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
June 30, 1995 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 9, 1995, 45,907,680 shares of the Registrant's Common Stock, $.01
par value, were outstanding.
FINGERHUT COMPANIES, INC.
FORM 10-Q
June 30, 1995
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements
Consolidated Statements of Earnings (Unaudited) -
thirteen weeks and twenty-six weeks ended
June 30, 1995 and July 1,1994 ......................... 3
Consolidated Statements of Financial Position
(Unaudited) - June 30, 1995, July 1, 1994 and
December 30, 1994 ..................................... 4
Consolidated Statements of Cash Flows (Unaudited) -
twenty-six weeks ended June 30, 1995 and
July 1,1994 ........................................... 5
Condensed Notes to Consolidated Financial
Statements (Unaudited)................................. 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition .....................10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K ...................... 17
Signatures...................................................... 18
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of dollars, except per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
Revenues:
Net sales $ 408,948 $ 388,767 $ 774,313 $ 713,448
Finance income and
other revenues 65,430 57,264 109,041 94,727
474,378 446,031 883,354 808,175
Costs and expenses:
Product cost 205,676 197,280 384,006 357,669
Administrative and
selling expenses 177,060 150,888 327,982 284,656
Provision for
uncollectible accounts 58,154 52,084 105,020 90,757
Discount on sale of
accounts receivable 17,884 14,031 35,405 20,953
Interest expense, net 6,633 6,741 12,396 13,731
465,407 421,024 864,809 767,766
Earnings before taxes 8,971 25,007 18,545 40,409
Provision for income
taxes 3,177 8,815 6,567 14,244
Net earnings $ 5,794 $ 16,192 $ 11,978 $ 26,165
Earnings per share $ .12 $ .32 $ .25 $ .52
Dividends $ .04 $ .04 $ .08 $ .08
Weighted average shares 48,186,409 50,650,369 48,321,429 50,704,263
See accompanying Condensed Notes to Consolidated Financial Statements.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
(Unaudited)
June 30, July 1, December 30,
1995 1994 1994
ASSETS
Current assets:
Cash and cash equivalents $ 26,987 $ 116,360 $ 85,382
Customer accounts receivable, net 376,924 282,855 351,605
Inventories, net 151,446 138,994 159,048
Promotional material 77,198 67,093 59,477
Deferred income taxes 106,299 62,338 116,755
Other 20,162 16,182 19,645
Total current assets 759,016 683,822 791,912
Property and equipment, net 266,725 196,764 226,385
Excess of cost over fair value of
net assets acquired, net 44,066 45,251 44,321
Customer lists, net 12,397 13,702 12,601
Other assets 26,146 19,587 22,714
$1,108,350 $ 959,126 $1,097,933
LIABILITIES
Current liabilities:
Accounts payable $ 146,046 $ 126,637 $ 156,121
Accrued payroll and employee benefits 22,396 24,094 39,891
Other accrued liabilities 57,510 40,467 55,595
Accrued unusual charges 10,105 - 29,358
Short-term debt 85,000 - -
Current portion of long-term debt 201 324 336
Current income taxes payable 852 3,587 42,327
Total current liabilities 322,110 195,109 323,628
Long-term debt, less current portion 246,460 246,683 246,516
Deferred income taxes 21,409 14,553 21,762
Other non-current liabilities 7,815 5,085 5,077
597,794 461,430 596,983
STOCKHOLDERS' EQUITY
Preferred stock - - -
Common Stock 458 463 456
Additional paid-in capital 257,190 257,827 253,926
Earnings reinvested 252,908 239,406 246,568
Total stockholders' equity 510,556 497,696 500,950
$1,108,350 $ 959,126 $1,097,933
See accompanying Condensed Notes to Consolidated Financial Statements.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Twenty-six Weeks Ended
June 30, July 1,
1995 1994
Cash flows from operating activities:
Net earnings $ 11,978 $ 26,165
Adjustments to reconcile net earnings to
net cash used by operating activities:
Depreciation and amortization 20,956 17,035
Change in assets and liabilities, excluding
the effects of business divestitures:
Customer accounts receivable, net (25,319) 72,412
Inventories, net 7,602 13,035
Promotional material and other current assets (15,151) (14,140)
Accounts payable (10,075) 2,710
Accrued payroll and employee benefits (17,495) (14,383)
Accrued liabilities (12,643) (18,718)
Current income taxes payable (40,337) (22,792)
Deferred and other income taxes 10,103 8,478
Other (5,912) (6,289)
Net cash (used) provided by operating activities (76,293) 63,513
Cash flows from investing activities:
Additions to property and equipment (58,706) (22,211)
Proceeds from business divestitures - 12,039
Net cash used by investing activities (58,706) (10,172)
Cash flows from financing activities:
Repayments of long-term debt (191) (158)
Revolving credit facility 85,000 -
Issuance of common stock 3,317 1,858
Repurchase of common stock (7,862) -
Cash dividends paid (3,660) (3,703)
Net cash provided (used) by financing activities 76,604 (2,003)
Net (decrease) increase in cash and cash equivalents (58,395) 51,338
Cash and cash equivalents at beginning of period 85,382 65,022
Cash and cash equivalents at end of period $ 26,987 $ 116,360
Supplemental noncash investing and financing activities:
Tax benefit from exercise of non-qualified
stock options $ 1,138 $ 1,417
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 13,351 $ 13,978
Cash paid during the period for income taxes $ 36,853 $ 27,961
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.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
1. Consolidated financial statements
The consolidated financial statements of Fingerhut Companies, Inc.
(the "Company") reflect the financial position and results of
operations of the Company and its wholly owned subsidiaries.
The consolidated financial statements as of June 30, 1995 and July 1,
1994, and for the thirteen and twenty-six weeks ended June 30, 1995
and July 1, 1994, 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 1994 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 periods' consolidated
financial statements whenever necessary to conform to the current
period's presentation.
2. 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.
3. Unusual Charges
In 1994, the Company recorded charges relating to the cancellation of
its proposed 24-hour cable television shopping channel, substantially
scaling back USA Direct, as well as provisions for corporate
streamlining.
A summary of the change in the Company's reserve for unusual charges
is as follows:
Accrued Accrued
unusual unusual
charges at (1) charges at
December 30, Reserves Reserve June 30,
(In thousands of dollars) 1994 Utilized Adjustments 1995
Product costs $ 5,253 $( 277) $( 1,895) $ 3,081
Administrative and
selling expenses 20,771 (14,313) ( 675) 5,783
Provision for
uncollectible accounts 3,334 ( 193) ( 1,900) 1,241
$29,358 $(14,783) $( 4,470) $10,105
(1) Recorded during the quarter ended March 31, 1995.
4. Sale of accounts receivable
Fingerhut Master Trust
In May 1995, the Company amended the Series 1994-2 Supplement under
the Fingerhut Master Trust to extend the life of the Series 1994-2
certificates. The Series 1994-2 certificates enter into amortization
periods beginning in May 1999.
The proceeds from the sale of accounts receivable to the Fingerhut
Master Trust were $1.003 billion, $872.9 million and $1.096 billion
as of June 30, 1995, July 1, 1994 and December 30, 1994,
respectively. The Company's retained interest in the Fingerhut
Master Trust was approximately $174.8 million, $121.9 million and
$184.2 million as of June 30, 1995, July 1, 1994 and December 30,
1994, respectively.
Fingerhut Financial Services Master Trust
In May 1995, the Fingerhut Financial Services Master Trust (the "FFS
Master Trust") was established. The FFS Master Trust allows the
Company to sell, on a continuous basis, an undivided interest in a
pool of MasterCard receivables generated or acquired by Direct
Merchants Credit Card Bank, N.A., a wholly owned subsidiary of the
Company. In May 1995, the FFS Master Trust issued the Series 1995-1
certificates with a maximum principal amount of $512.6 million. The
Series 1995-1 certificates enter into amortization periods beginning
in May 1999. As of June 30, 1995, the proceeds received from the
sale of MasterCard receivables to the FFS Master Trust were $136.9
million and the Company's retained interest in the FFS Master Trust
was $52.4 million, which includes $8.4 million in an investor reserve
account held by the Trustee of the FFS Master Trust.
5. Derivative Financial Instruments Held or Issued for Purposes other
than Trading
The Company enters into interest rate cap and swap agreements to
hedge its economic exposure to increasing interest rates from
floating rate accounts receivable certificates issued by the
Fingerhut Master Trust and the FFS Master Trust. Any premium paid
for these agreements is amortized to "Discount on sale of accounts
receivable" where the economic exposure to rising interest rates
exists.
In connection with the amendment of the Fingerhut Master Trust and
the establishment of the FFS Master Trust, the Company entered into
two interest rate cap agreements. The interest rate cap agreements
effectively cap thirty day LIBOR at 11.2% on a maximum notional
amount of $209.7 million of certificates issued by the Fingerhut
Master Trust, and $513.0 million of certificates issued by the FFS
Master Trust.
In June 1995, the Company also entered into interest rate swap
agreements for a maximum notional amount of $400.0 million. The
agreements exchange an obligation to pay a variable interest rate for
an obligation to pay a fixed interest rate of 5.8%. These agreements
expire in July 1998.
6. Customer accounts receivable, net
Customer accounts receivable, net consisted of the following:
(In thousands of dollars) June 30, July 1, December 30,
1995 1994 1994
Due from customers $ 512,742 $ 395,421 $ 484,158
Reserve for uncollectible
accounts, net of anticipated
recoveries (88,226) (75,093) (81,271)
Reserve for returns
and exchanges (12,140) (10,362) (14,889)
Other reserves (16,929) (13,433) (17,223)
Net collectible amount 395,447 295,533 370,775
Unearned finance income (18,523) (13,678) (19,170)
Customer accounts
receivable, net $ 376,924 $ 282,855 $ 351,605
7. Revolving credit facility
Interest expense related to the revolving credit facility for the
twenty-six week periods ended June 30, 1995 and July 1, 1994 was $2.1
million and $27 thousand, respectively. The average outstanding
balances during such periods were $56.0 million and $852 thousand,
respectively, and the average annual interest rate for the 1995 and
1994 periods was 7.5% and 6.3%, respectively.
8. Stockholders' equity
During the twenty-six week period ended June 30, 1995, 382,899 shares
of common stock were issued related to the exercise of employee stock
options and 64,034 shares of common stock were issued under the
Fingerhut Companies, Inc. Employee Stock Purchase Plan. The Company
also repurchased at prevailing market prices 214,100 shares of its
common stock for an aggregate of $3.2 million. The total shares of
common stock outstanding as of June 30, 1995 was 45,805,736.
The Company repurchased 1,724,956 options granted under the Fingerhut
Companies, Inc. Performance Enhancement Investment Plan. These
options were repurchased for the original purchase price paid by the
option holders. The repurchase had no impact on the Company's
earnings.
9. Subsequent events
In July 1995, the Company entered into additional interest rate swap
agreements for a maximum notional amount of $500.0 million to hedge
its economic exposure to increasing interest rates. The agreements
exchange an obligation to pay a variable interest rate for an
obligation to pay a fixed interest rate of 5.7%. These agreements
expire in July 1998.
On July 20, 1995, the Company declared a cash dividend in the amount
of $.04 per share, aggregating approximately $1.8 million, payable on
August 24, 1995, to the shareholders of record as of the close of
business on August 3, 1995.
In July 1995, the Company issued 32,844 shares of common stock under
the Fingerhut Companies, Inc. Employee Stock Purchase Plan and 68,700
shares related to the exercise of employee stock options.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
THIRTEEN AND TWENTY-SIX WEEKS ENDED
JUNE 30, 1995 AND JULY 1, 1994
Results of Operations
Second Quarter
Net sales for the current thirteen-week period were $408.9 million
compared to net sales of $388.8 million for the related period in 1994, an
increase of 5%. Net sales from Fingerhut's new customer acquisition
programs increased 17% to $77.1 million as the Company increased its
investment in new customers over the prior year in order to strengthen
customer list sales later in 1995. Net sales from Fingerhut's existing
customer list were $304.6 million compared to $304.3 million in 1994.
Mailings for the quarter were maintained at prior year levels, which
reflected more stringent mailing decisions to eliminate marginal programs.
Sales per mailing were comparable with the prior year and the first
quarter. Other net sales were $27.2 million compared to $18.6 million for
the same period in 1994. The increase was the result of the inclusion of
revenues of Figi's Inc. ("Figi's"), which were not consolidated in 1994,
and sales from infomercials first aired in 1994.
Net finance income and other revenues for the current thirteen-week period
increased 14% to $65.4 million from $57.3 million in the comparable 1994
period. The increase was due to revenues associated with MasterCard
accounts issued by the Company's subsidiary, Direct Merchants Credit Card
Bank, N.A. ("Direct Merchants Bank"). Fingerhut also recognized increased
finance income during the current quarter as a result of lengthened
payment plans and higher order size but this increase was less than the
one-time benefit to finance income recorded in 1994 due to the
establishment of the Fingerhut Master Trust.
Product cost for the current thirteen-week period was 50.3% of net sales,
or $205.7 million, compared to 50.7% of net sales, or $197.3 million,
during the comparable prior year period. The reduction as a percent of
net sales was due to a small improvement in product margins as well as
cost efficiencies.
Administrative and selling expenses for the current thirteen-week period
were $177.1 million, or 43.3% of net sales, compared to $150.9 million, or
38.8% of net sales, in the comparable prior year period. Price increases
for paper and postage, increased investment in new customer acquisition
programs and solicitation and operating expenses associated with the start-
up of Direct Merchants Bank's MasterCard products all contributed to the
higher ratio of expense to net sales in the quarter. These were partially
offset by benefits realized due to our cost reduction program.
The provision for uncollectible accounts for the second quarter of 1995
was $58.2 million, or 14.2% of net sales, compared to $52.1 million, or
13.4% of net sales, for the same period in the prior year. The increase
in the provision as a percent of net sales was due to a higher mix of new
customer acquisition programs as well as provisions related to retained
MasterCard receivables first generated in the current quarter.
Discount on sale of accounts receivable for the thirteen-week period ended
June 30, 1995 was $17.9 million compared to $14.0 million for the
comparable period in 1994. The increase resulted primarily from the
increase in short-term interest rates compared to the prior year and
expense relating to interest rate cap agreements entered into in December
1994. The increase would have been greater but for the one-time impact of
the Fingerhut Master Trust recorded in 1994.
Net interest expense for the current thirteen-week period was $6.6 million
compared to $6.7 million in the second quarter of 1994. The unfavorable
impact of higher borrowings under the revolving credit facility was offset
by the favorable impact from the expiration of interest rate swap
agreements in June 1994.
The effective tax rate for the second quarter of 1995 was 35.4% compared
with 35.3% in the comparable prior year period.
As a result of the items discussed above, net earnings for the thirteen-
week period ended June 30, 1995 were $5.8 million, or $.12 per share,
compared to second quarter 1994 net earnings of $16.2 million, or $.32 per
share.
First Half
Fingerhut Companies, Inc. net sales for the twenty-six week period ended
June 30, 1995 were $774.3 million compared to $713.4 million for the
corresponding period in 1994, an increase of 9%, or 7% excluding Figi's,
which was not consolidated in 1994. Net sales from Fingerhut's new
customer acquisition programs increased 11% to $140.5 million. Net sales
from Fingerhut's existing customer list increased 4% to $567.8 million.
Both increases were primarily due to additional mailings and higher
average order size, partially offset by lower response rates. Other net
sales were $66.0 million compared to $38.9 million for the same period in
1994. The increase was the result of the inclusion of revenues of Figi's,
which was not consolidated in 1994, and sales from infomercials first
aired in 1994.
Net finance income and other revenues for the first half of 1995 was
$109.0 million compared to $94.7 million for the same period in 1994. The
increase was primarily due to revenues associated with MasterCard accounts
issued by the Company's subsidiary, Direct Merchants Bank, as well as
increased sales from Fingerhut's existing customers and the effect of
lengthened payment plans related to those sales, partially offset by the
one-time benefit of implementing the Fingerhut Master Trust in 1994.
Product cost for the twenty-six week period ended June 30, 1995 was $384.0
million or 49.6% of net sales compared to $357.7 million or 50.1% of net
sales during the comparable prior year period. The reduction as a percent
of net sales was due to a small improvement in product margins, the
recovery of reserves established for unusual charges in the fourth quarter
of 1994 as well as cost efficiencies.
Administrative and selling expenses for the first half of 1995 were $328.0
million, or 42.4% of net sales, compared to $284.7 million or 39.9% of net
sales in the comparable prior year period. The increase as a percent of
net sales was due to higher costs as a result of price increases for paper
and postage, lower response rates from the existing customer list and new
customer acquisition programs, and solicitation and operating expenses
associated with the start-up of Direct Merchants Bank's MasterCard
products. These were partially offset by lower expenses due to our cost
reduction program.
The provision for uncollectible accounts for the first half of 1995 was
$105.0 million or 13.6% of net sales compared with $90.8 million or 12.7%
of net sales for the same period in the prior year. The increase in the
provision as a percent of net sales was primarily due to added provisions
in the first quarter resulting from increased delinquencies related to
receivables generated in 1994 as well as provisions related to retained
MasterCard receivables initially generated in the second quarter.
Discount on sale of accounts receivable for the twenty-six week period
ended June 30, 1995 was $35.4 million compared to $21.0 million for the
comparable period in 1994. The increase resulted primarily from higher
short-term interest rates and expense relating to interest rate cap
agreements entered into in December 1994, 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 1995 was $12.4 million compared
to $13.7 million in the comparable prior year period. The decrease was
primarily attributable to the expiration of interest rate swap agreements
in June 1994 which offset the higher utilization of the revolving credit
agreement.
The effective tax rate for the first twenty-six weeks of 1995 was 35.4%
compared with 35.2% in the first half of the prior year.
As a result of the items discussed above, net earnings for the twenty-six
week period ended June 30, 1995 were $12.0 million, or $.25 per share,
compared to first half 1994 net earnings of $26.2 million, or $.52 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 and the Fingerhut Financial Services Master
Trust agreements, borrowings under the Revolving Credit Facility and
issuance of long-term debt and common stock.
The proceeds received as of June 30, 1995 and December 30, 1994 from the
sale of Fingerhut accounts receivable were $1.003 billion and $l.096
billion, respectively, compared with $872.9 million as of July 1, 1994 and
$829.0 million as of December 31, 1993. Proceeds received from the sale
of MasterCard receivables were $136.9 million as of June 30, 1995.
