIBOR determined on June 27, 1994 for the period from
June 29, 1994 through July 19, 1994, and at a rate equal
to .30% per annum above LIBOR determined on the related
LIBOR Determination Date for the period from July 20,
1994 through August 21, 1994 and with respect to each
Interest Accrual Period thereafter, but in no event in
excess of 12% per annum (such rate, as in effect from
time to time, the "Class A Certificate Rate"). Interest
on the Certificates will accrue from the Closing Date and
will be distributed on July 20, 1994, and on the 20th day
of each month thereafter, or if such day is not a busi-
ness day, on the next succeeding business day (each, a
"Distribution Date"), in an amount equal to the product
of (a) the actual number of days in the related Interest
Accrual Period divided by 360, (b) the Class A Certifi-
cate Rate and (c) the outstanding principal balance of
the Class A Certificates as of the preceding Record Date
(or in the case of the first Distribution Date, the
initial Class A Invested Amount).
On the earlier of the January 20, 1997 Distri-
bution Date or the first Distribution Date following the
occurrence of a Pay Out Event, interest and principal
will be distributed to the Class A Certificateholders
monthly on each Distribution Date prior to the Series
Termination Date. Interest for any Distribution Date
will include accrued interest at the Class A Certificate
Rate from and including the preceding Distribution Date
or, in the case of the first Distribution Date from and
including the Closing Date, to but excluding such Distri-
bution Date. Interest for any Distribution Date due but
not paid on any Distribution Date will be due on the next
succeeding Distribution Date together with, to the extent
permitted by applicable law, additional interest on such
amount at the Class A Certificate Rate.
"Class A Invested Amount" means an amount equal
to (a) the initial principal balance of the Class A
Certificates less the Class A Percentage of the initial
deposit to the Pre-Funding Account plus the Class A
Percentage of any withdrawals from the Pre-Funding Ac-
count during the Funding Period in connection with the
addition of Receivables to the Trust and the deposit of
the amounts in the Pre-Funding Account at the end of the
Funding Period into the Excess Funding Account, minus
(b) the aggregate amount of principal payments (except
principal payments made from the Pre-Funding Account)
made to Class A Certificateholders pursuant to such date,
and minus (c) the aggregate amount of Class A Investor
Charge-Offs for all prior Distribution Dates, equal to
the amount by which the Class A Invested Amount has been
reduced to fund the Investor Default Amount on all prior
Distribution Dates and plus (d) the aggregate amount of
Available Series Imputed Yield Collections, Transferor
Imputed Yield Collections, Excess Imputed Yield Collec-
tions and Reallocated Principal Collections applied on
all prior Distribution Dates for the purpose of reimburs-
ing amounts deducted pursuant to the foregoing clause
(c).
During the period from and including the Clos-
ing Date to but excluding the earlier of (x) the first
day for which the Invested Amount equals the Full Invest-
ed Amount; (y) the first day on which a Pay Out Event is
deemed to occur; and (z) the first day of the January
1995 Monthly Period (the "Funding Period"), the Pre-
Funded Amount will be maintained in a trust account to be
established with The Bank of New York (the "Pre-Funding
Account"). The "Pre-Funded Amount" will equal the amount
of the initial deposit to the Pre-Funding Account, less
the amounts of any increases in the Invested Amount
pursuant to the Series 1994-1 Supplement in connection
with the increase in the amount of Receivables in the
Trust. On the Closing Date a cash deposit will be made
to the Pre-Funding Account such that the amount of Prin-
cipal Receivables plus the amount of such cash deposit on
such date will at least equal the sum of the initial
outstanding principal balances of the Class A Certifi-
cates, the Class B Certificates, the Class C Certificates
and the Class D Certificates. Funds on deposit in the
Pre-Funding Account will be invested by the Trustee at
the direction of the Servicer in Cash Equivalents.
During the Funding Period, funds on deposit in
the Pre-Funding Account will be withdrawn and paid to the
Transferor to the extent of any increases in the Invested
Amount as a result of the increase in the amount of
Receivables in the Trust. The Transferor expects that
the funds on deposit in the Pre-Funding Account will be
fully invested in Receivables by the end of the December
1994 Monthly Period. In the event of the occurrence of a
Pay Out Event during the Funding Period, the amounts
remaining on deposit in the Pre-Funding Account, will be
payable as principal first to the Class A Certificate-
holders until the Class A Invested Amount is paid in full
and then to the Class B Certificateholders until the
Class B Invested Amount is paid in full and then to the
Class C Certificateholders until the Class C Invested
Amount is paid in full. Should the Pre-Funded Amount be
greater than zero on the first day of the January 1995
Monthly Period, such amount will be deposited in the
Excess Funding Account.
Subject to the Agreement, payments of principal
are limited to the unpaid Class A Invested Amount of the
Class A Certificates, which may be less than the unpaid
balance of the Class A Certificates pursuant to the terms
of the Agreement. All principal of and interest on the
Class A Certificates is due and payable no later than the
June 20, 2001 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the
"Series Termination Date"). After the Series Termination
Date neither the Trust nor the Transferor will have any
further obligation to distribute principal or interest on
the Class A Certificates. In the event that the Class A
Invested Amount is greater than zero on the Series Termi-
nation Date, the Trustee will sell or cause to be sold,
to the extent necessary, an amount of interests in the
Receivables or certain of the Receivables up to 110% of
the Class A Invested Amount, the Class B Invested Amount,
the Class C Invested Amount and the Class D Invested
Amount at the close of business on such date (but not
more than the total amount of Receivables allocable to
the Investor Certificates), and shall pay the proceeds to
the Class A Certificateholders pro rata in final payment
of the Class A Certificates, then to the Class B Certifi-
cateholders pro rata in final payment of the Class B
Certificates, then to the Class C Certificateholders pro
rata in final payment of the Class C Certificates and
finally to the Class D Certificateholders pro rata in
final payment of the Class D Certificates.
Unless the certificate of authentication hereon
has been executed by or on behalf of the Trustee, by
manual signature, this Certificate shall not be entitled
to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused
this Certificate to be duly executed under its official
seal.
FINGERHUT RECEIVABLES, INC.
By:_____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates re-
ferred to in the within-mentioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK
By: _______________________
Name:
Title:
Exhibit A-2
[FORM OF CLASS B INVESTOR CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRE-
SENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT UNLESS
SUCH PURCHASER, AT ITS EXPENSE, DELIVERS TO THE
TRUSTEE, THE SERVICER AND THE TRANSFEROR AN OPINION
OF COUNSEL SATISFACTORY TO THEM TO THE EFFECT THAT
THE PURCHASE OR HOLDING OF THIS CERTIFICATE BY SUCH
PURCHASER WILL NOT RESULT IN THE ASSETS OF THE TRUST
BEING DEEMED TO BE "ASSETS OF THE BENEFIT PLAN" OR
SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF
ERISA AND THE CODE AND WILL NOT SUBJECT THE TRUSTEE,
THE TRANSFEROR OR THE SERVICER TO ANY OBLIGATION IN
ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND
SERVICING AGREEMENT, 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 PROVI-
SIONS 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 UNDERLY-
ING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY.
No. R-1 $92,050,000
FINGERHUT MASTER TRUST
FLOATING RATE ACCOUNTS RECEIVABLE TRUST
CERTIFICATE, SERIES 1994-1, CLASS B
Evidencing an undivided interest in a trust,
the corpus of which consists of receivables generated
from time to time in the ordinary course of business from
a portfolio of installment sale contracts generated or to
be generated by Fingerhut Corporation ("Fingerhut" or the
"Servicer") and other assets and interests constituting
the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut or any affiliate
of either of them.)
This certifies that CEDE & CO. (the "Certifi-
cateholder") is the registered owner of a fractional
undivided interest in the Fingerhut Master Trust (the
"Trust") issued pursuant to the Pooling and Servicing
Agreement, dated as of June 29, 1994 (the "Pooling and
Servicing Agreement"; such term to include any amendment
thereto) by and between Fingerhut Receivables, Inc., as
Transferor (the "Transferor"), Fingerhut as the Servicer,
and The Bank of New York (Delaware), as Trustee (the
"Trustee"), and the Series 1994-1 Supplement, dated as of
June 29, 1994 (the "Series 1994-1 Supplement"), among the
Transferor, Fingerhut as Servicer and the Trustee. The
Pooling and Servicing Agreement, as supplemented by the
Series 1994-1 Supplement, is herein referred to as the
"Agreement". The corpus of the Trust consists of all of
the Transferor's right, title and interest in, to and
under the Trust Property (as defined in the Agreement).
This Certificate does not purport to summarize
the Agreement and reference is made to that Agreement for
information with respect to the interests, rights, bene-
fits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee.
To the extent not defined herein, the capitalized terms
used herein have the meanings ascribed to them in the
Agreement. This Certificate is one of a series of Cer-
tificates entitled "Fingerhut Master Trust Accounts
Receivable Trust Certificates, Series 1994-1, Class B"
(the "Class B Certificates"), each of which represents a
fractional undivided interest in the Trust, and is issued
under and is subject to the terms, provisions and condi-
tions of the Agreement, to which Agreement, as amended
from time to time, the Certificateholder by virtue of the
acceptance hereof assents and by which the Certificate-
holder is bound.