The Revolving Credit Facility provides for aggregate commitments of $400.0
million, which includes the issuance of up to $200.0 million in letters of
credit. The commitment expires in October 1999. As of June 30, 1995, the
Company had an outstanding revolving credit balance of $85.0 million and
outstanding letters of credit of $5.8 million. As of July 1, 1994, the
Company had no borrowings under the Revolving Credit Facility but had
outstanding letters of credit of $13.9 million. Additional outstanding
open letters of credit under a separate agreement aggregated $44.0 million
and $36.1 million at June 30, 1995 and July 1, 1994, respectively.
The Company had an aggregate amount of fixed rate notes outstanding of
$245.0 million as of June 30, 1995 and July 1, 1994.
The Company used $76.3 million of cash for operations during the twenty-
six week period ended June 30, 1995, compared with $63.5 million provided
by operations for the related period in 1994. This net $139.8 million
increase in cash used for operations resulted from increased working
capital requirements as well as the $14.2 million decrease in earnings.
The most significant items affecting the increase in working capital
requirements were a change in customer accounts receivable and income
taxes payable. The change in customer accounts receivable from a $72.4
million source of cash in 1994 to a $25.3 million use of cash in 1995
resulted primarily from an increase in the percent of accounts receivable
which could be sold in June 1994 compared to June 1993 due to the
replacement of the Receivables Transfer Agreement with the Fingerhut
Master Trust in June 1994. The change also reflects retained receivables
associated with MasterCard accounts issued by the Company's subsidiary,
Direct Merchants Bank. The increased use of cash for income taxes was due
to unfavorable timing differences at December 1994 compared to December
1993, as the result of increased reserve provisions for unusual items and
uncollectible accounts.
The $48.5 million increase in net cash used by investing activities was
the result of increased capital expenditures related to the facility
additions discussed below and proceeds received in 1994 from businesses
divested at the end of 1993.
Several facility additions were approved by the Company's Board of
Directors in 1994. Construction continues in 1995 on a western
distribution center in Spanish Fork, Utah which began in the third quarter
of 1994. Capital spending through June 30, 1995 was $38.8 million. This
one million square-foot facility has projected capital spending of
approximately $60.0 million and is expected to be fully operational by mid-
1996. The $23.0 million data and technology center in Plymouth, Minnesota
opened in the second quarter of 1995. Capital spending through June 30,
1995 was $19.9 million.
The owner of certain office and warehouse facilities exercised its right
to require the Company to repurchase those facilities for approximately
$14.9 million. The agreement presently obligates the Company to complete
the purchase on or before September 29, 1995, but the Company anticipates
that it will receive an extension of the closing date to January 1996.
During 1994, the Company announced that its Board of Directors authorized
the repurchase of up to 2.5 million 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
are 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. During the first quarter of 1995, the Company
repurchased at prevailing market prices 214,100 shares of its common stock
for an aggregate of $3.2 million. No purchases were made during the
second quarter ended June 30, 1995. Total purchases to date were
1,021,500 shares for an aggregate of $16.6 million.
On July 20, 1995, the Company declared a cash dividend of $.04 per share,
or an aggregate of $1.8 million, payable on August 24, 1995, to the
shareholders of record as of the close of business on August 3, 1995.
In July 1995, the Company issued 32,844 shares of common stock under the
Fingerhut Companies, Inc. Employee Stock Purchase Plan and 68,700 shares
related to the exercise of employee stock options.
The Company believes it will have sufficient funds available to meet
current and anticipated commitments.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the Company was
held on May 18, 1995. At the meeting, the shareholders elected
each of Stanley S. Hubbard (35,543,053 votes for, 302,631 votes
withheld), Rakesh K. Kaul (35,254,300 votes for, 591,384 votes
withheld) and Richard M. Kovacevich (35,548,376 votes for,
297,308 votes withheld) to a three year term as director;
approved adoption of the Fingerhut Companies, Inc. 1995 Long Term
Incentive and Stock Option Plan (27,194,579 votes in favor of the
plan, 8,507,387 votes against the plan, 143,718 votes abstaining
and no broker non-votes); and ratified the appointment of KPMG
Peat Marwick LLP as the independent auditors of the Company for
the 1995 fiscal year (35,432,312 votes for, 343,040 votes
against, 70,332 votes abstaining and no broker non-votes).
Item 5. Other Information
The Company previously reported that it had signed a letter of
intent to sell certain assets of Figi's Inc. This letter of
intent has been terminated.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.u Pooling and Servicing Agreement dated as of May
26, 1995 among Fingerhut Financial Services
Receivables, Inc., as Transferor ("FFSRI"),
Direct Merchants Credit Card Bank, N.A., as
Servicer ("DMCCB"), and the Bank of New York
(Delaware), as Trustee (the "Trustee").
10.u(i) Series 1995-1 Supplement dated as of May 26,1995
among FFSRI, DMCCB, and the Trustee.
11 Computation of Earnings per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
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 14, 1995 By:
/s/ Peter G. Michielutti
Peter G. Michielutti
Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 1995 By:
/s/ Thomas C. Vogt
Thomas C. Vogt
Corporate Controller
(Principal Accounting Officer)
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
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
Primary
Net earnings (a) $ 5,794 $ 16,192 $ 11,978 $ 26,165
Weighted average shares
of common stock
outstanding 45,797,745 46,326,177 45,748,650 46,278,151
Common stock equivalents 2,388,664 4,324,192 2,572,779 4,426,112
Weighted average shares of
common stock and common
stock equivalents 48,186,409 50,650,369 48,321,429 50,704,263
Primary earnings per share
of common stock and common
stock equivalents (a/b) $ .12 $ .32 .25 .52
Fully diluted
Net earnings (c) $ 5,794 $ 16,192 $ 11,978 $ 26,165
Weighted average shares
of common stock
outstanding 45,797,745 46,326,177 45,748,650 46,278,151
Common stock
equivalents 2,473,542 4,324,192 2,777,403 4,430,797
Weighted average shares of
common stock and common
stock equivalents (d) 48,271 ,287 50,650,369 48,526,053 50,708,948
Fully diluted earnings per
share of common stock and
common stock equivalents
(c/d) $ .12 $ .32 $ .25 $ .52
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, which ever is higher.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF FINGERHUT COMPANIES, INC. FOR THE PERIOD
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> JUN-30-1995
<CASH> 26,987
<SECURITIES> 0
<RECEIVABLES> 512,742
<ALLOWANCES> 135,818
<INVENTORY> 151,446
<CURRENT-ASSETS> 759,016
<PP&E> 375,533
<DEPRECIATION> 108,808
<TOTAL-ASSETS> 1,108,350
<CURRENT-LIABILITIES> 322,110
<BONDS> 246,460
<COMMON> 458
0
0
<OTHER-SE> 510,098
<TOTAL-LIABILITY-AND-EQUITY> 1,108,350
<SALES> 408,948
<TOTAL-REVENUES> 474,378
<CGS> 205,676
<TOTAL-COSTS> 440,890
<OTHER-EXPENSES> 17,884
<LOSS-PROVISION> 58,154
<INTEREST-EXPENSE> 6,633
<INCOME-PRETAX> 8,971
<INCOME-TAX> 3,177
<INCOME-CONTINUING> 5,794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,794
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
EXHIBIT 10.U
POOLING AND
SERVICING AGREEMENT, dated as of May 26, 1995 by and
among FINGERHUT FINANCIAL SERVICES RECEIVABLES, INC., a
corporation organized and existing under the laws of the
State of Delaware, as Transferor, DIRECT MERCHANTS CREDIT
CARD BANK, N.A., a national banking organization orga
nized and existing under the laws of the United States of
America, as Servicer, and The Bank of New York
(Delaware), a Delaware 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:
"Account" shall mean each revolving credit
consumer credit card account established pursuant to a
Contract between a Credit Card Originator and any Person,
which on the Initial Closing Date is an Eligible Account
or, with respect to accounts transferred to the Trust
after the Initial Closing Date, is an Additional Account
or a Supplemental Account. The definition of Account
shall include each Transferred Account but shall not
include any Accounts containing Ineligible Receivables
and reassigned to the Transferor pursuant to Section 2.4.
The term "Account" shall be deemed to refer to an Addi
tional Account or Supplemental Account only from and
after the Addition Date with respect thereto, and the
term "Account" shall be deemed to refer to any Removed
Account only prior to the Removal Date with respect
thereto.
"Addition Date" shall mean each date as of
which Receivables under Additional Accounts or Supplemen
tal Accounts are included in the Trust as Accounts pursu
ant to Section 2.6.
"Additional Account" shall mean each revolving
credit consumer credit card account owned by a Credit
Card Originator coming into existence after the Initial
Closing Date which is an Approved Account that the Trans
feror has not elected to exclude from the Trust. Any
such election shall be made by the Transferor or the
Servicer providing to the Trustee a written notice there
of clearly identifying such excluded accounts.
"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 out
standing on such date of determination.
"Aggregate Investor Percentage" with respect to
each of Principal Collections, Finance Charge 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 Receiv
ables at the end of such day.
"Agreement" shall mean this Pooling and Servic
ing 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.
"Applicable Tax State" shall mean, as of any
date of determination, each state as to which any of the
following is then applicable: (a) a state in which the
Trustee maintains its principal corporate trust office,
(b) a state in which the Transferor maintains its princi
pal executive offices, and (c) a state in which the
Servicer regularly conducts servicing and collection
operations which are not limited to ministerial activi
ties and which relate to a material portion of the Receiv
ables.
"Applicants" shall have the meaning specified
in Section 6.7.
"Appointment Day" shall have the meaning speci
fied in subsection 9.2(a).
"Approved Account" shall mean each (i) Eligible
Account that is a MasterCard or VISA account or (ii) any
other revolving credit consumer credit card account the
inclusion in the Trust of which would not cause a Ratings
Event.
"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.
"Bank Receivables Purchase Agreement" shall
mean the amended and restated receivables purchase agree
ment dated as of May 26, 1995 between FCI, as purchaser
of such Receivables, and DMCCB, as seller of Receivables,
as amended from time to time and any other receivables
purchase agreement between FCI, as purchaser of Receiv
ables, and a Credit Card Originator, as seller of such
Receivables.
"Base Rate" shall mean, with respect to any
outstanding Series, the amount which the related Supple
ment specifies as the "Base Rate".
"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 applica
ble to any Series, proposed or temporary regulations of
the Internal Revenue Service.
"Benefit Plan" shall mean (i) an employee
benefit plan (as defined in Section 3(3) of ERISA that is
subject to the provisions of Title I of ERISA, (ii) a
plan described in Section 4975(e)(1) of the Code or (iii)
any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a
"Benefit Plan").
"Book-Entry Certificates" shall mean certifi
cates evidencing a beneficial interest in the Investor
Certificates, ownership and transfers of which shall be
made through book entries by a Clearing Agency as de
scribed in Section 6.10; provided, that after the occur
rence 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 Certifi
cates."
"Business Day" shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions
in New York, Minnesota, Utah, Nebraska, Oklahoma or Dela
ware (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) in
vestments in money market funds rated AAA-m or AAA-mg by
Standard & Poor's and Aaa by Moody's or otherwise ap
proved 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 FCI or an Affiliate) upon books main
tained 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 with
drawal 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 A-
1+ 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; (d) a guaranteed investment contract
(guaranteed as to timely payment) which each Rating
Agency designates in writing will not result in a with
drawal or downgrading of its then current rating of any
Series rated by it; (e) repurchase agreements transacted
with either (i) an entity subject to the United States
federal bankruptcy code, provided, however, that (A) the
term of the repurchase agreement is consistent with the
requirements with regard to the maturity of Cash Equiva
lents specified herein or in the applicable Supplement
for the applicable account or is due on demand, (B) the
Trustee or a third party acting solely as agent for the
Trustee has possession of the collateral, (C) the Trustee
on behalf of the Trust has a perfected first priority
security interest in the collateral, (D) the market value
of the collateral is maintained at the requisite collat
eral percentage of the obligation in accordance with
standards of the Rating Agencies, (E) the failure to
maintain the requisite collateral level will obligate the
Trustee to liquidate the collateral as promptly as prac
ticable upon instructions from the Servicer, (F) the
securities subject to the repurchase agreement are either
obligations of, or fully guaranteed as to principal and
interest by, the United States of America or any agency
or any instrumentality or agency thereof, certificates of
deposit or bankers acceptances and (G) the securities
subject to the repurchase agreement are free and clear of
any third party lien or claim, or (ii) a financial insti
tution insured by the FDIC, or any broker-dealer with
"retail-customers" that is under the jurisdiction of the
Securities Investors Protection Corp. ("SIPC"), provided,
however, that (A) the market value of the collateral is
maintained at the requisite collateral percentage of the
obligation in accordance with the standards of the Rating
Agencies, (B) the Trustee or a third party (with a rating
from Moody's and Standard & Poor's of P-1 and A-1+,
respectively) acting solely as agent for the Trustee has
possession of the collateral, (C) the collateral is free
and clear of third party liens and, in the case of an
SIPC broker, was not acquired pursuant to a repurchase or
reverse repurchase agreement and (D) the failure to main
tain the requisite collateral percentage will obligate
the Trustee to liquidate the collateral upon instructions
from the Servicer; provided, however, that at the time of
the Trust's investment or contractual commitment to
invest in any repurchase agreement the short-term depos
its or commercial paper rating of such entity or institu
tion in subsections (i) and (ii) above shall have a
credit rating of P-1 or A-1+ or their equivalent from
each Rating Agency; and (f) 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 Bank, societe anonyme.
"Certificate" shall mean any one of the Inves
tor Certificates of any Series or the Exchangeable Trans
feror 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 supple
mented by the Supplement for such Series.
"Certificate Owner" shall mean, with respect to
a Book-Entry Certificate, the Person who is the benefi
cial 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 Clear
ing 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 ex
changes 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 Certifi
cates, 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.
"Contract" means an agreement between a Credit
Card Originator and another Person for the extension of
revolving credit, including pursuant to a credit card, in
the form of a written contract, invoice, or revolving
credit agreement (but shall not include any agreement or
plan relating to the extension of credit on a closed-end
basis).
"Corporate Trust Office" shall mean the princi
pal 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 the writ
ten policies and procedures of the applicable Credit Card
Originator relating to the operation of its consumer
revolving credit card business, including, without limita
tion, the written policies and procedures for determining
the creditworthiness of credit card customers, the exten
sion of credit to credit card customers and relating to
the maintenance of credit card accounts and collection of
receivables with respect thereto, as such policies and
procedures may be amended, modified, or otherwise changed
from time to time.
"Credit Card Originator" shall mean DMCCB and
its successors or assigns under the Bank Receivables
Purchase Agreement and/or any transferee of the Accounts
from DMCCB or any other originator of accounts which
enters into a receivables purchase agreement with DMCCB,
FCI or the Transferor in accordance with the provisions
of this Agreement.
"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
settled according to the Servicer's (or, in the case of a
Credit Card Originator, such Credit Card Originator's)
computer master file of revolving credit accounts.
"Default Amount" shall mean, (i) on any Busi
ness Day other than the Default Recognition Date, the
aggregate amount of Principal Receivables in Accounts
which became Defaulted Accounts on such Business Day and
(ii) on any Default Recognition Date the aggregate amount
of Principal Receivables in Accounts which became De
faulted Accounts during the then current Monthly Period
(other than such Accounts which were included in clause
(i)).
"Default Recognition Date" shall mean the last
day of each calendar month; provided, however that with
respect to any Monthly Period the "related Default Recog
nition Date" shall mean the Default Recognition Date
occurring closest to the last day of such Monthly Period
and any amounts allocated or applied on such Default
Recognition Date shall be deemed to apply to the related
Monthly Period.
"Defaulted Account" shall mean each Account
with respect to which, in accordance with the Credit and
Collection Policy or the Servicer's customary and usual
servicing procedures, the Servicer has charged off the
Receivables in such Account as uncollectible; an Account
shall become a Defaulted Account on the day on which such
Receivables are recorded as charged off as uncollectible
on the Servicer's computer master file of consumer credit
card revolving accounts. Notwithstanding any other provi
sion hereof, any Receivables in a Defaulted Account that
are Ineligible Receivables shall be treated as Ineligible
Receivables rather than Receivables in Defaulted
Accounts.
"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 Option Receivables" shall mean, on
and after the date on which the Transferor's exercise of
its discount option pursuant to Section 2.8 takes effect,
the sum of (a) the aggregate Discount Option Receivables
at the end of the prior day (which amount, prior to the
date on which the Transferor's exercise of its discount
option takes effect and with respect to Receivables
generated prior to such date, shall be zero) plus (b) any
New Discount Option Receivables created on such day minus
(c) any Discount Option Receivables Collections received
on such Date of Processing.
"Discount Option Receivable Collections" shall
mean on any Date of Processing, on and after the date on
which the Transferor's exercise of its discount option
pursuant to Section 2.8 takes effect, the product of (a)
a fraction the numerator of which is the amount of Dis
count Option Receivables and the denominator of which is
the sum of the Principal Receivables and the Discount
Option Receivables in each case (for both numerator and
denominator) at the end of the prior Date of Processing,
(b) Collections of Principal Receivables and Discount
Option Receivables received on such Date of Processing
and (c) a fraction the numerator of which is the aggre
gate amount of Principal Receivables arising on each Date
of Processing falling on or after the date on which the
Transferor exercises its discount option and the denomi
nator of which is the Aggregate Principal Receivables on
such Date of Processing.
"Discount Percentage" shall mean the fixed
percentage, if any, designated by the Transferor pursuant
to Section 2.8.
"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 other
wise 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.
"DMCCB" shall mean Direct Merchants Credit Card
Bank, N.A., a national banking organization organized and
existing under the laws of the United States of America.
"Dollars", "$" or "U.S. $" shall mean United
States dollars.
"Eligible Account" shall mean, as of the Ini
tial Closing Date (or, with respect to Additional Ac
counts, on the date of creation thereof, or, with respect
to Supplemental Accounts, as of the date the Receivables
arising in such Accounts are designated for inclusion in
the Trust), each revolving credit consumer credit card ac
count owned by a Credit Card Originator:
(a) which is payable in Dollars;
(b) the Obligor on which has provided, as its
initial billing address, an address located in the United
States or its territories or possessions or a United
States military address;
(c) which has not been identified by the
applicable Credit Card Originator or any of its Affili
ates in its computer files as stolen or lost;
(d) which is not at the time of transfer to
the Trust sold or pledged to any other party and which
does not have Receivables which, at the time of transfer
to the Trust, are sold or pledged to any other party (pro
vided that Receivables which were sold or pledged prior
to the Closing Date, but were repurchased free of all
Liens or where all Liens were released prior to the sale
hereunder, shall not be disqualified under this clause
(d)); and
(e) the Receivables in which the applicable
Credit Card Originator has not charged off in its custom
ary and usual manner for charging off Receivables in such
Accounts as of the Initial Closing Date (or, with respect
to Additional Accounts, as of the date the Receivables of
such Accounts are first designated for inclusion in the
Trust) unless such Account is subsequently reinstated.