The Transferor has structured the Agreement,
the Class B Certificates, the Fingerhut Master Trust
Floating Rate Accounts Receivable Trust Certificates,
Series 1994-1, Class A (the "Class A Certificates" and
collectively with the Class B Certificates the "Offered
Certificates") and the Fingerhut Master Trust Floating
Rate Accounts Receivable Trust Certificates, Series 1994-
1, Class C (the "Class C Certificates") with the inten-
tion that the Offered Certificates will qualify under
applicable tax law as indebtedness, and both the Trans-
feror and each holder of a Class B Certificate (a "Class
B Certificateholder") or any interest therein by accep-
tance of its Certificate or any interest therein, agrees
to treat the Class B Certificates for purposes of feder-
al, state and local income or franchise taxes and any
other tax imposed on or measured by income, as indebted-
ness.
No principal will be payable to the Class B
Certificateholders until the Class B Payment Commencement
Date, which is the Distribution Date either on or follow-
ing the Distribution Date, on which the Class A Invested
Amount had been paid in full. No principal will be pay-
able to the Class B Certificateholders until all princi-
pal payments have been made to the Class A Certificate-
holders. No principal payments will be made to the Class
C Certificateholder until the Distribution Date either on
or following the Distribution Date on which the Class B
Invested Amount has been paid in full.
Each Class B Certificate represents the right
to receive interest at the rate of .60% per annum above
LIBOR determined on June 27, 1994 for the period from
June 29, 1994 through July 19, 1994, and at a rate equal
to .60% per annum above LIBOR determined on the related
LIBOR Determination Date for the period from July 20,
1994 through August 21, 1994 and with respect to each
Interest Accrual Period thereafter, but in no event in
excess of 12% per annum (such rate, as in effect from
time to time, the "Class B Certificate Rate" on the 20th
day of each month thereafter, or if such day is not a
business day, on the next succeeding business day (each,
a "Distribution Date"), in an amount equal to the product
of (a) the actual number of days in the related Interest
Accrual Period divided by 360, (b) the Class B Certifi-
cate Rate and (c) the outstanding principal balance of
the Class B Certificates as of the preceding Record Date
(or in the case of the first Distribution Date, the
initial Class B Invested Amount).
Interest for any Distribution Date will include
accrued interest at the Class B Certificate Rate from and
including the preceding Distribution Date or, in the case
of the first Distribution Date from and including the
Closing Date, to but excluding such Distribution Date.
Interest for any Distribution Date due but not paid on
any Distribution Date will be due on the next succeeding
Distribution Date together with, to the extent permitted
by applicable law, additional interest on such amount at
the Class B Certificate Rate.
"Class B Invested Amount" for any date means an
amount equal to (a) the initial principal balance of the
Class B Certificates less the Class B Percentage of the
initial deposit to the Pre-Funding Account plus the
Class B Percentage of any withdrawals from the Pre-Fund-
ing Account during the Funding Period in connection with
the addition of Receivables to the Trust and the deposit
of the amounts in the Pre-Funding Account at the end of
the Funding Period into the Excess Funding Account, minus
(b) the aggregate amount of principal payments (except
principal payments made from the Pre-Funding Account)
made to Class B Certificateholders prior to such date,
minus (c) the aggregate amount of Class B Investor
Charge-Offs for all prior Distribution Dates, equal to
the amount by which the Class B Invested Amount has been
reduced to fund the Investor Default Amount on all prior
Distribution Dates minus (d) the aggregate amount of
Reallocated Class B Principal Collections for which
neither the Class D Invested Amount nor the Class C
Invested Amount has been reduced for all prior Distribu-
tion Dates, and plus (e) the aggregate amount of Avail-
able Series Imputed Yield Collections, Transferor Imputed
Yield Collections, Excess Imputed Yield Collections and
Reallocated Class C Principal Collections and Reallocated
Class D Principal Collections applied on all prior Dis-
tribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c) and (d).
During the period from and including the Clos-
ing Date to but excluding the earlier of (x) the first
day for which the Invested Amount equals the Full Invest-
ed Amount; (y) the first day on which a Pay Out Event is
deemed to occur; and (z) the first day of the January
1995 Monthly Period (the "Funding Period"), the Pre-
Funded Amount will be maintained in a trust account to be
established with The Bank of New York (the "Pre-Funding
Account"). The "Pre-Funded Amount" will equal the amount
of the initial deposit to the Pre-Funding Account, less
the amounts of any increases in the Invested Amount
pursuant to the Series 1994-1 Supplement in connection
with the increase in the amount of Receivables in the
Trust. On the Closing Date a cash deposit will be made
to the Pre-Funding Account such that the amount of Prin-
cipal Receivables plus the amount of such cash deposit on
such date will at least equal the sum of the initial
outstanding principal balances of the Class A Certifi-
cates, the Class B Certificates, the Class C Certificates
and the Class D Certificates. Funds on deposit in the
Pre-Funding Account will be invested by the Trustee at
the direction of the Servicer in Cash Equivalents.
During the Funding Period, funds on deposit in
the Pre-Funding Account will be withdrawn and paid to the
Transferor to the extent of any increases in the Invested
Amount as a result of the increase in the amount of
Receivables in the Trust. The Transferor expects that
the funds on deposit in the Pre-Funding Account will be
fully invested in Receivables by the end of the December
1994 Monthly Period. In the event of the occurrence of a
Pay Out Event during the Funding Period, the amounts
remaining on deposit in the Pre-Funding Account, will be
payable as principal first to the Class A Certificate-
holders until the Class A Invested Amount is paid in full
and then to the Class B Certificateholders until the
Class B Invested Amount is paid in full and then to the
Class C Certificateholders until the Class C Invested
Amount is paid in full. Should the Pre-Funded Amount be
greater than zero on the first day of the January 1995
Monthly Period, such amount will be deposited in the
Excess Funding Account.
Subject to the Agreement, payments of principal
are limited to the unpaid Class B Invested Amount of the
Class B Certificates, which may be less than the unpaid
balance of the Class B Certificates pursuant to the terms
of the Agreement. All principal of and interest on the
Class B Certificates is due and payable no later than the
June 20, 2001 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the
"Series Termination Date"). After the Series Termination
Date neither the Trust nor the Transferor will have any
further obligation to distribute principal or interest on
the Class B Certificates. In the event that the Class B
Invested Amount is greater than zero on the Series Termi-
nation Date, the Trustee will sell or cause to be sold,
to the extent necessary, an amount of interests in the
Receivables or certain of the Receivables up to 110% of
the Class A Invested Amount, the Class B Invested Amount,
the Class C Invested Amount and the Class D Invested
Amount at the close of business on such date (but not
more than the total amount of Receivables allocable to
the Investor Certificates), and shall pay the proceeds to
the Class A Certificateholders pro rata in final payment
of the Class A Certificates, then to the Class B Certifi-
cateholders pro rata in final payment of the Class B
Certificates, then to the Class C Certificateholders pro
rata in final payment of the Class C Certificates and
finally to the Class D Certificateholders pro rata in
final payment of the Class D Certificates.
Unless the certificate of authentication hereon
has been executed by or on behalf of the Trustee, by
manual signature, this Certificate shall not be entitled
to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused
this Certificate to be duly executed under its official
seal.
FINGERHUT RECEIVABLES, INC.
By:_______________________
Name:
Title:
Dated:June 29, 1994
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates re-
ferred to in the within-mentioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK
By:
Name:
Title:
Exhibit A-3
[FORM OF CLASS C INVESTOR CERTIFICATE]
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURI-
TIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS
CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS AND ONLY PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT TO AN INSTITUTIONAL INVESTOR THAT
THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTI-
TUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
("QIB") PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER
HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RE-
SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR TO THE TRANSFEROR. EACH
CERTIFICATE OWNER BY ACCEPTING A BENEFICIAL INTEREST
IN THIS CERTIFICATE IS DEEMED TO REPRESENT THAT IT
IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT UNLESS
SUCH PURCHASER, AT ITS EXPENSE, DELIVERS TO THE
TRUSTEE, THE SERVICER AND THE TRANSFEROR AN OPINION
OF COUNSEL SATISFACTORY TO THEM TO THE EFFECT THAT
THE PURCHASE OR HOLDING OF THIS CERTIFICATE BY SUCH
PURCHASER WILL NOT RESULT IN THE ASSETS OF THE TRUST
BEING DEEMED TO BE "ASSETS OF THE BENEFIT PLAN" OR
SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF
ERISA AND THE CODE AND WILL NOT SUBJECT THE TRUSTEE,
THE TRANSFEROR OR THE SERVICER TO ANY OBLIGATION IN
ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND
SERVICING AGREEMENT, 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 PROVI-
SIONS 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 UNDERLY-
ING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S
INVESTMENT IN THE ENTITY.
No. ___ $_________
FINGERHUT MASTER TRUST
FLOATING RATE ACCOUNTS RECEIVABLE TRUST
CERTIFICATE, SERIES 1994-1, Class C
Evidencing an undivided interest in a trust,
the corpus of which consists of receivables generated
from time to time in the ordinary course of business from
a portfolio of installment sale contracts generated or to
be generated by certain subsidiaries of Fingerhut Corpo-
ration ("Fingerhut" or the "Servicer") and other assets
and interests constituting the Trust under the Agreement
described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut or any affiliate
of either of them.)