"Eligible Receivable" shall mean each Receiv
able that satisfies each of the following criteria: (a)
arises under an Account, (b) it is not sold or pledged to
any other party, (c) it constitutes an "account," "chat
tel paper" or a "general intangible" as each are defined
in Article 9 of the UCC as then in effect in each Rele
vant 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 was created
or acquired in compliance, in all material respects, with
all Requirements of Law applicable to the Credit Card
Originator and pursuant to a Contract that complies, in
all material respects, with all Requirements of Law
applicable to the Credit Card Originator (including
without limitation, laws, rules and regulations relating
to truth in lending, usury, fair credit billing, fair
credit reporting, equal credit opportunity and fair debt
collection practices), (f) all material consents, licens
es, 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 and (g) immediately prior to giving
effect to the sale, 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 Transfer
or (other than Permitted Liens).
"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 or
one Series 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 Ex
changeable 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).
"FCI" shall mean Fingerhut Companies, Inc. a
corporation organized and existing under the laws of the
State of Minnesota.
"FDIC" shall mean the Federal Deposit Insurance
Corporation, or any successor thereto.
"Finance Charge Collections" shall mean, with
respect to any Business Day, Collections received by the
Servicer with respect to Finance Charge Receivables on
such Business Day.
"Finance Charge Receivables" shall mean the sum
of (w) all amounts billed from time to time to the
Obligors on any Account in respect of (i) Periodic Fi
nance Charges, (ii) overlimit fees, (iii) late charges,
(iv) returned check fees, (v) annual membership fees and
annual service charges, if any, (vi) transaction charges,
(vii) cash advance fees and (viii) similar fees and
charges, excluding fees and charges for insurance and
insurance type products, plus (x) Recoveries, (y) invest
ment earnings on amounts credited to the Excess Funding
Account and (z) Discount Option Receivables, if any.
"FFSRI" shall mean Fingerhut Financial Services
Receivables, Inc., a Delaware corporation.
"Foreign Clearing Agency" shall mean CEDEL and
the Euroclear Operator.
"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 subdivi
sion thereof and any entity exercising executive, legis
lative, 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.
"Ineligible Receivable" means any Receivable
that does not satisfy the definition of Eligible Receiv
able.
"Initial Closing Date" shall mean May 30, 1995.
"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 Invest
ment 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 cer
tificate 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, Finance Charge Collections and
Receivables in Defaulted Accounts, and with respect to
any Series of Certificates, the percentage specified in
the related Supplement.
"Lien" shall mean any lien, security interest
or other encumbrance; provided, however, that any assign
ment 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, the sum of the
numerators used in the calculation of the Investor Per
centages for Principal Collections for all outstanding
Series on such date of determination.
"Minimum Retained Interest" shall mean the
product of the weighted average Minimum Retained Percent
ages for all Series and the sum of the outstanding prin
cipal amounts of all Classes of all Series.
"Minimum Retained Percentage" shall mean, for
any Series, the Minimum Retained Percentage specified in
the Supplement for that Series.
"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 Minimum Transferor Percentage.
"Minimum Transferor Percentage" shall mean the
highest Minimum Transferor Percentage specified in any
Supplement.
"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 Supple
ment, 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.
"New Discount Option Receivables" shall mean,
on any Date of Processing on and after the date on which
the Transferor's exercise of its discount option pursuant
to Section 2.8 takes effect, the product of the amount of
any Principal Receivables created on such Date of Pro
cessing (without reducing the amount of Principal Receiv
ables by the amount of Financial Charge Receivables which
are Discount Option Receivables) and the Discount Per
centage.
"Obligor" shall mean a Person obligated to make
payments with respect to a Receivable arising under an
Account pursuant to a Contract.
"Officer's Certificate" shall mean a certifi
cate 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.
"Paying Agent" shall mean any paying agent
appointed pursuant to Section 6.6 and shall initially be
the Trustee.
"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.
"Periodic Finance Charges" shall have, with
respect to any Account, the meaning specified in the
Contract applicable to such Account for finance charges
(due to periodic rate) or any similar term.
"Permitted Lien" shall mean with respect to the
Receivables: (i) Liens in favor of the Transferor creat
ed 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 that 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 estab
lished.
"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.
"Portfolio Yield" shall mean, with respect to
any Monthly Period and any outstanding Series, the amount
which the related Supplement specifies as the "Portfolio
Yield" for such Monthly Period.
"Principal Account" shall have the meaning
specified in subsection 4.2(b).
"Principal Collections" shall mean, with re
spect to any Business Day, the Collections received with
respect to each Principal Receivable 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 on any
Account other than such amounts that are Finance Charge
Receivables (including Discount Option Receivables) or Re
ceivables in Defaulted Accounts and shall include, with
out limitation, amounts payable for purchases of goods or
services or cash advances. A Receivable shall be deemed
to have been created at the end of the day on the Date of
Processing of such Receivable. In calculating the aggre
gate amount of Principal Receivables on any day, the
amount of Principal Receivables shall be reduced by the
aggregate amount of credit balances in the Accounts on
such day.
"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 purchase
agreement dated as of May 26, 1995 between the Transferor
as purchaser of such Receivables, and FCI, as seller of
such Receivables as may be 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.
"Ratings Event" shall mean, with respect to
any Class of any outstanding Series rated by a Rating
Agency, a reduction or withdrawal of the rating of any
such Class by a Rating Agency.
"Reassignment Date" shall have the meaning
specified in subsection 2.4(e).
"Receivable" shall mean all of the indebtedness
of any Obligor under an Account, including the right to
receive payment of any interest or finance charges and
other obligations of such Obligors with respect thereto.
Each receivable includes, without limitation, all rights
of the Transferor under the applicable Contract.
"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 in Accounts that
previously became Defaulted Accounts.
"Registered Certificates" shall have the mean
ing specified in Section 6.1.
"Related Person" shall mean a Person that is an
Affiliate of FCI, 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 jurisdic
tions 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 Agree
ment or the ownership or security interest of the Trustee
established under this Agreement.
"Removal Date" shall have the meaning specified
in subsection 2.7(b).
"Removal Notice Date" shall mean the day, no
later than the fifth Business Day prior to a Removal
Date, on which the Transferor gives notice to the Trustee
pursuant to Section 2.7(a) of its intention to remove
Accounts from the Trust.
"Removed Accounts" shall have the meaning
specified in subsection 2.7(a).
"Requirements of Law" for any Person shall mean
the certificate of incorporation or articles of associa
tion 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 Presi
dent 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 Supple
ment.
"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 denom
inator 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 DMCCB and there
after any Person appointed as successor as herein provid
ed to service the Receivables.
"Servicer Default" shall have the meaning
specified in Section 10.1.
"Servicing Fee" shall have the meaning speci
fied in the related Supplements.
"Settlement Statement" shall mean a report in
the form specified in subsection 1.2(e) as may be supple
mented pursuant to any Supplement.
"Shared Principal Collections" shall mean, with
respect to any Business Day, the aggregate amount of
Principal Collections for all outstanding Series that 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 supplement executed in
connection with the issuance of such Certificates).
"Supplemental Accounts" shall have the meaning
specified in subsection 2.6(b).
"Supplemental Certificate" shall have the
meaning specified in subsection 6.9(d).
"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 (Delaware).
"Transfer Date" shall mean, with respect to any
Series, the Business Day immediately prior to each Dis
tribution Date.
"Transferor" shall mean Fingerhut Financial
Services 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, Finance Charge Collections and Receivables
in Defaulted Accounts, 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 Sup
plement.
"Transferor Retained Class" shall mean any
Class of Investor Certificates of any Series which the
Transferor retained pursuant to the terms of any Supple
ment.
"Transferred Account" shall mean an Account
with respect to which a new credit account number has
been issued by the applicable Credit Card Originator
under circumstances resulting from a lost or stolen
credit card and not requiring standard application and
credit evaluation procedures under the Credit and Collec
tion Policy.
"Trigger Event" shall have the meaning speci
fied 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 speci
fied 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 as
signed in Section 2.1.
"Trust Termination Date" shall mean the earli
est to occur of (i) unless a Trust Extension shall have
occurred, the day after the Distribution Date with re
spect 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 out
standing sufficient to pay in full the Aggregate Invested
Amount plus interest accrued at the applicable Certifi
cate Rate through the end of the day prior to the Distri
bution Date with respect to each such Series and certain
other amounts as may be specified in any Series Supple
ment, (ii) if a Trust Extension shall have occurred, the
Extended Trust Termination Date, and (iii) the date speci
fied in Section 12.1.
"Trustee" shall mean The Bank of New York
(Delaware), a banking corporation organized and existing
under the laws of Delaware, 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 appli
cable jurisdiction.
"Undivided Interest" shall mean the undivided
interest in the Trust evidenced by an Investor Certifi
cate.
"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 princi
ples. 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 war
ranties of DMCCB in this Agreement and in any Supplement
in its capacity as Servicer and of FFSRI in its capacity
as Transferor shall be deemed to be the agreements, repre
sentations and warranties of DMCCB and FFSRI 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 "hereun
der" and words of similar import when used in this Agree
ment shall refer to any Supplement or this Agreement as a
whole and not to any particular provision of this Agree
ment 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 re
ceiving the consent of the Trustee to such change, deliv
er 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 Exhib
it, as so changed, shall for all purposes of this Agree
ment constitute such Exhibit. The Trustee may conclu
sively rely upon such Officer's Certificate in determin
ing 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 arising in con
nection with the Accounts existing as of the Initial
Closing Date and any Additional Accounts, including, with
out limitation, all accounts, general intangibles, chat
tel paper, contract rights, and other obligations of any
Obligor with respect to the Receivables, now or hereafter
existing, (ii) all monies and investments due or to
become due with respect thereto (including, without limi
tation, the right to any Finance Charge Receivables,
including any Recoveries), (iii) all proceeds of such Re
ceivables, (iv) the Purchase Agreement and (v) the Bank
Receivables Purchase Agreement. Such property, together
with all monies and investments on deposit, from time to
time, in the Collection Account, the Excess Funding
Account, the Series Accounts maintained for the benefit
of the Certificateholders of any Series of Certificates,
any Enhancement and all monies available under any En
hancement, to be provided for any Series for payment to
the Certificateholders of such Series, shall constitute
the assets of the Trust (collectively, the "Trust Proper
ty"). 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 obliga
tion of the Transferor, the Servicer, the applicable
Credit Card Originator or any other Person in connection
with the Receivables or any agreement or instrument
relating thereto, including, without limitation, any
obligation to any Obligors, merchant banks, merchant
clearance systems, VISA USA, Inc., MasterCard Interna
tional Incorporated or insurers, or in connection with
the Purchase Agreement or the Bank Receivables 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 state
ments (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, chattel paper or
general intangibles (each 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 deliv
er 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 Receiv
ables 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 Agree
ment 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 or acquired to the Trust
(the "Secured Obligations"), and agrees that this Agree
ment shall constitute a security agreement under applica
ble law.
Section 2.2 Acceptance by Trustee.
(a) The Trustee hereby acknowledges its accep
tance, 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 main
tain such right, title and interest, upon the Trust
herein set forth, for the benefit of all Certificatehold
ers.
(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 busi
ness 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 re
spect to the Transferor required under federal and Dela
ware law; provided, however, that no representation or
warranty is made with respect to any qualifications,
licenses or approvals which the Trustee would have to
obtain to do business in any state in which the Trustee
seeks to enforce any Receivable.
(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 Agree
ment and the Purchase Agreement, and the consummation of
the transactions provided for herein and therein, consti
tutes 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, affect
ing 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 Conflicts. The execution and delivery
of this Agreement and the Purchase Agreement and the per
formance 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 material tax returns required to be filed
and has paid or made adequate provision for the payment
of all material 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 Certifi
cates, the performance of the transactions contemplated
by this Agreement and the Purchase Agreement and the ful
fillment 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) seek
ing to prevent the consummation of any of the transac
tions contemplated hereby or thereby, (iii) seeking any
determination or ruling that would materially and ad
versely 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
performance by the applicable Credit Card Originator in
accordance with the terms of the Contract giving rise to
such Receivables. 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 execu
tive offices of the Transferor are in Minnetonka, Minneso
ta, and the offices where the Transferor keeps its re
cords concerning the Receivables and related Contracts
are in Hennepin County, Minnesota and St. Cloud, Minneso
ta.
(l) Use of Proceeds. No proceeds of the
issuance of any Certificate will be used by the Transfer
or 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 consti
tute 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.
_ (o) Solvency. The Transferor is not insolvent and
will not be rendered insolvent upon the transfer of the
Receivables to the Trust.
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 repre
sentation 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 Sup
plement. 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 war
rants 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, and, with respect to any matters in
volving Additional Accounts, as of the date the Receiv
ables of such Accounts are first designated for inclusion
in the Trust:
(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 bankrupt
cy, 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 consti
tutes either (A) a valid transfer, assignment, set-over
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 any Receivables in Additional Accounts
designated for inclusion in the Trust (other than
Receivables in Supplemental Accounts) 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 proper
ty, upon the filing of the financing statement described
in Section 2.1 and in the case of the Receivables hereaf
ter 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 claim
ing 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 fund
ing 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 appli
cable, any Series Account as provided in any Supplement)
and, if this Agreement constitutes the grant of a securi
ty 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, assign
ment, set-over and conveyance to the Transferor of all
right, title and interest of FCI in and to the Receiv
ables purported to be sold thereunder, whether then exist
ing or thereafter created in the applicable Accounts and
the proceeds thereof.
(iii) 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.
(iv) 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.
(v) Each Account classified as an
"Eligible Account" by the Transferor in any document or
report delivered hereunder will satisfy the requirements
contained in the definition of Eligible Account as of the
time of such document or report and each Receivable clas
sified 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.
(vi) 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 repre
sent 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 (vi) 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 a
principal 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 subse
quently 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 such Principal Receivables shall be included in deter
mining the Aggregate 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 calcula
tion of the Transferor Interest would cause the Transfer
or 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 Princi
pal 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 por
tion of such deposit allocated to the Investor Certif
icates of each Series shall be distributed to the Inves
tor 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 aggregate 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 Trans
feror 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 reas
signment 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 warran
ties 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 reas
signment 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 reas
signment 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 Business Day preceding the Reassign
ment 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 oc
curs), 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 Supple
ment. 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 consid
ered 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 Distribu
tion Account or the applicable Series Account, the Re
ceivables and all monies due or to become due with re
spect 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 instru
ments of transfer or assignment, in each case without
recourse, representation or warranty, as shall be pre
pared by and as are reasonably requested by the Trans
feror 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 Certificate
holders of any Series give notice directing the Transfer
or to accept reassignment as provided above, the obliga
tion of the Transferor to accept reassignment of the
applicable Receivables and pay the reassignment deposit
amount pursuant to this subsection 2.4(e) shall consti
tute the sole remedy respecting a breach of the represen
tations 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 Supple
ment 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, Chattel
Paper or General Intangibles. 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 en
forcement 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 "ac
count," "chattel paper" or a "general intangible" (as de
fined 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 pro
hibit the Transferor from suffering to exist upon any of
the Receivables any Permitted Lien.
(c) 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 after receipt thereof.
(d) Notice of Liens. The Transferor
shall notify the Trustee promptly after becoming aware of
any Lien on any Receivable other than Permitted Liens.
(e) Enforcement of Purchase Agreements.
The Transferor agrees to take all action necessary and
appropriate to enforce its rights and claims under the
Purchase Agreement and the Bank Receivables Purchase
Agreement.
(f) Separate Business. The Transferor
will not permit its assets to be commingled with those of
either DMCCB or FCI and the Transferor shall maintain
separate corporate records, books of account and bank ac
counts from those of either DMCCB or FCI. The Transferor
will not conduct its business in the name of either DMCCB
or FCI and will cause either DMCCB or FCI 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 either DMCCB or FCI. The Trans
feror 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 either DMCCB or FCI. The Trans
feror shall cause either DMCCB or FCI 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 either DMCCB or FCI and
that either DMCCB or FCI will contribute to the Trans
feror on the Closing Date a demand note. The Transferor
will maintain an arm's length relationship with either
DMCCB or FCI with respect to any transactions between the
Transferor, on the one hand, and either DMCCB or FCI, on
the other.
(g) 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
modification to, or waiver of any provision of, the
Purchase Agreement and (iii) shall not permit the addi
tion or removal of an Account or 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 Account or Receivable to or from the
Trust.
Section 2.6 Addition of Accounts.
(a) Unless otherwise specified in any
Supplement, all accounts which meet the definition of
Additional Accounts shall be included as Accounts from
and after the date upon which such Additional Accounts
are created and all Receivables in such Additional Ac
counts, whether such Receivables are then existing or
thereafter created, shall be transferred automatically to
the Trust upon purchase by the Transferor. For all
purposes of this Agreement, all receivables of such
Additional Accounts shall be treated as Receivables upon
their creation and shall be subject to the eligibility
criteria specified in the definitions of "Eligible Re
ceivable" and "Eligible Account".
(b) The Transferor may elect at any time
to terminate or suspend the inclusion in Accounts of Addi
tional Accounts by delivering to the Trustee, the
Servicer and each Rating Agency ten days prior written
notice of such election. If the Transferor has elected
to terminate or suspend the inclusion of Additional Acc
ounts and (i) on the tenth Business Day prior to any
Determination Date, the Transferor Interest for the relat
ed Monthly Period is less than the Minimum Transferor
Interest, the Transferor shall designate additional
credit card accounts ("Supplemental Accounts") to be
included as Accounts in a sufficient amount such that the
Transferor Interest as a percentage of the Aggregate
Principal Receivables for such Monthly Period after
giving effect to such addition is at least equal to the
Minimum Transferor Interest, or on any Record Date, the
Aggregate Principal Receivables is less than the Minimum
Aggregate Principal Receivables, the Transferor shall
designate Supplemental Accounts to be included as Ac
counts in a sufficient amount such that the Aggregate
Principal Receivables will be equal to or greater than
the Minimum Aggregate Principal Receivables. Receivables
from such Supplemental Accounts shall be transferred to
the Trust on or before the tenth Business Day following
such Record Date. On any day on which the Receivables in
Supplemental Accounts are to be transferred to the Trust,
the Receivables in such Accounts shall be included as
Eligible Receivables if they satisfy the requirements of
the definition of "Eligible Receivables".
(c) In addition to its obligation under
subsection 2.6(b), if and for so long as the Transferor
has elected to terminate or suspend the inclusion of
Additional Accounts, the Transferor may, by giving ten
Business Days' notice to the Trustee and each Rating
Agency, but shall not be obligated to, designate from
time to time Supplemental Accounts of the Transferor to
be included as Accounts.