This certifies that ___________________ (the
"Certificateholder") is the registered owner of a frac-
tional undivided interest in the Fingerhut Master Trust
(the "Trust") issued pursuant to the Pooling and Servic-
ing Agreement, dated as of June 29, 1994 (the "Pooling
and Servicing Agreement"; such term to include any amend-
ment thereto) by and between Fingerhut Receivables, Inc.,
as Transferor (the "Transferor"), Fingerhut as the
Servicer, and The Bank of New York (Delaware), as Trustee
(the "Trustee"), and the Series 1994-1 Supplement, dated
as of June 29, 1994 (the "Series 1994-1 Supplement"),
among the Transferor, Fingerhut as Servicer and the
Trustee. The Pooling and Servicing Agreement, as supple-
mented by the Series 1994-1 Supplement, is herein re-
ferred to as the "Agreement." The corpus of the Trust
consists of all of the Transferor's right, title and
interest in, to and under the Trust Property (as defined
in the Agreement).
This Certificate does not purport to summarize
the Agreement and reference is made to that Agreement for
information with respect to the interests, rights, bene-
fits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee.
To the extent not defined herein, the capitalized terms
used herein have the meanings ascribed to them in the
Agreement. This Certificate is one of a series of Cer-
tificates entitled "Fingerhut Master Trust Floating Rate
Accounts Receivable Trust Certificates, Series 1994-1,
Class C" (the "Class C Certificates"), each of which
represents a fractional undivided interest in the Trust,
and is issued under and is subject to the terms, provi-
sions and conditions of the Agreement, to which Agree-
ment, as amended from time to time, the Certificateholder
by virtue of the acceptance hereof assents and by which
the Certificateholder is bound.
The Transferor has structured the Agreement,
the Class C Certificates, the Fingerhut Master Trust
Floating Rate Accounts Receivable Trust Certificates,
Series 1994-1, Class A (the "Class A Certificates") and
the Fingerhut Master Trust Floating Rate Accounts Receiv-
able Trust Certificates, Series 1994-1, Class B (the
"Class B Certificates") with the intention that the
Class A, Class B and Class C Certificates will qualify
under applicable tax law as indebtedness, and both the
Transferor and each holder of a Class C Certificate (a
"Class C Certificateholder") or any interest therein by
acceptance of its Certificate or any interest therein,
agrees to treat the Class C Certificates for purposes of
federal, state and local income or franchise taxes and
any other tax imposed on or measured by income, as in-
debtedness.
No principal will be payable to the Class C
Certificateholders until the Class C Payment Commencement
Date, which is the Distribution Date either on or follow-
ing the Distribution Date, on which the Class A Invested
Amount and the Class B Invested Amount have been paid in
full. No principal payments will be payable to the Class
C Certificateholder until the Distribution Date either on
or following the Distribution Date on which the Class B
Invested Amount has been paid in full.
Each Class C Certificate represents the right
to receive interest at the rate of 5.5% per annum from
June 29, 1994 through July 19, 1994, and at a rate equal
to 1.0% per annum above the arithmetic mean of LIBOR pre-
vailing on the related LIBOR Determination Date, but in
no event in excess of 12% per annum (such rate, as in
effect from time to time, the "Class C Certificate
Rate"), from July 20, 1994 through August 21, 1994 and
with respect to each Interest Accrual Period thereafter.
Interest on the Class C Certificates will accrue from the
Closing Date and will be distributed on July 20, 1994,
and on the 20th day of each month thereafter, or if such
day is not a business day, on the next succeeding busi-
ness day (each, a "Distribution Date"), in an amount
equal to the product of (a) the actual number of days in
the related Interest Accrual Period divided by 360, (b)
the Class C Certificate Rate and (c) the outstanding
principal balance of the Class C Certificates as of the
preceding Record Date (or in the case of the first Dis-
tribution Date, the initial Class C Invested Amount).
Interest for any Distribution Date will include
accrued interest at the Class C Certificate Rate from and
including the preceding Distribution Date or, in the case
of the first Distribution Date from and including the
Closing Date, to but excluding such Distribution Date.
Interest for any Distribution Date due but not paid on
any Distribution Date will be due on the next succeeding
Distribution Date together with, to the extent permitted
by applicable law, additional interest on such amount at
the Class C Certificate Rate.
"Class C Invested Amount" for any date means an
amount equal to (a) the initial principal balance of the
Class C Certificates less the Class C Percentage of the
initial deposit to the Pre-Funding Account plus the Class
C Percentage of any withdrawals from the Pre-Funding
account during the Funding Period in connection with the
addition of Receivables to the Trust and the deposit of
the amounts in the Pre-Funding Account at the end of the
Funding Period into the Excess Funding Account, minus (b)
the aggregate amount of principal payments (except prin-
cipal payments made from the Pre-Funding Account) made to
Class C Certificateholders prior to such date, minus (c)
the aggregate amount of Class C Investor Charge-Offs for
all prior Distribution Dates, equal to the amount by
which the Class C Invested Amount has been reduced to
fund the Investor Default Amount on all prior Distribu-
tion Dates, minus (d) the aggregate amount of Reallocated
Class C Principal Collections for which the Class D
Invested Amount has not been reduced for all prior Dis-
tribution Dates, and plus (e) the aggregate amount of
Available Series Imputed Yield Collections, Transferor
Imputed Yield Collections, Excess Imputed Yield Collec-
tions and Reallocated Class D Principal Collections and
certain other amounts as may be available applied on all
prior Distribution Dates for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c)
and (d).
During the period from and including the Clos-
ing Date to but excluding the earlier of (x) the first
day for which the Invested Amount equals the Full Invest-
ed Amount; (y) the first day on which a Pay Out Event is
deemed to occur; and (z) the first day of the January
1995 Monthly Period (the "Funding Period"), the Pre-
Funded Amount will be maintained in a trust account to be
established with the Trustee (the "Pre-Funding Account").
The "Pre-Funded Amount" will equal the amount of the
initial deposit to the Pre-Funding Account, less the
amounts of any increases in the Invested Amount pursuant
to the Series 1994-1 Supplement in connection with the
increase in the amount of Receivables in the Trust. On
the Closing Date a cash deposit will be made to the Pre-
Funding Account such that the amount of Principal Receiv-
ables plus the amount of such cash deposit on such date
will at least equal the sum of the initial outstanding
principal balances of the Class A Certificates, the
Class B Certificates, the Class C Certificates and the
Class D Certificates. Funds on deposit in the Pre-Fund-
ing Account will be invested by the Trustee at the direc-
tion of the Servicer in Cash Equivalents
During the Funding Period, funds on deposit in
the Pre-Funding Account will be withdrawn and paid to the
Transferor to the extent of any increases in the Invested
Amount as a result of the increase in the amount of
Receivables in the Trust. The Transferor expects that
the funds on deposit in the Pre-Funding Account will be
fully invested in Receivables by the end of the December
1994 Monthly Period. In the event of the occurrence of a
Pay Out Event during the Funding Period, the amounts
remaining on deposit in the Pre-Funding Account, will be
payable as principal first to the Class A Certificate-
holders until the Class A Invested Amount is paid in full
and then to the Class B Certificateholders until the
Class B Invested Amount is paid in full and then to the
Class C Certificateholders until the Class C Invested
Amount is paid in full. Should the Pre-Funded Amount be
greater than zero on the first day of the January 1995
Monthly Period, such amount will be deposited in the
Excess Funding Account.
Subject to the Agreement, payments of principal
are limited to the unpaid Class C Invested Amount of the
Class C Certificates, which may be less than the unpaid
balance of the Class C Certificates pursuant to the terms
of the Agreement. All principal of and interest on the
Class C Certificates is due and payable no later than the
June 20, 2001 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the
"Series Termination Date"). After the Series Termination
Date neither the Trust nor the Transferor will have any
further obligation to distribute principal or interest on
the Class C Certificates. In the event that the Class C
Invested Amount is greater than zero on the Series Termi-
nation Date, the Trustee will sell or cause to be sold,
to the extent necessary, an amount of interests in the
Receivables or certain of the Receivables up to 110% of
the Class A Invested Amount, the Class B Invested Amount,
the Class C Invested Amount and the Class D Invested
Amount at the close of business on such date (but not
more than the total amount of Receivables allocable to
the Investor Certificates), and shall pay the proceeds to
the Class A Certificateholders pro rata in final payment
of the Class A Certificates, then to the Class B Certifi-
cateholders pro rata in final payment of the Class B
Certificates, then to the Class C Certificateholders pro
rata in final payment of the Class C Certificates and
finally to the Class D Certificateholders pro rata in
final payment of the Class D Certificates.
Unless the certificate of authentication hereon
has been executed by or on behalf of the Trustee, by
manual signature, this Certificate shall not be entitled
to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused
this Certificate to be duly executed under its official
seal.
FINGERHUT RECEIVABLES, INC.