(d) Unless otherwise specified in a
Series Supplement, the Transferor agrees that any such
transfer of Receivables from Supplemental Accounts, under
subsection 2.6(b) or (c), shall satisfy the following
conditions (to the extent provided below):
(i) on or before the fifth Business
Day prior to the Addition Date with respect to additions
pursuant to subsection 2.6(b) and on or before the
twentieth Business Day prior to the Addition Date with
respect to additions pursuant to subsection 2.6(c) (as
applicable, the "Notice Date"), the Transferor shall give
the Trustee, each Rating Agency and the Servicer written
notice that such Supplemental Accounts will be included,
which notice shall specify the approximate aggregate
amount of the Receivables to be transferred;
(ii) on or before the applicable
Addition Date, the Transferor shall have delivered to the
Trustee a written assignment (including an acceptance by
the Trustee on behalf of the Trust for the benefit of the
Investor Certificateholders) in substantially the form of
Exhibit H (the "Assignment") and the Transferor shall
have indicated in its computer files that the Receivables
created in connection with the Supplemental Accounts have
been transferred to the Trust and, within five Business
Days thereafter, the Transferor shall have delivered to
the Trustee or the bailee of the Trustee a computer file
or microfiche list containing a true and complete list of
all Supplemental Accounts, identified by account number
and the Principal Receivables in such Supplemental Ac
counts, as of the Addition Date, which computer file or
microfiche list shall be as of the date of such Assign
ment incorporated into and made a part of such
Assignment;
(iii) the Transferor shall represent
and warrant that (x) no selection procedure that is mate
rially adverse to the interests of the Investor Certifi
cateholders was utilized in selecting the Supplemental
Accounts and (y) as of the applicable Addition Date, the
Transferor is not insolvent and will not be rendered
insolvent upon the transfer of Receivables to the Trust;
(iv) the Transferor shall represent
and warrant that, as of the Addition Date, the Assignment
constitutes either (x) a valid transfer and assignment to
the Trust of all right, title and interest of the
Transferor in and to (A) the Receivables then existing
and thereafter created and arising in connection with the
Accounts and any accounts that meet the definition of
Additional Accounts, including, without limitation, all
accounts, general intangibles, chattel paper, contract
rights, and other obligations of any Obligor with respect
to the Receivables, now or hereafter existing, whether or
not arising out of or in connection with the sale or
lease of goods or the rendering of services, (B) all
monies and investments due or to become due with respect
thereto (including, without limitation, the right to any
payment of interest and Finance Charge Receivables,
including any Recoveries), (C) all proceeds (as defined
in the UCC as in effect in the Relevant UCC State) of
such Receivables, (D) the Purchase Agreement and (E) the
Bank Receivables Purchase Agreement, and such Receivables
and all proceeds thereof 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
(i) Permitted Liens, (ii) the interest of the Transferor
as Holder of the Exchangeable Transferor Certificate and
any other Class or Series of Certificates and (iii) the
Transferor's right, if any, to receive interest accruing
on, and investment earnings, if any, in respect of, any
Interest Funding Account and any Principal Account, the
Excess Funding Account or any Series Account as provided
in this Agreement and any related Supplement or (y) a
grant of a security interest (as defined in the UCC as in
effect in the Relevant UCC State) in such property to the
Trust, which is enforceable with respect to then existing
Receivables of the Supplemental Accounts, the proceeds
(as defined in the UCC as in effect in the Relevant UCC
State) thereof upon the conveyance of such Receivables to
the Trust, and which will be enforceable with respect to
the Receivables thereafter created in respect of Supple
mental Accounts conveyed on such Addition Date and the
proceeds (as defined in the UCC as in effect in the
Relevant UCC State) thereof upon such creation; and (z)
if the Assignment constitutes the grant of a security
interest to the Trust in such property, upon the filing
of a financing statement as described in Section 2.1 with
respect to such Supplemental Accounts and in the case of
the Receivables thereafter created in such Supplemental
Accounts and the proceeds (as defined in the UCC as in
effect in the Relevant UCC State) thereof, upon such
creation, the Trust shall have a first priority perfected
security interest in such property, except for Permitted
Liens;
(v) the Transferor shall deliver to
the Trustee an Officer's Certificate substantially in the
form of Schedule 2 to Exhibit H confirming the items set
forth in paragraph (ii) above;
(vi) the Transferor shall deliver to
the Trustee an Opinion of Counsel with respect to the
Receivables in the Supplemental Accounts (with a copy to
the Rating Agencies) substantially in the form of Exhibit
I; and
(vii) the Transferor shall have
received written notice from the Rating Agencies that the
inclusion of such accounts as Supplemental Accounts
pursuant to subsection 2.6(b) or (c), as the case may be,
will not result in the reduction or withdrawal of its
then existing rating of any Class of any Series of Inves
tor Certificates then issued and outstanding and shall
have delivered such notice to the Trustee.
(e) The Transferor shall be permitted to
designate Additional Accounts with respect to any Monthly
Period (the "Current Monthly Period") prior to the last
day of the May 1996 Monthly Period pursuant to subsection
2.6(a) of the Agreement, without limitation, provided,
however, that with respect to each Monthly Period begin
ning with the September 1995 Monthly Period:
(i) the arithmetic average for the three
Monthly Periods preceding the Current Monthly Period, of
the annualized percentage equivalent of a fraction for
each respective Monthly Period, the numerator of which is
equal to the Default Amount for the respective Monthly
Period (provided, however, that the Default Amount with
respect to each Default Recognition Date shall be deemed
to apply to the Monthly Period ending closest to such
Default Recognition Date) and the denominator of which is
equal to the average amount of Aggregate Principal Re
ceivables outstanding on each day during such Monthly
Period, is less than 6%;
(ii) the arithmetic average for the three
Monthly Periods preceding the Current Monthly Period, of
the percentage (the "Payment Rate Percentage") equivalent
of a fraction for each respective Monthly Period, the
numerator of which is equal to the amount of Collections
received during the respective Monthly Period and the
denominator of which is equal to the Aggregate Principal
Receivables as of the first day of the respective Monthly
Period, is greater than or equal to 6%; or
(iii)the weighted average of the Portfolio
Yields for each Series then outstanding for the
three Monthly Periods preceding the Current
Monthly Period minus the weighted average of the
Base Rates for each Series then outstanding for
such three Monthly Periods (the "Excess Spread
Percentage") is greater than or equal to 4%.
(iv) Standard & Poor's shall not have notified
the Transferor that the continued addition of Additional
Accounts pursuant to this subsection 2.6(e) will result
in a reduction or withdrawal of the then current rating
of any Class by Standard & Poor's.
In the event that as of any date of determination
prior to last day of the May 1996 Monthly Period any of
the conditions in clauses (i) through (iii) listed above
is not met, and with respect to each Monthly Period after
the May 1996 Monthly Period this subsection 2.6(e) shall
no longer apply and the conditions of subsection 2.6(f)
shall apply. On or before the later of (x) the last day
of the September 1995 Monthly Period, the December 1995
Monthly Period and the March 1996 Monthly Period or (y)
in each case the tenth day following receipt of the
settlement statement for the prior Monthly Period, Stan
dard & Poor's shall determine whether a Ratings Event
shall have occurred in connection with the addition of
Additional Accounts during the three consecutive Monthly
Periods ending in August, November and February preceding
such date. Upon the occurrence of a Ratings Event in
connection with the addition of Additional Accounts this
subsection 2.6(e) shall no longer apply and the condi
tions of subsection 2.6(f) shall apply.
(f) Additional Accounts shall be deemed to be
Accounts the Receivables of which shall be designated for
inclusion in the Trust if, unless each Rating Agency
otherwise consents, on and after the beginning of the
June 1996 Monthly Period and earlier to the extent re
quired pursuant to subsection 2.6(e), the following
conditions are met: the number of Accounts the Receiv
ables of which are designated to be included in the Trust
pursuant to subsection 2.6(a) since (i) the first day of
the eleventh preceding Monthly Period (or, in the case of
any date on which Additional Accounts are to be added to
the Trust which occurs on or before the last day of the
May 1996 Monthly Period, the Initial Closing Date) minus
the number of Accounts of the type described in clause
(ii) of the definition of "Approved Account" which have
been added on the initial day of the addition of such
type of Account pursuant to such clause (ii) since the
first day of such eleventh preceding Monthly Period (or
the Initial Closing Date, as the case may be) minus any
Removed Accounts removed since the first day of such
eleventh preceding Monthly Period (or the Initial Closing
Date, as the case may be) shall not exceed 20% of the
number of Accounts on the first day of such eleventh
preceding Monthly Period (or the Initial Closing Date, as
the case may be), and (ii) the first day of the second
preceding Monthly Period (or, in the case of any date on
which Additional Accounts are to be added to the Trust
which occurs on or before the last day of the July 1995
Monthly Period, the Initial Closing Date) minus the
number of Accounts of the type described in clause (ii)
of the definition of "Approved Accounts" have been added
on the initial day of the addition of such type of Ac
count pursuant to such clause (ii) since the first day of
such second preceding Monthly Period (or the Initial
Closing Date, as the case may be) minus any Removed
Accounts removed since the first day of such second
preceding Monthly Period (or the Initial Closing Date, as
the case may be) shall not exceed 15% of the number of
Accounts on the first day of such second preceding Month
ly Period (or the Initial Closing Date, as the case may
be).
Section 2.7 Removal of Accounts.
(a) On each Determination Date that the
Transferor Interest for the related Monthly Period
exceeds the Minimum Transferor Interest with respect to
such Determination Date, the Trustee shall be deemed to
have offered to the Transferor automatically and without
any notice to or action by or on behalf of the Trustee,
as of such Determination Date, the right to remove from
the Trust all of the Trust's right, title and interest
in, to and under the Receivables then existing and
thereafter created, all monies then due or to become due
and all amounts thereafter received with respect thereto
and all proceeds thereof in or with respect to those
Accounts designated by the Transferor (the "Removed
Accounts") in an aggregate amount not greater than the
lesser of (i) the excess of the Transferor Interest over
the Minimum Transferor Interest and (ii) the excess of
Aggregate Principal Receivables over the Minimum Aggre
gate Principal Receivables. To accept such offer, the
Transferor is required to furnish to the Trustee and each
Rating Agency written notice by the fifth Business Day
after the Determination Date specifying the approximate
aggregate amount of Principal Receivables covered by the
offer that the Transferor intends to accept. There shall
be no more than one such removal with respect to any
Monthly Period.
(b) In addition to the satisfaction of
the conditions set forth in subsection 2.7(a), the
Transferor shall be permitted to accept reassignment to
it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions:
(i) On each date specified by the
Transferor for removal of the Removed Accounts (a "Remov
al Date"), the Transferor shall prepare and the Trustee
shall execute and deliver to the Transferor a written
reassignment in substantially the form of Exhibit J (the
"Reassignment") and the Transferor shall deliver to the
Trustee or the bailee of the Trustee a computer file or
microfiche list containing a true and complete schedule
identifying all Accounts the Receivables in which remain
in the Trust specifying for each such Account, as of the
Removal Notice Date, its account number and the
principal balance of such Account. Such computer file or
microfiche list shall be incorporated into and made part
of this Agreement as of the date of such Reassignment.
(ii) The Transferor shall represent
and warrant as of each Removal Notice Date that (a) the
list of the Accounts not removed from the Trust, as of
the Removal Notice Date, complies in all material
respects with the requirements of paragraph (i) above and
(b) no selection procedure used by the Transferor that is
materially adverse to the interests of the Investor
Certificateholders was utilized in selecting the Removed
Accounts.
(iii) The Transferor shall represent
and warrant that the removal of any Receivables in any
Removed Accounts on any Removal Date shall not, in the
reasonable belief of the Transferor, cause, immediately
or with the passage of time, a Pay Out Event to occur.
(iv) The Transferor shall have
delivered at least 20 days' (or such lesser number as any
Rating Agency may agree) prior written notice (which may
be given prior to the Removal Date in expectation that
the Trustee will make the offer described in subsection
2.7(a)) of such removal to each Rating Agency that has
rated any outstanding Class of any Series and the Trustee
shall have received written confirmation from each such
Rating Agency that such Rating Agency will not reduce or
withdraw its rating on any outstanding Class of any
Series as a result of such removal.
(v) The Transferor shall have deliv
ered to the Trustee an Officer's Certificate confirming
the Transferor's compliance with the items set forth in
paragraphs (i) through (iv) above. The Trustee may
conclusively rely on such certificate, shall have no duty
to make inquiries with regard to the matters set forth
therein and shall incur no liability in so relying.
(c) Upon satisfaction of the conditions
set forth in subsections 2.7(a) and (b), the Trustee
shall execute and deliver the Reassignment to the
Transferor, and the Receivables from the Removed Accounts
shall no longer constitute a part of the Trust.
Section 2.8 Discount Option. (a) The
Transferor shall have the option to designate a percent
age, which may be a fixed percentage or a variable
percentage based on a formula (the "Discount Percent
age"), of Principal Receivables, without giving effect to
any discounting pursuant to this Section 2.8, arising on
or after the date of such designation, to be treated as
Finance Charge Receivables. The Transferor shall provide
to the Servicer, the Trustee, any Enhancement Provider
and the Rating Agency 15 days' prior written notice of
such designation, and such designation shall become
effective on the date designated therein (i) unless such
designation in the reasonable belief of the Transferor
would cause a Pay Out Event to occur, or an event which,
with notice or the lapse of time or both, would consti
tute a Pay Out Event and (ii) only if the Rating Agency
shall have delivered a letter to the Transferor and the
Trustee confirming that its then current rating of the
Investor Certificates of any Series then outstanding will
not be reduced or withdrawn as a result of such designa
tion.
(b) After the date on which the
Transferor's exercise of its discount option takes
effect, and with respect to Receivables generated on and
after such date, the Transferor, in accordance with Sec
tion 4.3, shall deposit into the Collection Account in
immediately available funds an amount equal to the amount
of the Discount Option Receivable Collections processed
on such day. The deposit made by the Transferor into the
Collection Account under the preceding sentence shall be
considered a payment of such Discount Option Receivables
and shall be applied as Finance Charge Receivables in
accordance with Article IV.
Section 2.9 Covenants of the Transferor
with Respect to the Purchase Agreement. The Transferor,
in its capacity as purchaser of the Receivables from FCI
or a Credit Card Originator pursuant to the Purchase
Agreement, hereby covenants that the Transferor will at
all times enforce the covenants and agreements of each
Credit Card Originator in the Bank Receivables Purchase
Agreement, including, without limitation, covenants to
the effect set forth below.
(a) Periodic Finance Charges and Other Fees. Except
as otherwise required by any Requirement of Law, or as is
deemed by the applicable Credit Card Originator in its
sole discretion to be necessary in order to maintain its
credit card business on a competitive basis, it shall not
at any time reduce the annual percentage rates of the
Periodic Finance Charges assessed on the Receivables or
other fees charged on any of the Accounts if, as a result
of any such reduction, either (i) the Transferor's
reasonable expectation is that such reduction will cause
a Pay Out Event to occur or (ii) such reduction is not
also applied to any comparable segment of consumer re
volving credit card accounts owned by such Credit Card
Originator that have characteristics the same as, or
substantially similar to, such Accounts.
(b) Credit and Collection Policy and Contracts. Each
Credit Card Originator shall comply with and perform its
obligations under the Contracts relating to the Accounts
and the Credit and Collection Policy except insofar as
any failure so to comply or perform would not materially
and adversely affect the rights of the Trust or the
Certificateholders hereunder or under the Certificates.
Subject to compliance with all Requirements of Law, a
Credit Card Originator may change the terms and pro
visions of the Contracts or the Credit and Collection
Policy with respect to any of the Accounts in any respect
(including the calculation of the amount, or the timing,
of charge-offs and the Periodic Finance Charges and other
fees to be assessed thereon) only if in the reasonable
judgment of the Credit Card Originator (i) (if it owns a
comparable segment of receivables) such change is made
applicable to any comparable segment of the consumer re
volving credit card accounts owned by such Credit Card
Originator which have characteristics the same as, or
substantially similar to, such Accounts or (ii) (if it
does not own such a comparable segment of receivables)
will not be made with the intent to materially benefit
the Transferor or the Credit Card Originator over the
Investor Certificateholders or to materially adversely af
fect the Investor Certificateholders, except as otherwise
restricted by an endorsement, sponsorship, or other
agreement between the Transferor and an unrelated third
party or by the terms of the Contracts.
The Transferor further covenants that the
Transferor will not enter into any amendments to the Bank
Receivables Purchase Agreement or the Purchase Agreement
that would cause a Ratings Event to occur.
[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) DMCCB agrees to act as the Servicer
under this Agreement. The Investor Certificateholders of
each Series by their acceptance of the related Certifi
cates consent to DMCCB acting as Servicer. Notwithstand
ing the foregoing or any other provisions of this Agree
ment or any Supplement, the Investor Certificateholders
consent to an Affiliate of DMCCB 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 agree
ment 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 Agree
ment; provided, further, that DMCCB 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 satisfac
tion 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 com
mence enforcement proceedings with respect to such Re
ceivables, (v) to make any filings, reports, notices,
applications, registrations with, and to seek any con
sents 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 re
quirements and (vi) to delegate certain of its service,
collection, enforcement and administrative duties hereun
der with respect to the Accounts and the Receivables to
any Person who agrees to conduct such duties in accor
dance 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 or its
delegate 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 administra
tive duties hereunder.
(c) The Servicer shall not be obligated
to use separate servicing procedures, offices or
employees for servicing the Receivables from the proce
dures, offices and employees used by the Servicer in con
nection with servicing other credit card receivables.
Section 3.2 Servicing Compensation. As
compensation for its servicing activities hereunder and
reimbursement for its expenses as set forth in the imme
diately following paragraph, the Servicer shall be enti
tled 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 Supple
ment, equal to the product of (i) a fraction, the numera
tor of which is the actual number of days in the measur
ing 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 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 applica
ble 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 Servic
ing 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 addi
tions 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. DMCCB, 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 either (i) a national banking association
duly organized, validly existing and in good standing
under the laws of the United States or (ii) 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 con
ducted, and to execute, deliver and perform its obliga
tions 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 Re
ceivables.
(c) Due Authorization. The execution and
delivery of this Agreement and the consummation of the
transactions provided for herein, have been duly autho
rized 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, mora
torium or other similar laws now or hereinafter in ef
fect, 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 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 appli
cable 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 and the related Contract, will maintain in
effect all qualifications required under Requirements of
Law in order to service properly each Receivable and the
related Contract and will comply in all material respects
with all other Requirements of Law in connection with
servicing each Receivable and the related Contract the
failure to comply with which would have a material ad
verse 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 related Account or the rights or obligations of
any Enhancement Provider, nor shall it reschedule, revise
or defer payments due on any Receivable except in accor
dance with the Credit and Collection Policies.