By:________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class C Certificates re-
ferred to in the within-mentioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK
By:
Name:
Title:
Exhibit A-4
[FORM OF CLASS D INVESTOR CERTIFICATE]
THIS CERTIFICATE 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 REGIS-
TERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURI-
TIES LAW. FINGERHUT RECEIVABLES, INC. SHALL BE
PROHIBITED FROM TRANSFERRING ANY INTEREST IN OR
PORTION OF THIS CERTIFICATE UNLESS, PRIOR TO SUCH
TRANSFER, IT SHALL HAVE DELIVERED TO THE TRUSTEE AN
OPINION OF COUNSEL TO THE EFFECT THAT SUCH PROPOSED
TRANSFER WILL NOT ADVERSELY AFFECT THE FEDERAL,
MINNESOTA OR DELAWARE INCOME TAX CHARACTERIZATION OF
ANY OUTSTANDING SERIES OF INVESTOR CERTIFICATES OR
THE TAXABILITY (OR TAX CHARACTERIZATION) OF THE
TRUST UNDER FEDERAL, MINNESOTA OR DELAWARE INCOME
TAX LAWS. IN NO EVENT SHALL THE TRANSFEROR BE
PERMITTED TO TRANSFER ANY INTEREST IN OR PORTION OF
THIS CERTIFICATE IF, AFTER GIVING EFFECT TO SUCH
PROPOSED TRANSFER, TAKING INTO ACCOUNT THE CERTIFI-
CATES WHOSE TRANSFER IS PROPOSED, MORE THAN 20% (BY
INVESTED AMOUNT AND BY VALUE) OF THE OUTSTANDING
CERTIFICATES ISSUED BY THE TRUST WITH RESPECT TO
WHICH NO OPINION OF COUNSEL WAS ISSUED THAT THE
APPLICABLE CLASS WOULD BE TREATED AS DEBT FOR FEDER-
AL INCOME TAX PURPOSES (INCLUDING THE EXCHANGEABLE
TRANSFEROR CERTIFICATE AND EACH TRANSFEROR RETAINED
CLASS) WOULD NOT BE BENEFICIALLY OWNED BY THE
FINGERHUT RECEIVABLES, INC.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, 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.
No. ___ $_________
FINGERHUT MASTER TRUST
FLOATING RATE ACCOUNTS RECEIVABLE TRUST
CERTIFICATE, SERIES 1994-1, CLASS D
Evidencing an undivided interest in a trust,
the corpus of which consists of receivables generated
from time to time in the ordinary course of business from
a portfolio of installment sale contracts generated or to
be generated by Fingerhut Corporation ("Fingerhut" or the
"Servicer") and other assets and interests constituting
the Trust under the Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Receivables, Inc., Fingerhut or any affiliate
of either of them.)
This certifies that Fingerhut Receivables, Inc.
(the "Certificateholder") is the registered owner of a
fractional undivided interest in the Fingerhut Master
Trust (the "Trust") issued pursuant to the Pooling and
Servicing Agreement, dated as of June 29, 1994 (the
"Pooling and Servicing Agreement"; such term to include
any amendment or Supplement thereto) by and between
Fingerhut Receivables, Inc., as Transferor (the "Trans-
feror"), Fingerhut as the Servicer, and The Bank of New
York (Delaware), as Trustee (the "Trustee"), and the
Series 1994-1 Supplement, dated as of June 29, 1994 (the
"Series 1994-1 Supplement"), among the Transferor,
Fingerhut as Servicer and the Trustee. The Pooling and
Servicing Agreement, as supplemented by the Series 1994-1
Supplement, is herein referred to as the "Agreement."
The corpus of the Trust consists of all of the
Transferor's right, title and interest in, to and under
(i) the Trust Property (as defined in the Agreement) and
(ii) the property described in Sections 3A and 17 of the
Series 1994-1 Supplement.
This Certificate does not purport to summarize
the Agreement and reference is made to that Agreement for
information with respect to the interests, rights, bene-
fits, obligations, proceeds, and duties evidenced hereby
and the rights, duties and obligations of the Trustee.
To the extent not defined herein, the capitalized terms
used herein have the meanings ascribed to them in the
Agreement. This Certificate is one of a series of Cer-
tificates entitled "Fingerhut Master Trust Floating Rate
Accounts Receivable Trust Certificates, Series 1994-1,
Class D" (the "Class D Certificates"), each of which
represents a fractional undivided interest in the Trust,
and is issued under and is subject to the terms, provi-
sions and conditions of the Agreement, to which Agree-
ment, as amended from time to time, the Certificateholder
by virtue of the acceptance hereof assents and by which
the Certificateholder is bound.
Fingerhut Receivables, Inc. shall be prohibited
from Transferring any interest in or portion of the
Class D Certificate unless, prior to such Transfer, it
shall have delivered to the Trustee an Opinion of Counsel
to the effect that such proposed Transfer will not ad-
versely affect the Federal, Minnesota or Delaware income
tax characterization of any outstanding Series of Inves-
tor Certificate or the taxability (or tax characteriza-
tion) of the Trust under Federal, Minnesota or Delaware
income tax laws. In no event shall Fingerhut Receiv-
ables, Inc. be permitted to Transfer any interest in or
portion of the Class D Certificate if, after giving
effect to such proposed Transfer, taking into account the
certificates whose Transfer is proposed, more than 20%
(by Invested Amount and by value) of the outstanding
certificates issued by the Trust with respect to which no
Opinion of Counsel was issued that the applicable class
would be treated as debt for federal income tax purposes
(including the Transferor Certificate and each Transferor
Retained Class) would not be beneficially owned by the
Transferor.
No principal will be payable to the Class D
Certificateholders until the Class D Payment Commencement
Date, which is the Distribution Date either on or follow-
ing the Distribution Date on which the Class C Invested
Amount had been paid in full. No principal will be pay-
able to the Class D Certificateholders until all princi-
pal payments have first been made to the Class A Certifi-
cateholders and then on and after the Class B Principal
Payment Commencement Date, after all principal payments
have been made to the Class B Certificateholders and then
on and after the Class C Principal Payment Commencement
Date, after all payments have been made to the Class C
Certificateholders.
Interest will not accrue on the unpaid princi-
pal amount of the Class D Certificates.
"Class D Invested Amount" means an amount equal
to (a) the initial principal balance of the Class D
Certificates, minus (b) the aggregate amount of principal
payments made to Class D Certificateholders prior to such
date, minus (c) the aggregate amount of Class D Investor
Charge-Offs for all prior Distribution Dates, equal to
the amount by which the Class D Invested Amount has been
reduced to fund the Investor Default Amount on all prior
Distribution Dates, minus (d) the aggregate amount of
Reallocated Principal Collections for all prior Distribu-
tion Dates, and plus (e) the aggregate amount of Imputed
Yield Collections, Transferor Imputed Yield Collections,
and Excess imputed Yield Collections applied on all prior
Distribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c) and (d).
Subject to the Agreement, payments of principal
are limited to the unpaid Class D Invested Amount of the
Class D Certificates, which may be less than the unpaid
balance of the Class D Certificates pursuant to the terms
of the Agreement. All principal of and interest on the
Class D Certificates is due and payable no later than the
June 20, 2001 Distribution Date (or if such day is not a
Business Day, the next succeeding Business Day) (the
"Series Termination Date"). After the Series Termination
Date neither the Trust nor the Transferor will have any
further obligation to distribute principal or interest on
the Class C Certificates. In the event that the Class D
Invested Amount is greater than zero on the Series Termi-
nation Date, the Trustee will sell or cause to be sold,
to the extent necessary, an amount of interests in the
Receivables or certain of the Receivables up to 110% of
the Class A Invested Amount, the Class B Invested Amount,
the Class C Invested Amount and the Class D Invested
Amount at the close of business on such date (but not
more than the total amount of Receivables allocable to
the Investor Certificates), and shall pay the proceeds to
the Class A Certificateholders pro rata in final payment
of the Class A Certificates, then to the Class B Certifi-
cateholders pro rata in final payment of the Class B
Certificates, then to the Class C Certificateholders pro
rata in final payment of the Class C Certificates and
finally to the Class D Certificateholders pro rata in
final payment of the Class D Certificates.
Unless the certificate of authentication hereon
has been executed by or on behalf of the Trustee, by
manual signature, this Certificate shall not be entitled
to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused
this Certificate to be duly executed under its official
seal.
FINGERHUT RECEIVABLES, INC.
By:________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class D Certificates re-
ferred to in the within-mentioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK
By:________________________
Name:
Title:
Exhibit 11
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(In thousands of dollars, except per share data)
Unaudited
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 1, June 25, July 1, June 25,
1994 1993 1994 1993
Primary
Net earnings (a) $ 16,192 $ 12,976 $ 26,165 $ 20,740
Weighted average shares of
common stock outstanding 46,326,177 45,972,640 46,278,151 45,932,852
Common stock equivalents 4,324,192 3,922,464 4,426,112 3,785,542
Weighted average shares of
common stock and common
stock equivalents (b) 50,650,369 49,895,104 50,704,263 49,718,394
Primary earnings per share
of common stock and common
stock equivalents (a/b) $ .32 $ .26 $ .52 $ .42
Fully diluted
Net earnings (c) $ 16,192 $ 12,976 $ 26,165 $ 20,740
Weighted average shares of
common stock outstanding 46,326,177 45,972,640 46,278,151 45,932,852
Common stock equivalents 4,324,192 4,012,254 4,430,797 3,977,292
Weighted average shares of
common stock and common
stock equivalents (d) 50,650,369 49,984,894 50,708,948 49,910,144
Fully diluted earnings per
share of common stock and
common stock equivalents
(c/d) $ .32 $ .26 $ .52 $ .42
Common stock equivalents for primary earnings per share are computed
by the treasury stock method using the average market price.
Common stock equivalents for quarterly fully diluted earnings per
share are computed by the treasury stock method using the ending
market price, average market price for the last month or the average
of the fully diluted monthly amounts used in the quarter, whichever
is higher.
Common stock equivalents for year-to-date fully diluted earnings per
share are computed by the treasury stock method using the ending
market price or the average of the fully diluted monthly amounts used
in the period, whichever is higher.