(i) All Consents Required. All approv
als, authorizations, consents, orders or other actions of
any Governmental Authority required in connection with
the execution and delivery of this Agreement and the per
formance of the transactions contemplated by this Agree
ment 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 accordance 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 an Account (in which case
any such promissory 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 evi
denced 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 designat
ed 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 materially
adverse to the interests of the Certificate Owners, 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 Finance
Charge Collections and the aggregate amount of Principal
Collections processed during such Monthly Period; (ii)
the aggregate amount of the applicable Investor Percent
age of Principal Collections during the preceding Monthly
Period for each Series of Certificates and the aggregate
amount of the applicable Investor Percentage of Finance
Charge Collections during the preceding Monthly Period
for each Series of Certificates; (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 allocable to principal; (v)
for each Series and for each Class within any such Se
ries, the amount of such distribution allocable to inter
est; (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 Re
ceivables in the Trust at the close of business on the
last day of the Monthly Period preceding such Distribu
tion 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 aggregate amount of
Discount Option Receivables in the Trust at the close of
business on the last day of the Monthly Period preceding
such Distribution Date; (xvi) the aggregate amount of
Discount Option Receivables Collections processed during
such Monthly Period; and (xvii) 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 State
ment. 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 1995, an Officer's
Certificate substantially in the form of Exhibit D stat
ing 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 knowledge, based on such review, the Servicer
has fully performed all its obligations under this Agree
ment throughout such period, or, if there has been a
default in the performance of any such obligation, speci
fying 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 Corpo
rate 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 national
ly recognized independent public accountants (who may
also render other services to the Servicer or the Trans
feror) 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 proce
dures, 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 Accounts 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 national
ly 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 amounts and percentages set
forth in four 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 may include personal computer generated reports
that summarize data from the computer reports generated
by either the Transferor or Servicer which are used to
prepare the Daily Reports) which were the source of such
amounts and percentages and that on the basis of such
comparison, such amounts and percentages are in agreement
except 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 there
in) as indebtedness for purposes of federal, state, local
and foreign income or franchise taxes and any other tax
imposed on or measured by income. Each Investor Certifi
cateholder, 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 employ
er 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
aggregate amount of the Principal Receivables used to
calculate the Investor Percentages applicable to any
Series and the Transferor Interest 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 re
spect 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, follow
ing any such adjustment, the Transferor Interest would be
less than the Minimum Transferor Interest, within two
Business Days of the date on which such adjustment
obligation 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 ap
plied 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 deposit was 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 Collec
tion 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 depos
ited into the Collection Account (or shall be entitled to
receive a refund from the Collection Account in the case
of an excess deposit) 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 para
graph, 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 DMCCB. In the
event that DMCCB 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 FCI each certificate and report required to be pre
pared, 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 and the related
Supplement to be deposited in the Investor Accounts or to
be paid to the Investor Certificateholders of such Se
ries; 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 Exchange
able Transferor Certificate shall represent the remaining
undivided interest in the Trust, including the right to
receive the Collections and other amounts with respect to
each Series at the times and in the amounts specified in
this Article IV and the related Supplement to be paid to
the Holder of the Exchangeable Transferor Certificate;
provided, however, that the aggregate interest represent
ed 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 and the Supplements, 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 pro
vided by law by the FDIC having corporate trust powers
and acting as trustee for funds deposited therein (pro
vided, 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 cer
tificates 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 commer
cial paper, or a rating from Standard & Poor's of AAA and
from Moody's of Aaa in the case of the long-term unse
cured debt obligations) or (ii) with a depositary insti
tution, which may include the Trustee, which is accept
able to the Rating Agency (in the case of (i) and (ii), a
"Qualified Institution"). If, at any time, the institu
tion 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 subse
quent 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 Ac
counts. The Trustee, for the benefit of the Investor Cer
tificateholders, shall establish and maintain with a
Qualified Institution in the name of the Trust two segre
gated trust accounts for each Series (an "Interest Fund
ing 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 estab
lished, 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 Ac
count."
(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 Se
ries. 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 Distri
bution 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 Insti
tution, 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 Certificateholders. Except as provided in subsection
4.3(e), 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 Certificate
holders. Pursuant to the authority granted to the
Servicer herein, the Servicer shall have the power,
revocable by the Trustee, to make withdrawals and pay
ments from the Excess Funding Account for the purpose of
carrying out the Servicer's or Trustee's duties hereun
der. 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 or before 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 in accordance with instructions from the
Servicer to the Trustee 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 writ
ten 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 avail
ability 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 the related Supplement 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 and the related Supplement. The
Servicer shall make such deposits or payments on the date
indicated herein by wire transfer or as otherwise provid
ed 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, DMCCB
(or any successors to DMCCB pursuant to Section 8.2) or
an Affiliate of DMCCB shall remain the Servicer hereun
der, and (a)(i) DMCCB (or any successors to DMCCB pursu
ant to Section 8.2) or an Affiliate of DMCCB provides to
the Trustee a letter of credit or other form of Enhance
ment 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 pro
posed 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 then-existing
ratings of the Investor Certificates, or (b) DMCCB (or
any successors to DMCCB 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 Ex
changeable Transferor Certificate, prior to the close of
business on the day any Collections are deposited in the
Collection Account as otherwise provided in this Article
IV and the related Supplement, 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 Finance Charge Collec
tions 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 Ex
changeable 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) Allocation for Series. On each
Business Day, (i) the amount of Finance Charge
Collections available in the Collection Account allocable
to each Series, (ii) the amount of Principal Collections
available in the Collection Account allocable to each
Series and (iii) the Receivables in Defaulted Accounts
allocable to each Series shall be determined in
accordance with the provisions of the related Supplement.
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 Ac
count, 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 and the Supplements.
(d) 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 Certif
icates. The Servicer shall pay any remaining Shared
Principal Collections on such Business Day to the Trans
feror; 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 F
unding Account to the extent necessary to increase the
Transferor Interest above the Minimum Transferor Inter
est; 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 Receiv
ables applicable for such Series.
(e) 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 deposit
ed in the Collection Account and treated as Finance
Charge Collections. Any investment instructions to the
Trustee shall be in writing and shall include a certifi
cation 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 Pay Out Event or 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 there
of may be issued in bearer form (the "Bearer Certifi
cates") with attached interest coupons and, if
applicable, a special coupon (collectively, the "Cou
pons") 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. Unless
otherwise specified in any Supplement, any Investor Cer
tificate shall be issuable in a minimum denomination of
$1,000 Undivided Interest and integral multiples thereof,
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 Trans
feror 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 authen
ticated 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 (other than Receivables in
Supplemental Accounts) and the other components to the
Trust, the Trustee shall authenticate and deliver the
initial Series of Investor Certificates (or applicable
Classes thereof), upon the written order of the Transfer
or. Upon the issuance of such Investor Certificates,
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 Ex
change 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 designation 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 authenticat
ed by or on behalf of the Trustee, in authorized denomi
nations 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 origi
nal 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 pro
vided 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 Trustee is hereby ini
tially 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 Trustee 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 Trustee 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 refer
ence in this Agreement to the Transfer Agent and Regis
trar shall include any co-transfer agent and co-registrar
unless the context otherwise requires. The Trustee shall
be permitted to resign as Transfer Agent and Registrar
upon 30 days' written notice to the Servicer. In the
event that the Trustee shall no longer be the Transfer
Agent and Registrar, the Transferor shall appoint a
successor Transfer Agent and Registrar. If any Series
with respect to which Book Entry Certificates were origi
nally issued is no longer issued as Book-Entry Certifi
cates, then the Servicer may appoint a successor Transfer
Agent and Registrar.
Unless otherwise provided in the related
Supplement, in the case of any Investor Certificate with
respect to which no Opinion of Counsel to the effect that
such Investor Certificate (or Class or Series to which
such Investor Certificate pertains) will be characterized
as indebtedness for federal income tax purposes was deliv
ered, no sale, assignment, participation, pledge, hypothe
cation, transfer or other disposition of such Investor
Certificate (or any interest therein) shall be made
unless the Transferor and the Servicer shall have granted
their prior consent thereto, which consent may not be
unreasonably withheld and, provided further, that for
purposes of this sentence, it shall in all cases be rea
sonable for the Transferor or the Servicer to withhold
consent to such proposed sale, assignment, participation,
pledge, hypothecation, transfer or other disposition of
all or any part of a Certificate (or any interest there
in) if the transaction would, if effected, give rise to
any adverse tax consequence, as determined in the sole
and absolute discretion of the Transferor or the
Servicer.
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 aggre
gate 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 Certifi
cates 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 Certifi
cate 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) au
thenticate and deliver, the Investor Certificates of such
Series which the Certificateholder making the exchange is
entitled to receive. Every Investor Certificate present
ed or surrendered for registration of transfer or ex
change 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 Certif
icateholder thereof or his attorney-in-fact duly autho
rized 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
Certificate 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 Certif
icates of such Series.
Unless otherwise provided in the related
Supplement, 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 ex
change 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 exchange in full for Definitive Certificates, but
shall not be required to destroy such Global
Certificates. Such certificate shall also state that a
certificate or certificates 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 transferred, 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 Certificates 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 re
ceived an Opinion of Counsel to the effect that such pro
posed Transfer will not adversely affect the Federal or
Applicable Tax State income tax characterization of any
outstanding Series of Investor Certificates or the tax
ability (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
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 Trans
fer Agent and Registrar is different from the Trustee, in
which case the Transfer Agent and Registrar shall) au
thenticate 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 regis
tered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Article V (as de
scribed 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 pro
tected in relying upon any such request, demand, authori
zation, direction, notice, consent or waiver, only Inves
tor 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 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. 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 Trustee. The Trustee 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 locat
ed in New York City, the Transferor shall maintain a co-
paying agent in New York City (for Registered Certifi
cates only) or any other city designated in such Supple
ment.
(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 Certifi
cateholders 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 Certificate-
holders' Names and Addresses. The Trustee will furnish
or cause to be furnished by the Transfer Agent and Regis
trar 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, respec
tively, 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 provid
ed in the related Supplement, holders of Investor Certif
icates evidencing Undivided Interests aggregating not
less than 25% of the Invested Amount of the Investor Cer
tificates 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 communi
cation 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 Certificate
holder, 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
authenticating agents (each, an "Authenticating Agent")
with respect to the Certificates which shall be autho
rized to act on behalf of the Trustee in authenticating
the Certificates in connection with the issuance, deliv
ery, registration of transfer, exchange or repayment of
the Certificates. The Trustee will appoint any Transfer
Agent and Registrar to be an Authentication Agent. When
ever reference is made in this Agreement to the authenti
cation 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 authenti
cation executed on behalf of the Trustee by an Authenti
cating Agent. Each Authenticating Agent must be accept
able 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
Authenticating 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 Defea
sance 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 Certif
icateholders of such Series may tender their Investor
Certificates and the Holder of the Exchangeable Transfer
or 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 Certifi
cates and (ii) a reissued Exchangeable Transferor Certif
icate (an "Investor Exchange"). Unless otherwise speci
fied in any Supplement, the Transferor shall not be
permitted to deposit money into any Defeasance Account.
The Transferor Exchange and Investor Exchange are re
ferred 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 Ex
change 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 Enhance
ment Provider, if any, with respect to such Series. On
the Exchange Date, the Trustee shall authenticate and
deliver any such Class or Classes of such Series of Inves
tor Certificates only upon delivery to it of the follow
ing: (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 indebt
edness or partnership interests for Federal and applica
ble state income tax purposes or (ii) that the issuance
of the newly issued Series of Investor Certificates will
not adversely affect the Federal or Applicable Tax State
income tax characterization of any outstanding Series of
Investor Certificates or the taxability of the Trust
under Federal or Applicable Tax State 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 Class
of any Series as to which it is a Rating Agency, (f) an
Officer's Certificate of the Transferor, that on the
Exchange Date after giving effect to such exchange (i)
the Transferor Interest would be at least equal to the
Minimum Transferor Interest and (ii) the Retained Inter
est would be at least equal to the Minimum Retained
Interest, (g) the existing Exchangeable Transferor Certif
icate 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 (includ
ing any rights to allocations of Finance Charge Collec
tions and Principal Collections), (viii) the interest pay
ment 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 Finance Charge Collections, (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 Trans
feror 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 pre-funded, 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 Cer
tificates 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 Ex
changeable 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 13.1 hereof to the extent that it
amends any of the terms of this Agreement), to be deliv
ered 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)
would be at least equal to the Minimum Transferor Inter
est ,(ii) following such exchange the Retained Interest
(less any interest therein represented by any Supplemen
tal Certificates) equals or exceeds the Minimum Retained
Interest, and (iii) the Trustee received prior to such ex
change (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 inter
est 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 Certificate
holders 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 respon
sibilities under the applicable Depositary Agreement, and
(B) the Transferor is unable to locate a qualified suc
cessor, (ii) the Transferor, at its option, advises the
Trustee in writing that it elects to terminate the book-
entry system through the Clearing Agency or Foreign
Clearing Agency with respect to any Series of Certifi
cates or (iii) after the occurrence of a Servicer De
fault, Certificate Owners of a Series representing bene
ficial 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 Clear
ing Agency is no longer in the best interests of the
Certificate Owners, the Trustee shall notify all Certifi
cate Owners of such Series, through the applicable Clear
ing 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 Certifi
cates 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. Nei
ther the Transferor nor the Trustee shall be liable for
any delay in delivery of such instructions and may con
clusively 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-
Certificate 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, (x) a corporation organized and
existing under the laws of the United States of America
or any State or the District of Columbia or (y) a state
or national banking association that is not subject to
the Bankruptcy Code of 1978, as amended from time to
time, or to any successor statute, and shall expressly as
sume, 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 bene
fit 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 any Credit
Card Originator 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 with
drawing 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
surviving entity, the surviving entity shall file new UCC-
1 financing statements with respect to the interest of
the Trust in the Receivables.
(b) The obligations of the Transferor
hereunder 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 Transfer
or 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 perfor
mance 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 En
hancement 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 other
wise; provided, however, that this provision shall not
protect the Transferor against any liability which would
otherwise be imposed upon it by reason of willful misfea
sance, bad faith or gross negligence in the performance
of duties or by reason of reckless disregard of obliga
tions 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 Trans
feror 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 Certifi
cates) 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 part
nership under the Delaware Uniform Partnership Law, in
which the Transferor is a general partner. The Transfer
or agrees to pay, indemnify and hold harmless each Inves
tor 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 Ser
vice 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
consolidation or into which the Servicer is merged or the
Person which acquires by conveyance or transfer the
properties and assets of the Servicer substantially as an
entirety shall be (x) a corporation organized and
existing under the laws of the United States of America
or any State or the District of Columbia or (y) a state
or national banking association that is not subject to
the Bankruptcy Code of 1978, as amended from time to
time, or to any successor statute, 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);
(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 directors, 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 perfor
mance 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 Trust
ee, 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, liabili
ty, reasonable expense, damage or injury, including, but
not limited to, any judgment, award, settlement, reason
able attorneys' fees and other costs or expenses incurred
in connection with the defense of any actual or threat
ened 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 re
sponsible 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, direc
tors, employees or agents) or the Investor Certificate
holders; provided, further, that the Servicer shall not
indemnify or hold harmless the Trust, the Investor Cer
tificateholders 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 Certifi
cateholders; 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 suf
fered or sustained by any of them in their capacities as
investors, including without limitation losses incurred
as a result of Receivables in Defaulted Accounts; provid
ed further, that the Servicer shall not indemnify or hold
harmless the Transferor, the Trust, the Investor Certifi
cateholders or the Certificate Owners for any losses, lia
bilities, expenses, damages or injuries suffered or
sustained by the Trust, the Investor Certificateholders
or the Certificate Owners arising under any tax law, in
cluding without limitation, any federal, state, local or
foreign income or franchise taxes or any other tax im
posed on or measured by income (or any interest, penal
ties 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 sus
tained 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
that 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 Trust
ee. 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 Accounts and
the Receivables in such cases where the Trustee is
required in connection with the enforcement of the rights
of the Investor Certificateholders, 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 any Credit Card
Originator, 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. It is
understood and agreed by the parties hereto that the
Servicer may delegate certain of its duties hereunder to
First Data Resources, Inc., a Delaware corporation. 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 First Data Resources, Inc. or an
Affiliate of DMCCB (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, FCI or DMCCB shall
consent to the appointment of a bankruptcy trustee or re
ceiver 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 liqui
dator in any bankruptcy proceeding or any other insolven
cy, 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, FCI or DMCCB; or the Transferor,
FCI or DMCCB 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 reorga
nization statute including the U.S. bankruptcy code, make
an assignment for the benefit of its creditors or volun
tarily suspend payment of its obligations; or the Trans
feror shall become unable for any reason to transfer
Receivables to the Trust in accordance with the provi
sions 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
Certificates shall occur without any notice or other
action on the part of the Trustee or the Investor Certif
icateholders 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 or FCI shall
consent to the appointment of a bankruptcy trustee or
receiver or liquidator 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 liquidator for the winding-up or liquidation
of its affairs shall have been entered against the
Transferor or FCI (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 oc
curred, the Transferor shall immediately cease to trans
fer Principal 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 Principal Receivables, receiv
ables accrued in respect of Finance Charge Receivables
(other than Discount Option Receivables), whenever creat
ed, accrued in respect of Receivables that have been
transferred to the Trust, shall continue to be a part of
the Trust, and Collections with respect thereto shall con
tinue to be allocated and paid in accordance 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 liqui
dation, 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 "Disposi
tion"), and (ii) send written notice to the Investor
Certificateholders describing the provisions of this
Section 9.2 and requesting each Investor Certificatehold
er 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 effec
tuate a Disposition, or (B) the Investor Certificatehold
er 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 Transfer
or 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); provid
ed, however, that in the event the Insolvency Event at
issue shall have occurred with respect to FCI, the Trust
shall not be reconstituted unless the Trustee shall have
first received an Opinion of Counsel to the effect that
the Trust, as reconstituted, shall not be subject to
Federal or any Applicable Tax State income tax on its in
come. 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 out
standing Principal Receivables and (C) a fraction the
numerator of which is the related Investor Percentage of
Finance Charge Collections and the denominator of which
is the sum of all Investor Percentages with respect to
Finance Charge 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 Finance Charge Collections and the amount of such pro
ceeds that are allocable to Collections of Principal
Receivables. Unless the Trustee receives written in
structions 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 in
struct the Trustee to make any required drawing, with
drawal, or payment under any Enhancement on or before the
date occurring five Business Days after the date such pay
ment, 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 non-
willful act of the Servicer shall not constitute a Ser
vicer 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 Certificatehold
ers 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 evidenc
ing 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 Certificate
holders) (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 pursu
ant 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, with
out limitation, the transfer to such Successor Servicer
of all authority of the Servicer to service the Receiv
ables 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 thereaf
ter 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 Suc
cessor 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, correspon
dence 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 fail
ure 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, communi
cations 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 Agree
ment 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 Certificate Rate through the date of such
purchase; provided, however, that no such purchase by the
Transferor shall occur unless the Transferor shall deliv
er an Opinion of Counsel reasonably acceptable to the
Trustee that such purchase would not constitute a fraudu
lent 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 Supple
ment, 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 appoint
ment at the time when the Servicer ceases to act as
Servicer, the Trustee without further action shall auto
matically 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 insti
tution 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 require
ments, having a net worth of not less than $50,000,000
and whose regular business includes the servicing of
credit card 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 responsibili
ties, 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 provi
sions of each Enhancement.
(c) In connection with such appointment
and assumption, the Trustee shall be entitled to such
compensation, 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 Finance Charge 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-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of
such transfer of servicing rights. The Successor
Servicer agrees to cooperate with the Transferor in
effecting the termination of the responsibilities and
rights of the Successor Servicer to conduct servicing 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 Certificate
holders at their respective addresses appearing in the
Certificate Register. Upon any termination or appoint
ment 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 In
vested Amount of each Series materially adversely affect
ed 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 perfor
mance of their respective 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 accor
dance 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 spe
cifically 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 re
ceived written notice that a Servicer Default has oc
curred (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 circum
stances 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 exam
ine 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 re
ferred 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 hereun
der, 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 Trust
ee, 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 open-end revolving credit card
receivables (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 open-end revolving
credit card receivables; 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 certifi
cate, the monthly payment instructions and notification
to the Trustee, the monthly Certificateholder's state
ment, any resolution, Officer's Certificate, certificate
of auditors or any other certificate, statement, instru
ment, 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 par
ties;
(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 Certificateholders 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 Accounts or the Receivables for
the purpose of establishing the presence or absence of de
fects, the compliance by the Transferor with its repre
sentations 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, suffer
ing 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 [Reserved]
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 expens
es of its agents and counsel) except any such expense,
disbursement or advance as may arise from its own negli
gence or bad faith and except as provided in the follow
ing 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 require
ments, 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 super
vision or examination by federal or state authority and
(b) not be a Related Person. If such corporation publish
es 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 provi
sions 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
appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be deliv
ered to the resigning Trustee and one copy to the succes
sor 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 Trust
ee 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 unreason
ably 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 corpo
ration 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
obligations conferred or imposed upon the Trustee shall
be conferred or imposed upon and exercised or performed
by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee
or co-trustee is not authorized to act separately without
the Trustee joining in such act), except to the extent
that under any 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
attorney-in-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 dis
tributed to Certificateholders. The Trustee, upon re
quest, will furnish the Servicer with all such informa
tion 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 liabili
ties, costs or expenses of the Trust, the Investor Cer
tificateholders 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 Certifi
cates 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 avail
able 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 Trust
ee, 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
executed 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 Certifi
cate 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
responsibilities 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 Sections 7.4, 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 May 26,
2095. 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
outstanding, 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 great
er 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 commer
cially reasonable manner. The Servicer shall notify each
Enhancement Provider of the proposed sale of the Receiv
ables 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 discre
tion. 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, howev
er, that the Trustee shall determine conclusively in its
sole discretion the amount of such proceeds which are
allocable to Finance Charge Collections and the amount of
such proceeds which are allocable to Principal Collec
tions. 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 princi
pal to be made on such Series on such date, and the Trust
ee 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 respec
tive seniorities, an amount of Principal Receivables and
the related Finance Charge 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 allocat
ed 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 Transfer
or 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 Enhance
ment Provider an opportunity to bid on such Receivables.
The Transferor shall be permitted to purchase such Receiv
ables in such case and shall have a right of first refus
al 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 pro
ceeds of such sale in excess of such principal and inter
est paid shall be paid to the Holder of the Exchangeable
Transferor Certificate. Upon such Series Termination
Date with respect to the applicable Series of Certifi
cates, 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 applica
ble 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 Distribu
tion 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 Termina
tion Date occurs) upon which final payment of such Inves
tor 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 distribu
tion. 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 above-mentioned
written notice, the Trustee shall give a second written
notice (or, in the case of Bearer Certificates,
publication notice) to the remaining Investor Certifi
cateholders of such Series upon receipt of the appropri
ate 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 cancella
tion, 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 Distribu
tion 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 aban
doned 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 accrued
interest theretofore posted as Finance Charge Receiv
ables) allocable to the Trust pursuant to any Supplement,
except for amounts held by the Trustee pursuant to sub
section 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, repre
sentation 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 Certificate
holders, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provi
sions 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 amend
ment 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, fur
ther, 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 Inves
tor Certificateholder, change the definition of or the
manner of calculating the interest of any Investor Cer
tificateholder of such Series without the consent of the
related Investor Certificateholder or reduce the percent
age pursuant to Subsection 13.1(b) required to consent to
any such amendment, in each case without the consent of
all such Investor 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 Certificate
holders; (ii) change the definition of or the manner of
calculating the interest of any Investor Certificatehold
er 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 Cer
tificateholders.
(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
Certificateholder 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 and any amendments regarding the
addition or removal of Receivables from the Trust as
provided in Sections 2.6 or 2.7, executed in accordance
with the provisions hereof, shall not be considered
amendments to this Agreement for the purpose of subsec
tions 13.1(a) and (b).
(g) In connection with any amendment, the
Trustee may request an Opinion of Counsel from the Trans
feror or Servicer to the effect that the amendment com
plies 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 9-402(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, 1996, an Opinion of Counsel, substantially
in the form of Exhibit E and upon each date that any
Supplemental Accounts are to be included in the Accounts
pursuant to subsection 2.6(c) an Opinion of Counsel
substantially in the form of Exhibit I.
Section 13.3 Limitation on Rights of
Certificateholders.
(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 indem
nity 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 Certifi
cateholder, 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 ACCORDANCE 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 F470, Minnetonka, Minnesota, 55343, Attention:
Chief Financial Officer, with a copy to the Servicer as
provided below, (b) in the case of the Servicer, 1455
West 2200 South, Salt Lake City, Utah 84119, Attention:
Treasurer with a copy to 4400 Baker Road, Minnetonka,
Minnesota 55343, Attention: Treasurer and General Coun
sel, (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 Certifi
cateholder 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 provid
ed in the related Supplement. If and so long as any
Series or Class is listed on the Luxembourg Stock Ex
change 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 as
signed by the Servicer without the prior consent of
Holders of Investor Certificates evidencing Undivided
Interests aggregating not less than 66 2/3% of the In
vested 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 appli
cable 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,
direction, notice, consent, waiver or other act by a
Certificateholder 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,
direction, 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 FINANCIAL SERVICES RECEIVABLES, INC.
Transferor
By:____________________________________
Name:
Title:
DIRECT MERCHANTS CREDIT CARD BANK, N.A.
Servicer
By:____________________________________
Name:
Title:
THE BANK OF NEW YORK (DELAWARE)
Trustee
By:__________________________________
Name:
Title:
EXHIBIT A
FORM OF EXCHANGEABLE TRANSFEROR CERTIFICATE
No. 1
One Unit
FINGERHUT FINANCIAL SERVICES MASTER TRUST
ASSET BACKED CERTIFICATE
THIS CERTIFICATE WAS ISSUED PURSUANT TO AN EXEMPTION FROM REGIS
TRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY BE SOLD ONLY PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE
UNDER THE ACT OR AN EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE ACT. IN ADDITION, THE TRANSFER OF THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. A COPY OF THE POOLING AND SERVICING AGREEMENT
WILL BE FURNISHED TO THE HOLDER OF THIS CERTIFICATE BY THE TRUSTEE
UPON WRITTEN REQUEST.
This Certificate represents an Undivided Interest
in the Fingerhut Financial Services Master Trust
Evidencing an undivided interest in a trust, the corpus of which
consists of open-end or revolving credit receivables generated from
time to time in the ordinary course of business by Direct Merchants
Credit Card Bank, N.A. ("DMCCB" or the "Servicer") and other assets
and interests constituting the Trust under the Pooling and Servic
ing Agreement described below.
(Not an interest in or a recourse obligation of
Fingerhut Financial Services Receivables, Inc.,
Direct Merchants Credit Card Bank, N.A.
or any Affiliate of either of them.)
This certifies that FINGERHUT FINANCIAL SERVICES RECEIV
ABLES, INC. ("FFSRI," the "Holder" or the "Transferor," as the
context requires) is the registered owner of a fractional undivided
interest in the Fingerhut Financial Services Master Trust (the
"Trust") issued pursuant to the Pooling and Servicing Agreement,
dated as of May 26, 1995 (the "Pooling and Servicing Agreement";
such term to include any amendment or Supplement thereto) by and
among FFSRI, as Transferor, DMCCB, as the Servicer, and The Bank of
New York (Delaware), as Trustee (the "Trustee"), as supplemented by
each supplement thereto existing from time to time. The corpus of
the Trust will include (i) a portfolio of Receivables (the "Receiv
ables") generated from time to time by DMCCB satisfying certain
criteria, (ii) all funds to be collected from Obligors in respect
of the Receivables, (iii) all right, title, and interest of the
Transferor in, to, and under the Purchase Agreement, (iv) the
benefit of funds on deposit in the Excess Funding Account, (v)
Recoveries, (vi) moneys on deposit in the Pre-Funding Account,
(vii) all proceeds of the foregoing, (viii) all monies and invest
ments due or to become due with respect thereto and all amounts
received with respect to the Receivables in existence on the
Closing Date or generated thereafter, all monies on deposit in the
Collection Account, the Interest Funding Account, the Principal
Account, the Distribution Account, the Pre-Funding Account and the
Excess Funding Account (excluding any investment earnings on such
deposited amounts except for such amounts as are on deposit in the
Pre-Funding Account and the Excess Funding Account), and all other
assets and interests constituting the Trust and (ix) all proceeds
of the foregoing.
To the extent not defined herein, the capitalized terms
used herein have the meanings assigned in the Pooling and Servicing
Agreement. This Certificate is issued under and is subject to the
terms, provisions and conditions of the Pooling and Servicing
Agreement, to which Pooling and Servicing Agreement, as amended
from time to time, the Holder by virtue of the acceptance hereof
assents and by which the Holder is bound.
This Certificate has not been registered or qualified
under the Securities Act of 1933, as amended, or any state securi
ties law. No sale, transfer or other disposition of this Certifi
cate shall be permitted other than in accordance with the provi
sions of Section 6.3, 6.9 or 7.2 of the Pooling and Servicing Agree
ment.
The Receivables arise generally from revolving consumer
credit card accounts.
This Certificate is the Exchangeable Transferor Certifi
cate (the "Certificate"), which represents an undivided interest in
the Trust, including the right to receive the Collections and other
amounts at the times and in the amounts specified in the Pooling
and Servicing Agreement to be paid to the Holder of the Exchange
able Transferor Certificate. The aggregate interest represented by
this Certificate at any time in the Principal Receivables in the
Trust shall not exceed the Transferor Interest at such time. In
addition to this Certificate, Series of Investor Certificates will
be issued to investors pursuant to the Pooling and Servicing
Agreement, each of which will represent an Undivided Interest in
the Trust. This Certificate shall not represent any interest in
any Enhancement, except to the extent provided in the Pooling and
Servicing Agreement. The Transferor Interest on any date of
determination will be an amount equal to the aggregate amount of
Principal Receivables at the end of the day immediately prior to
such date of determination plus amounts on deposit in the Excess
Funding Account and Pre-Funding Account (but not including any
investment earnings thereon) minus the Aggregate Invested Amount at
the end of such day.
The Servicer shall deposit all Collections in the Collec
tion Account as promptly as possible after the Date of Processing
of such Collections. Unless otherwise stated in any Supplement,
throughout the existence of the Trust, the Servicer shall allocate
to the Holder of the Certificate an amount equal to the product of
(A) the Transferor Percentage and (B) the aggregate amount of such
Principal Collections and Finance Charge Collections, respectively,
in respect of each Monthly Period. Notwithstanding the first sen
tence of this paragraph, the Servicer need not deposit this amount
or any other amounts so allocated to the Certificate pursuant to
the Pooling and Servicing Agreement into the Collection Account and
shall pay, or be deemed to pay, such amounts as collected to the
Holder of the Certificate.
DMCCB or any permitted successor or assignee, as
Servicer, is entitled to receive as servicing compensation a month
ly servicing fee. The portion of the servicing fee which will be
allocable to the Holder of the Certificate pursuant to the Pooling
and Servicing Agreement will be payable by the Holder of the
Certificate and neither the Trust nor the Trustee or the Investor
Certificateholders will have any obligation to pay such portion of
the servicing fee.
This Certificate does not represent a recourse obligation
of, or any interest in, the Transferor or the Servicer. This
Certificate is limited in right of payment to certain Collections
respecting the Receivables, all as more specifically set forth
hereinabove and in the Pooling and Servicing Agreement.
Upon the termination of the Trust pursuant to Section
12.1 of the Pooling and Servicing Agreement, the Trustee shall
assign and convey to the Holder of the Certificate (without re
course, representation or warranty) all right, title and interest
of the Trust in the Receivables, whether then existing or thereaf
ter created, and all proceeds relating thereto. The Trustee shall
execute and deliver such instruments of transfer and assignment, in
each case without recourse, as shall be reasonably requested by the
Holder of the Certificate to vest in such Holder all right, title
and interest which the Trustee had in the Receivables.
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 Pooling
and Servicing Agreement, or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Cer
tificate to be duly executed.
FINGERHUT
FINANCIAL SERVICES RECEIVABLES,
INC.
By:
Name:
Title:
Date:
CERTIFICATE OF AUTHENTICATION
This is the Exchangeable Transferor Certificate referred
to in the within-mentioned Pooling and Servicing Agreement.
Authenticating Agent
By:
Name:
Title:
EXHIBIT B
FORM OF DAILY REPORT
[TO BE SUPPLIED]
EXHIBIT C
FORM OF SETTLEMENT STATEMENT
[TO BE SUPPLIED]
EXHIBIT D
FORM OF ANNUAL SERVICER'S CERTIFICATE
FINGERHUT FINANCIAL SERVICES RECEIVABLES, INC.
______________________________
FINGERHUT FINANCIAL SERVICES MASTER TRUST
______________________________
The undersigned, a duly authorized representative of
Direct Merchants Credit Card Bank, N.A. ("DMCCB"), as Servicer,
pursuant to the Pooling and Servicing Agreement dated as of May 26,
1995 (the "Pooling and Servicing Agreement") by and among Fingerhut
Financial Services Receivables, Inc. (the "Transferor"), DMCCB, as
Servicer and The Bank of New York (Delaware), as trustee (the
"Trustee") does hereby certify that:
1. DMCCB is Servicer under the Pooling and Ser
vicing Agreement.
2. The undersigned is duly authorized pursuant to
the Pooling and Servicing Agreement to execute and deliver
this Certificate to the Trustee.
3. This Certificate is delivered pursuant to Sec
tion 3.5 of the Pooling and Servicing Agreement.
4. A review of the activities of the Servicer
during (the period from the Closing Date until) (the twelve
fiscal month period ended) ________, 19__ was conducted under
our supervision.
5. Based on such review, the Servicer has, to the
best of our knowledge, fully performed all its obligations
under the Pooling and Servicing Agreement throughout such
period and no default in the performance of such obligations
has occurred or is continuing except as set forth in paragraph
6 below.
6. The following is a description of each default
in the performance of the Servicer's obligations under the
provisions of the Pooling and Servicing Agreement, including
any Supplement, known to us to have been made during such
period which sets forth in detail (i) the nature of each such
default, (ii) the action taken by the Servicer, if any, to
remedy each such default and (iii) the current status of each
such default:
[If applicable, insert "None."]
IN WITNESS WHEREOF, the undersigned has duly executed
this certificate this ___ day of ________, ____.
DIRECT MERCHANTS CREDIT CARD BANK, N.A.,
as Servicer
Name:
Title:
EXHIBIT E
FORM OF ANNUAL OPINION OF COUNSEL
The opinion set forth below, which is to be delivered
pursuant to subsection 13.2(d)(ii) of the Pooling and Servicing
Agreement, may be subject to certain qualifications, assumptions,
limitations and exceptions taken or made in the opinion of counsel
delivered on the Initial Closing Date with respect to similar
matters.
No filing or other action, other than such filing or
action described in such opinion, is necessary from the date of
such opinion through ________ of the following year to continue the
perfected status of the interest of the Trust in the collateral
described in the financing statements referred to in such opinion.
EXHIBIT F
FORM OF RECONVEYANCE OF RECEIVABLES
RECONVEYANCE OF RECEIVABLES, dated as of _____ __ , 19__
by and between FINGERHUT FINANCIAL SERVICES RECEIVABLES, INC., a
corporation organized and existing under the laws of the State of
Delaware (the "Transferor"), and The Bank of New York (Delaware), a
banking corporation organized and existing under the laws of the
State of delaware (the "Trustee") pursuant to the Pooling and
Servicing Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Transferor and the Trustee are parties to
the Pooling and Servicing Agreement dated as of May 26, 1995 (here
inafter as such agreement may have been, or may from time to time
be, amended, supplemented or otherwise modified, the "Pooling and
Servicing Agreement") by and among the Transferor, Direct Merchants
Credit Card Bank, N.A., as Servicer, and the Trustee;
WHEREAS, pursuant to the Pooling and Servicing Agreement,
the Transferor wishes to cause the Trustee to reconvey all of the
Receivables and proceeds thereof, whether now existing or hereafter
created, from the Trust to the Transferor pursuant to the terms of
Section 12.4 of the Pooling and Servicing Agreement upon termina
tion of the Trust pursuant to subsection 12.1(a) of the Pooling and
Servicing Agreement (as each such term is defined in the Pooling
and Servicing Agreement);
WHEREAS, the Trustee is willing to reconvey the Receiv
ables subject to the terms and conditions hereof;
NOW THEREFORE, the Transferor and the Trustee hereby
agree as follows:
1. Defined Terms. All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined mean
ings when used herein, unless otherwise defined herein.
"Reconveyance Date" shall mean _____ __, 19__.
2. Return of Lists of Receivables. The Trustee shall
deliver to the Transferor or the bailee of the Transferor, not
later than three Business Days after the Reconveyance Date, each
and every computer file or microfiche list of Receivables delivered
to the Trustee pursuant to the terms of the Pooling and Servicing
Agreement.
3. Conveyance of Receivables. (a) The Trustee does
hereby reconvey to the Transferor, without recourse, representation
or warranty, on and after the Reconveyance Date, all right, title
and interest of the Trust in and to each and every Receivable now
existing and hereafter created, all monies due or to become due
with respect thereto (including all Finance Charge Receivables),
all proceeds (as defined in Section 9-306 of the UCC as in effect
in the Relevant UCC State) of such Receivables, except for amounts,
if any, held by the Trustee pursuant to subsection 12.3(b) of the
Pooling and Servicing Agreement.
(b) In connection with such transfer, the Trustee
agrees to execute and deliver to the Transferor on or prior to the
date of this Reconveyance, such UCC termination statements as the
Transferor may reasonably request, evidencing the release by the
Trust of its lien on the Receivables.
4. Counterparts. This Reconveyance may be executed in
two or more counterparts (and by different parties on separate coun
terparts), each of which shall be an original, but all of which
together shall constitute one and the same instrument.
5. Governing Law. THIS RECONVEYANCE SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFER
ENCE TO ITS CONFLICT OF LAW PROVISIONS.
EXHIBIT G
FORM OF AGREED-UPON PROCEDURES
The Servicer and Trustee will engage a firm of nationally recog
nized independent public accountants (who may also render other
services to the Servicer or any of its subsidiaries) to perform
certain agreed-upon procedures substantially similar to the follow
ing:
1) The accountants will obtain the Master Trust schedules showing
the daily amount of eligible accounts receivable activity
(hereinafter referred to as the "Daily Report") for 5 days
within the period and compare amounts set forth on the Daily
Report representing sales, cash advances, payments, interest
income, and charge offs and miscellaneous charges and adjust
ments, with the corresponding amounts set forth in the
Servicer's accounts receivable reports and recompute the
mathematical accuracy of amounts and percentages within the
Daily Report.
2) For 5 days within the period, the accountants will compare the
payments appearing on the Servicer's accounts receivable
reports to an entry on the relevant Daily Report. The accoun
tants will compare the cash transfers indicated on the Daily
Reports to entries on the relevant Master Trust bank state
ments.
3) The accountants will compare the aggregate customer balances
in the "30-59 day delinquent" and "90-119 day delinquent" cate
gories as reflected on the monthly Settlement Statement to the
corresponding amounts set forth in the Servicer's accounts
receivable aging reports as of 3 month-ends within the period.
4) For 5 weekly periods, the accountants will compare the begin
ning of week and end of week total receivables balances on the
Servicer's accounts receivable reports with the corresponding
balances on the corresponding Daily Report and will verify the
amounts of the calculation of beginning and ending Principal
Receivable balances and beginning and ending Finance Charge
Receivables balances on each Daily Report within each weekly
period.
5) For 5 days within the period, the accountants will recompute
the daily allocation of Principal and Finance Charge Collec
tions to each series based upon information appearing on the
Daily Reports.
6) For one monthly Settlement Statement during the period, the
accountants will compare the amounts and percentages appearing
therein to the information appearing in the corresponding
Daily Reports for such month.
EXHIBIT H
FORM OF ASSIGNMENT OF RECEIVABLES IN SUPPLEMENTAL ACCOUNTS
ASSIGNMENT No. __ OF RECEIVABLES IN ADDITIONAL
ACCOUNTS, dated as of ________ __, ____ by and between
FINGERHUT FINANCIAL SERVICES RECEIVABLES, INC., a corpora
tion organized under the laws of the State of Delaware
(the "Transferor"), to a banking organized and existing
under the laws of the State of Delaware (the "Trustee")
pursuant to the Pooling and Servicing Agreement referred
to below.
W I T N E S S E T H:
WHEREAS, the Transferor and the Trustee are par
ties to the Pooling and Servicing Agreement, dated as of
May 26, 1995 (hereinafter as such agreement may have
been, or may from time to time be, amended, supplemented
or otherwise modified, the "Pooling and Servicing Agree
ment");
WHEREAS, pursuant to the Pooling and Servicing
Agreement, the Transferor wishes to designate Supplemen
tal Accounts of the Transferor to be included as Accounts
and to convey the Receivables of such Supplemental Ac
counts, whether now existing or hereafter created, to the
Trust as part of the corpus of the Trust (as each such
term is defined in the Pooling and Servicing Agreement);
and
WHEREAS, the Trustee is willing to accept such
designation and conveyance subject to the terms and condi
tions hereof;
NOW, THEREFORE, the Transferor and the Trustee
hereby agree as follows:
(i) Defined Terms. All terms defined in the Pooling
and Servicing Agreement and used herein shall have such defined
meanings when used herein, unless otherwise defined herein.
"Addition Date" shall mean, with
respect to the Supplemental Accounts designated hereby,
____________, ____.
"Notice Date" shall mean, with
respect to the Supplemental Accounts designated hereby,
_________, ______ (which shall be a date on or prior to
the fifth Business Day prior to the Addition Date with
respect to additions pursuant to subsection 2.6(a) of the
Pooling and Servicing Agreement and the tenth Business
Day prior to the Addition Date with respect to additions
pursuant to subsection 2.6(b) of the Pooling and
Servicing Agreement).
(ii) Designation of Additional Accounts. The Transferor shall
deliver to the Trustee not later than five Business Days after the
Addition Date, a computer file or microfiche list containing a true
and complete list of each MasterCardr and VISAr account which as of
the Addition Date shall be deemed to be an Additional Account, such
accounts being identified by account number and by the amount of
Receivables in such accounts as of the close of business on the
Addition Date. Such list shall be delivered five Business Days
after the date of this Agreement and shall be marked as Schedule l
to this Assignment and, as of the Addition Date, shall be
incorporated into and made a part of this Assignment.
(iii) Conveyance of Receivables.
The Transferor does hereby transfer,
assign, set-over and otherwise convey to the Trustee, on
behalf of the Trust, for the benefit of the Certificate
holders, without recourse on and after the Addition Date,
all right, title and interest of the Transferor in and to
the Receivables now existing and hereafter created in the
Additional Accounts designated hereby, all monies due or
to become due with respect thereto (including all Finance
Charge Receivables) and all proceeds of such Receivables.
In connection with such transfer, the Transferor agrees to
record and file, at its own expense, a financing statement with
respect to the Receivables now existing and hereafter created in
the Additional Accounts designated hereby (which may be a single
financing statement with respect to all such Receivables) for the
transfer of accounts as defined in Section 9_106 of the UCC as in
effect in the State of Delaware meeting the requirements of
applicable state law in such manner and such jurisdictions as are
necessary to perfect the assignment of such Receivables to the
Trust, and to deliver a file-stamped copy of such financing
statement or other evidence of such filing (which may, for
purposes of this Section 3, consist of telephone confirmation
of such filing) to the Trustee on or prior to the date of this
Assignment.
In connection with such transfer, the Transferor further
agrees, at its own expense, on or prior to the date of this Assign
ment to indicate in its computer files that Receivables created in
connection with the Additional Accounts designated hereby have
been transferred to the Trust pursuant to this Assignment for
the benefit of the Certificateholders.
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 Receivables now existing
and hereafter created and arising in connection with the
Additional Accounts designated hereby, all monies due or
to become due with respect thereto (including all Finance
Charge Receivables) and all proceeds of such Receivables,
and that this Assignment shall constitute a security
agreement under applicable law.
(iv) Acceptance by Trustee. The Trustee hereby
acknowledges its acceptance on behalf of the Trust for the benefit
of the Certificateholders of all right, title and interest
previously held by the Transferor in and to the Receivables now
existing and hereafter created, and declares that it shall maintain
such right, title and interest, upon the trust herein set forth, for
the benefit of all Certificateholders.
(v) Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Trust as of the
Addition Date:
Legal Valid and Binding Obligation. This Assignment consti
tutes a legal, valid and binding obligation of the Transferor en
forceable against the Transferor in accordance with its terms,
except as such enforceability may be limited by applicable bankrupt
cy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect affecting the enforcement of creditors'
rights in general and except as such enforceability may be limited
by general principles of equity (whether considered in a suit at
law or in equity).
Eligibility of Accounts and Receivables. Each Additional
Account designated hereby is an Eligible Account and each Receiv
able in such Additional Account is an Eligible Receivable. No
selection procedures believed by the Transferor to be materially ad
verse to the interests of the Investor Certificateholders were
utilized in selecting the Additional Accounts from the available
Eligible Accounts, provided, that, the selection of newly origi
nated Accounts is deemed not to be materially adverse to the
interests of the Investor Certificateholders.
Insolvency. The Transferor is not insolvent and, after
giving effect to the conveyance set forth in Section 3 of this As
signment, will not be insolvent.
Security Interest. This Assignment constitutes either (i) a
valid transfer and assignment to the Trust of all right, title and
interest of the Transferor in and to Receivables now existing and
hereafter created in the Additional Accounts designated hereby, and
all proceeds (as defined in the UCC as in effect in the State of
Delaware) of such Receivables, and such Receivables and any
proceeds thereof 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) Liens permitted under subsection
2.5(b) of the Pooling and Servicing Agreement, (y) the interest of
the Holder of the Exchangeable Transferor Certificate and (z) the
Transferor's right to receive interest accruing on, and investment
earnings in respect of, the Finance Charge Account and the Princi
pal Account as provided in the Pooling and Servicing Agreement; or
(ii) a grant of a security interest (as defined in the UCC as in
effect in the State of Delaware) in such property to the Trust,
which is enforceable with respect to the existing Receivables of
the Additional Accounts designated hereby and the proceeds (as de
fined in the UCC as in effect in the State of Delaware) thereof
upon the conveyance of such Receivables to the Trust, and which
will be enforceable with respect to the Receivables thereafter
created in respect of Additional Accounts designated hereby and the
proceeds (as defined in the UCC as in effect in the State of Dela
ware) thereof upon such creation; and provided, further, that if
this Assignment constitutes the grant of a security interest to the
Trust in such property pursuant to subsection (ii) above, upon the
filing of a financing statement described in Section 3 of this As
signment with respect to the Additional Accounts designated hereby
and in the case of the Receivables of such Additional Accounts
thereafter created and the proceeds (as defined in the UCC as in
effect in the State of Delaware) thereof upon such creation, the
Trust shall have a first priority perfected security interest in
such property, except for Liens permitted under subsection 2.5(b)
of the Pooling and Servicing Agreement.
(vi) Conditions Precedent. The acceptance by the Trustee set
forth in Section 4 and the amendment of the Pooling and Servicing
Agreement set forth in Section 7 are subject to the satisfaction,
on or prior to the Addition Date, of the following conditions
precedent:
Officer's Certificate. The Transferor shall have delivered
to the Trustee a certificate of a Vice President or more senior
officer substantially in the for: of Schedule 2 hereto, certifying
that (i) all requirements set forth in Section 2.6 of the Pooling
and Servicing Agreement for designating Additional Accounts and
conveying the Principal Receivables of such Accounts, whether now
existing or hereafter created, have been satisfied and (ii) each of
the representations and warranties made by the Transferor in
Section 5 is true and correct as of the Addition Date. The Trustee
may conclusively rely on such Officer's Certificate, shall have no
duty to make inquiries with regard to the matters set forth
therein, end shall incur no liability In so relying.
Opinion of Counsel. The Transferor shall have delivered to
the Trustee an Opinion of Counsel with respect to the Additional Ac
counts designated hereby substantially in the form of Exhibit I to
the Pooling and Servicing Agreement.
Additional Information. The Transferor shall have delivered
to the Trustee such information as was reasonably requested by the
Trustee to satisfy itself as to the accuracy of the representation
and warranty set forth in subsection 5(d) to this Agreement.
(vii) Amendment of the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement is hereby amended to provide that
all references therein to the "Pooling and Servicing Agreement," to
"this Agreement" and "herein" shall be deemed from and after the
Addition Date to be a dual reference to the Pooling and Servicing
Agreement as supplemented by this Assignment. Except as expressly
amended hereby, all of the representations, warranties, terms,
covenants and conditions of the Pooling and Servicing Agreement
shall remain unamended and shall continue to be, and shall remain,
in full force and effect in accordance with its terms and except as
expressly provided herein shall not constitute or be deemed to
constitute a waiver of compliance with or a consent to
noncompliance with any term or provision of the Pooling and Ser
vicing Agreement.
(viii) Counterparts. This Assignment may be executed in two
or more counterparts (and by different parties on separate counter
parts), each of which shall be an original, but all of which togeth
er shall constitute one and the same instrument.
(ix) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS.
IN WITNESS WHEREOF, the undersigned have
caused this Assignment of Receivables in Additional
Accounts to be duly executed and delivered by their
respective duly authorized officers on the day and year
first above written.
FINGERHUT FINANCIAL SERVICES
RECEIVABLES, INC.
By:
Name:
Title
THE BANK OF NEW YORK
(DELAWARE)
By:
Name:
Title:
Schedule 1
to Assignment of
Receivables in
Supplemental Accounts
SUPPLEMENTAL ACCOUNTS
Schedule 2
to Assignment of
Receivables in
Supplemental Accounts
Fingerhut Financial Services Receivables,Inc.
Fingerhut Financial Services Master Trust
Officer's Certificate
____________________, a duly authorized officer of
Fingerhut Financial Services Receivables, Inc., a Dela
ware corporation (the "Transferor"), hereby certifies and
acknowledges on behalf of the Bank that to the best of
his knowledge the following statements are true on
______, ____, (the "Addition Date"), and acknowledges on
behalf of the Bank that this Officer's Certificate will
be relied upon by ______________ as Trustee (the "Trust
ee") of the Fingerhut Financial Services Master Trust in
connection with the Trustee entering into Assignment No.
of Receivables in Supplemental Accounts, dated as of the
Addition Date (the "Assignment"), by and between the Bank
and the Trustee, in connection with the Pooling and
Servicing Agreement, dated as of _________, 1995, as
heretofore supplemented and amended (the "Pooling and
Servicing Agreement") pursuant to which the Transferor
and the Trustee are parties. The undersigned hereby cer
tifies and acknowledges on behalf of the Bank that:
On or prior to the Addition Date, the Bank has delivered to
the Trustee the Assignment (including an acceptance by the Trustee
on behalf of the Trust for the benefit of the Investor
Certificateholders) and the Bank has indicated in its computer
files that the Receivables created in connection with the
Supplemental Accounts have been transferred to the Trust and within
five Business Days after the Addition Date the Bank shall deliver
to the Trustee a [computer file or] microfiche list containing a
true and complete list of all Supplemental Accounts identified by
account number and the aggregate amount of the Receivables in such
Supplemental Accounts as of the Addition Date, which computer file
or microfiche list shall be as of the date of such Assignment,
incorporated into and made a part of such Assignment and the
Pooling and Servicing Agreement.
Legal Valid and Binding Obligation. The Assignment consti
tutes a legal, valid and binding obligation of the Bank, enforce
able against the Bank in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect affecting the enforcement of creditors' rights in general
except as such enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
Accounts. Each Supplemental Account designated Pursuant to
the Assignment is an Eligible Account. No selection procedures
believed by the Bank to be materially adverse to the interests of
the Investor Certificateholders were utilized in selecting the Addi
tional Accounts from the available Eligible Accounts, provided,
that, the selection of newly originated Accounts is deemed not to
be materially adverse to the interests of the Investor
Certificateholders.
Insolvency. The Bank is not insolvent and, after giving
effect to the conveyance set forth in Section 3 of the Assignment,
will not be insolvent.
Security Interest. The Assignment constitutes either (i) a
valid transfer and assignment to the Trust of all right, title and
interest of the Bank in and to Receivables now existing and
hereafter created in the Supplemental Accounts designated pursuant
to the Assignment and all proceeds (as defined in the UCC as in
effect in the State of Delaware) of such Receivables, and such Re
ceivables and any proceeds thereof 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) Liens permitted
under subsection 2.5(b) of the Pooling and Servicing Agreement, (y)
the interest of the Bank as holder of the Exchangeable Transferor
Certificate and (z) the Bank's right to receive interest accruing
on, and investment earnings in respect of, the Finance Charge
Account and the Principal Account or any Series Account as provided
in the Pooling and Servicing Agreement and any Supplement; or (ii)
a grant of a security interest (as defined in the UCC as in effect
in the State of Delaware) in such property to the Trust, which is
enforceable with respect to the existing Receivables of the
Additional Accounts designated pursuant to the Assignment and the
proceeds (as defined in the UCC as in effect in the State of
Delaware) thereof upon the conveyance of such Receivables to the
Trust, and which will be enforceable with respect to the Receiv
ables thereafter created in respect of Additional Accounts
designated pursuant to the Assignment and the proceeds (as defined
in the UCC as in effect in the State of Delaware) thereof upon such
creation; and provided, further, that if the Assignment constitutes
the grant of a security interest to the Trust in such property
pursuant to subsection (ii) above, upon the filing of a financing
statement described in Section 3 of the Assignment with respect to
the Additional Accounts designated pursuant to the Assignment and
in the case of the Receivables of such Additional Accounts thereaf
ter created and the proceeds (as defined in the UCC as in effect in
the State of Delaware) thereof upon such creation, the Trust shall
have a first priority perfected security Interest in such property,
except for Liens permitted under subsection 2.5(b) of the Pooling
and Servicing Agreement.
Requirements of Pooling and Servicing Agreement. All
requirements set forth in Section 2.6 of the Pooling and Servicing
Agreement for designating Additional Accounts and conveying the
Principal Receivables of such Accounts, whether now existing or
hereafter created, have been satisfied.
Initially capitalized terms used herein
and not otherwise defined are used as defined in the
Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto set my
hand this ___________ day of ________ ____.
FINGERHUT FINANCIAL SERVICES
RECEIVABLES, INC.
By:
Name:
Title:
EXHIBIT I
FORM OF OPINION OF COUNSEL REGARDING SUPPLEMENTAL AC
COUNTS
PROVISIONS TO BE INCLUDED IN OPINION OF COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 2.6(d)(vi)
OF THE POOLING AND SERVICING AGREEMENT
The opinions set forth below may be subject to certain
qualifications, assumptions, limitations and exceptions
taken or made in the opinion of the Transferor's counsel
with respect to similar matters delivered on the Closing
Date. Such counsel may rely as to factual matters on
certificates of officers of the Transferor and the
Servicer.
(i) The Assignment has been duly authorized, executed
and delivered by the Transferor and constitutes the valid
and legally binding agreement of the Transferor, enforce
able against the Transferor in accordance with its terms,
except (x) to the extent that the enforceability thereof
may be limited by (a) bankruptcy, insolvency, receiver
ship, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights
generally and the rights of creditors of Delaware char
tered banks as the same may be applied in the event of
the bankruptcy, insolvency, receivership, reorganization,
moratorium or other similar event in respect of the Trans
feror, and (b) general principles of equity (regardless
of whether enforceability is considered in a proceeding
at law or in equity).
_ The provisions of the Pooling and Servicing
Agreement are effective to create, in favor of the Trustee, a valid
security interest (as such term is defined in Section 1-201(37) of
the Delaware UCC) in all of the Transferor's right, title and inter
est in that portion of the Receivables which constitutes accounts,
general intangibles or chattel paper under the Delaware UCC and pro
ceeds thereof which security interest if characterized as a
transfer for security will secure all Secured Obligations and which
security interest if characterized as a sale of accounts will
constitute a valid sale of all of the Transferor's right, title and
interest in and to the Receivables and the proceeds thereof.
_ A Uniform Commercial Code financing statement
having been filed in the appropriate recording offices, the securi
ty interest (as such term is defined in Section 1-201(37) of the
Relevant UCC) in favor of the Trustee in the Receivables and
proceeds thereof has been perfected, and under the Relevant UCC no
other security interest of any other creditor of the Transferor
will be equal or prior to the security interest of the Trustee in
such Receivables and the proceeds thereof.
_
EXHIBIT J
FORM OF REASSIGNMENT OF RECEIVABLES
REASSIGNMENT NO.
OF RECEIVABLES, dated as of , , by
and between FINGERHUT FINANCIAL SERVICES RECEIVABLES,
INC., a corporation organized and existing under the laws
of the States of Delaware (the "Transferor"), and THE
BANK OF NEW YORK (DELAWARE), a banking corporation orga
nized under the laws of the State of Delaware (the
"Trustee") pursuant to the Pooling and Servicing Agree
ment referred to below.
W I T N E S S E T H
WHEREAS, the
Transferor and the Trustee are parties to the Pooling and
Servicing Agreement, dated as of May 26, 1995
(hereinafter as such agreement may have been, or may from
time to time be, amended, supplemented or otherwise
modified, the "Pooling and Servicing Agreement") by and
among the Transferor, Federated Department Stores, Inc.
as Servicer, and the Trustee;
WHEREAS, pursuant to
Section 2.7 of the Pooling and Servicing Agreement, the
Transferor wishes to remove all Receivables from certain
designated Accounts (collectively, the "Removed
Accounts") and to cause the Trustee to reconvey the
Receivables of such Removed Accounts, whether now
existing or hereafter created, from the Trust to the
Transferor (as each such term is defined in the Pooling
and Servicing Agreement); and
WHEREAS, the Trustee
is willing to accept such designation and to reconvey the
Receivables in the Removed Accounts subject to the terms
and conditions hereof.
NOW THEREFORE, the
Transferor and the Trustee hereby agree as follows:
(x) Defined Terms. All terms defined in the Pooling
and Servicing Agreement and used herein shall have such
defined meanings when used herein, unless otherwise
defined herein.
"Removal Date" shall mean, with respect to
the Removed Accounts designated hereby, , .
"Removal Notice Date" shall mean, with
respect to the Removed Accounts designated hereby,
, (which shall be a date on or prior to the fifth
Business Day prior to the Removal Date).
(xi) Designation of Removed Accounts. The Transferor
shall deliver to the Trustee or the bailee of the
Trustee, not later than five Business Days after the
Removal Date, a computer file or microfiche list contain
ing a true and complete list of each revolving consumer
credit card account which as of the Removal Date shall be
deemed to be a Removed Account, such accounts being
identified by account number and by the aggregate amount
of Receivables in such accounts as of the close of busi
ness on the Removal Date. Such list shall be marked as
Schedule 1 to this Reassignment and shall be incorporated
into and made a part of this Reassignment as of the
Removal Date.
(xii) Conveyance of Receivables
_ The Trustee does hereby reconvey to the Transferor,
without recourse, representation or warranty, on and
after the Removal Date, all right, title and interest of
the Trust in and to the Receivables now existing and
hereafter created in the Removed Accounts designated
hereby, all monies due or to become due with respect
thereto (including all Finance Charge Receivables) and
all proceeds (as defined in Section 9-306 of the UCC as
in effect in the [Relevant UCC State]) of such Receiv
ables.
_ In connection with such transfer, the Trustee
agrees to execute and deliver to the Transferor on or
prior to the date of this Reassignment, a termination
statement with respect to the Receivables now existing
and hereafter created in the Removed Accounts designated
hereby evidencing the release by the Trust of its Lien on
the Receivables in the Removed Accounts, and meeting the
requirements of applicable state law, in such manner and
such jurisdictions as are necessary to remove such Lien.
(xiii) Representations and Warranties of the
Transferor. The Transferor hereby represents and war
rants to the Trust as of the Removal Date:
_ Legal, Valid and Binding Obligation. This
Reassignment constitutes a legal, valid and binding
obligation of the Transferor enforceable against the
Transferor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect affecting the enforcement
of creditors' rights in general and except as such en
forceability may be limited by general principles of
equity (whether considered in a suit at law or in equi
ty).
_ Selection Procedures. No selection procedures
believed by the Transferor to be materially adverse to
the interests of the Investor Certificateholders were
utilized in selecting the Removed Accounts designated
hereby.
(xiv) Conditions Precedent. The amendment of the
Pooling and servicing Agreement set forth in Section 6
hereof is subject to the satisfaction, on or prior to the
Removal Date, of the following condition precedent:
The Transferor shall have delivered to
the Trustee an Officer's Certificate certifying that (i)
as of the Removal Date, all requirements set forth in Sec
tion 2.7 of the Pooling and Servicing Agreement for
designating Removed Accounts and reconveying the Receiv
ables of such Removed Accounts, whether now existing or
hereafter created, have been satisfied, and (ii) each of
the representations and warranties made by the Transferor
in Section 4 hereof is true and correct as of the Removal
Date. The Trustee may conclusively rely on such
Officer's Certificate, shall have no duty to make inqui
ries with regard to the matters set forth therein and
shall incur no liability in so relying.
(xv) Amendment of the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement is hereby amended to
provide that all references therein to the "Pooling and
Servicing Agreement", to "this Agreement" and "herein"
shall be deemed from and after the Removal Date to be a
dual reference to the Pooling and Servicing Agreement as
supplemented by this Reassignment. Except as expressly
amended hereby, all of the representations, warranties,
terms, covenants and conditions of the Pooling and
Servicing Agreement shall remain unamended and shall
continue to be, and shall remain, in full force and
effect in accordance with its terms and except as ex
pressly provided herein shall not constitute or be deemed
to constitute a waiver of compliance with or a consent to
non-compliance with any term or provision of the Pooling
and Servicing Agreement.
(xvi) Counterparts. This Reassignment may be
executed in two or more counterparts, and by different
parties on separate counterparts, each of which shall be
an original, but all of which together shall constitute
one and the same instrument.
(xvii) Governing Law. THIS REASSIGNMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVI
SIONS.
IN WITNESS WHEREOF, the undersigned have
caused this Reassignment of Receivables to be duly
executed and delivered by their respective duly
authorized officers on the day and year first above
written.
FINGERHUT FINANCIAL SERVICES
RECEIVABLES INC.
By:
Name:
Title:
THE BANK OF NEW YORK (DELAWARE)
as Trustee,
By:
Name:
Title:
FINGERHUT FINANCIAL SERVICES RECEIVABLES, INC.
Transferor
DIRECT MERCHANTS CREDIT CARD BANK,
N.A.
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of Certificateholders
of the Fingerhut Financial
Services Master Trust
POOLING AND SERVICING AGREEMENT
Dated as of May 26, 1995
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
Section 1.2 Other Definitional Provisions
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES 28
Section 2.1 Conveyance of Receivables 28
Section 2.2 Acceptance by Trustee 30
Section 2.3 Representations and Warranties of the Transferor 30
Section 2.4 Representations and Warranties of the Transferor
Relating to the Agreement and the Receivables 34
Section 2.5 Covenants of the Transferor 40
Section 2.6 Addition of Accounts 42
Section 2.7 Removal of Accounts 48
Section 2.8 Discount Option 50
Section 2.9 Covenants of the Transferor with Respect to the
Purchase Agreement 51
ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES 53
Section 3.1 Acceptance of Appointment and Other Matters
Relating to the Servicer 53
Section 3.2 Servicing Compensation 54
Section 3.3 Representations and Warranties of the Servicer 56
Section 3.4 Reports and Records for the Trustee 59
Section 3.5 Annual Servicer's Certificate 61
Section 3.6 Annual Independent Accountants' Servicing Report 62
Section 3.7 Tax Treatment 62
Section 3.8 Adjustments 63
Section 3.9 Notices to DMCCB 64
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS 65
Section 4.1 Rights of Certificateholders 65
Section 4.2 Establishment of Accounts 65
Section 4.3 Collections and Allocations 69
ARTICLE V
[ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES] 73
ARTICLE VI
THE CERTIFICATES 74
Section 6.1 The Certificates 74
Section 6.2 Authentication of Certificates 75
Section 6.3 Registration of Transfer and Exchange of
Certificates 75
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates 80
Section 6.5 Persons Deemed Owners 81
Section 6.6 Appointment of Paying Agent 82
Section 6.7 Access to List of Certificate-holders'
Names and Addresses 83
Section 6.8 Authenticating Agent 84
Section 6.9 Tender of Exchangeable Transferor Certificate 85
Section 6.10 Book-Entry Certificates 90
Section 6.11 Notices to Clearing Agency 91
Section 6.12 Definitive Certificates 91
Section 6.13 Global Certificate; Euro-Certificate Exchange Date 92
Section 6.14 Meetings of Certificateholders 92
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR 94
Section 7.1 Liability of the Transferor 94
Section 7.2 Merger or Consolidation of, or Assumption of
the Obligations of, the Transferor 94
Section 7.3 Limitation on Liability 95
Section 7.4 Liabilities 96
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER 98
Section 8.1 Liability of the Servicer 98
Section 8.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer 98
Section 8.3 Limitation on Liability of the Servicer and Others 99
Section 8.4 Servicer Indemnification of the Transferor, the
Trust and the Trustee 100
Section 8.5 The Servicer Not to Resign 101
Section 8.6 Access to Certain Documentation and Information
Regarding the Receivables 102
Section 8.7 Delegation of Duties 102
ARTICLE IX
PAY OUT EVENTS 104
Section 9.1 Pay Out Events 104
Section 9.2 Additional Rights Upon the Occurrence of Certain
Events 105
ARTICLE X
SERVICER DEFAULTS 108
Section 10.1 Servicer Defaults 108
Section 10.2 Trustee to Act; Appointment of Successor 111
Section 10.3 Notification to Certificateholders 114
Section 10.4 Waiver of Past Defaults 114
ARTICLE XI
THE TRUSTEE 115
Section 11.1 Duties of Trustee 115
Section 11.2 Certain Matters Affecting the Trustee 117
Section 11.3 Trustee Not Liable for Recitals in Certificates 119
Section 11.4 [Reserved] 120
Section 11.5 The Servicer to Pay Trustee's Fees and Expenses 120
Section 11.6 Eligibility Requirements for Trustee 121
Section 11.7 Resignation or Removal of Trustee 121
Section 11.8 Successor Trustee 123
Section 11.9 Merger or Consolidation of Trustee 123
Section 11.10 Appointment of Co-Trustee or Separate Trustee 124
Section 11.11 Tax Returns 125
Section 11.12 Trustee May Enforce Claims Without Possession
of Certificates 126
Section 11.13 Suits for Enforcement 126
Section 11.14 Rights of Certificateholders to Direct Trustee 127
Section 11.15 Representations and Warranties of Trustee 127
Section 11.16 Maintenance of Office or Agency 128
ARTICLE XII
TERMINATION 129
Section 12.1 Termination of Trust 129
Section 12.2 Optional Termination 131
Section 12.3 Final Payment with Respect to any Series 132
Section 12.4 Termination Rights of Holder of Exchangeable
Transferor Certificate 134
ARTICLE XIII
MISCELLANEOUS PROVISIONS 135
Section 13.1 Amendment 135
Section 13.2 Protection of Right, Title and Interest to Trust137
Section 13.3 Limitation on Rights of Certificateholders 139
Section 13.4 Governing Law 140
Section 13.5 Notices 140
Section 13.6 Severability of Provisions 141
Section 13.7 Assignment 141
Section 13.8 Certificates Non-Assessable and Fully Paid 141
Section 13.9 Further Assurances 142
Section 13.10 No Waiver; Cumulative Remedies 142
Section 13.11 Counterparts 142
Section 13.12 Third-Party Beneficiaries 142
Section 13.13 Actions by Certificateholders 143
Section 13.14 Rule 144A Information 143
Section 13.15 Merger and Integration 144
Section 13.16 Heading 144
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
Exhibit G Form of Agreed-Upon Procedures
Exhibit H Form of Assignment of Receivables in
Supplemental Accounts
Exhibit I Form of Opinion of Counsel Regarding
Supplemental Accounts
Exhibit J Form of Reassignment
EXHIBIT 10.U(i)
SERIES 1995-1
SUPPLEMENT, dated as of May 26, 1995 (this "Series
Supplement") by and among FINGERHUT FINANCIAL SERVICES
RECEIVABLES, INC., a corporation organized and existing
under the laws of the State of Delaware, as Transferor
(the "Transferor"), DIRECT MERCHANTS CREDIT CARD BANK,
N.A., a national banking organization organized under the
laws of the United States, as Servicer (the "Servicer"),
and THE BANK OF NEW YORK (DELAWARE), a Delaware banking
corporation organized and existing under the laws of the
State of Delaware as trustee (together with its succes
sors in trust thereunder as provided in the Agreement
referred to below, the "Trustee"), under the Pooling and
Servicing Agreement dated as of May 26, 1995 as amended,
supplemented or otherwise modified from time to time (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.
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 1995-1 Certificates." The
Series 1995-1 Certificates shall be issued in four
Classes, which shall be designated generally as the
Variable Funding Trust Certificate, Series 1995-1, Class
A (the "Class A Certificate"), the Floating Rate Accounts
Receivable Trust Certificates, Series 1995-1, Class B
(the "Class B Certificates"), the Floating Rate Accounts
Receivable Trust Certificates, Series 1995-1, Class C
(the "Class C Certificates") and the Variable Funding
Trust Certificate, Series 1995-1, Class D (the "Class D
Certificate").
2. Definitions. In the event that any term
or provision contained herein shall conflict with or be
inconsistent with any provision contained in the Agree
ment, the terms and provisions of this Series Supplement
shall govern with respect to the Series 1995-1
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 de
fined in the Agreement. Each capitalized term defined
herein shall relate only to the Series 1995-1 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 Adjusted 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 Principal 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 Receivables for all Series; provided, however,
that during any Class A Pay Down Period, the numerator
used in the above calculation shall be the sum of the
Class A Invested Amount, the Class B Invested Amount and
the Class C Invested Amount as of the day immediately pre
ceding the commencement of the Class A Pay Down Period.
"ABC Investor Default Amount" shall mean (i) on
any Business Day other than a Default Recognition Date,
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 reporting date and (ii) on any Default Recognition
Date, an amount equal to the product of (a) the sum of
the Class A Default Recognition Allocation Percentage,
the Class B Default Recognition Allocation Percentage and
the Class C Default Recognition Allocation Percentage
applicable on such Default Recognition Date and (b) the
Default Amount with respect to such Default Recognition
Date.
"ABC Revolving Principal Collections" shall
have the meaning specified in Section 4.9(b) of the
Agreement.
"Additional Class A Invested Amounts" shall
have the meaning specified in Section 6.15 of the Agree
ment.
"Additional Class D Invested Amounts" shall
have the meaning specified in Section 6.16 of the Agree
ment.
"Additional Interest" shall mean, at any time
of determination, the sum of Class B Additional Interest
and Class C Additional Interest.
"Adjusted Portfolio Yield" shall mean for the
Series 1995-1 Certificates, with respect to any Monthly
Period, the annualized percentage equivalent of a frac
tion, the numerator of which is an amount equal to the
sum of the aggregate amount of Available Series 1995-1
Finance Charge Collections (without giving effect to any
portion thereof representing amounts withdrawn from the
Payment Reserve Account) for such Monthly Period, minus
the aggregate Investor Default Amount for such Monthly
Period and the Series Allocation Percentage of any Ad
justment 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 sum of the Class A Invested
Amount, the Class B Invested Amount and the Class C
Invested Amount.
"Administration Agreement" shall mean the
Amended and Restated Administration Agreement, dated as
of May 26, 1995, between the Fingerhut Owner Trust and
Fingerhut Corporation, as the same may from time to time
be amended, restated, modified and in effect.
"Administrator" shall mean Fingerhut Corpora
tion as administrator under the Administration Agreement.
"Aggregate ABC Principal Amount" shall mean
with respect to any date of determination an amount equal
to the sum of the Class A Outstanding Principal Amount,
the Class B Invested Amount and the Class C Invested
Amount, each as of such date of determination.
"Aggregate Interest Rate Caps Notional Amount"
shall mean with respect to any date of determination an
amount equal to the sum of the notional amounts or equiv
alent amounts of all outstanding Cap Agreements, Replace
ment Interest Rate Caps and Qualified Substitute Arrange
ments, each as of such date of determination.
"Amortization Period" shall mean the period
beginning on the day following the last day of the Re
volving Period and ending on the Series 1995-1 Termina
tion Date.
"Amortization Period Commencement Date" shall
mean (i) the earlier of May 28, 1999 and the Pay Out Com
mencement Date or (ii) if there is any Extension, the
earlier of the date specified as such in the most recent
Extension Notice and the Pay Out Commencement Date.
"Available Series 1995-1 Finance Charge Collect
ions" shall have the meaning specified in subsection
4.9(a) of the Agreement.
"Base Rate" shall mean, as of any Business Day,
the sum of (i) the average of (A) the Class A Certificate
Rate, (B) the Class B Certificate Rate and (C) the Class
C Certificate Rate, each of (A), (B) and (C) weighted by
the unpaid principal amount of each respective Class of
Certificates as of such Business Day, plus (ii) the
product of 2% per annum and the percentage equivalent of
a fraction the numerator of which is the sum of the Class
A Adjusted Invested Amount, the Class B Invested Amount,
the Class C Invested Amount and the Class D Invested
Amount and the denominator of which is the Invested
Amount.
"Cap Agreements" shall mean the interest rate
cap agreements, between the Transferor, the Trustee and a
Cap Provider, as amended from time to time, with respect
to the Class A Certificate Rate, Class B Certificate Rate
and Class C Certificate Rate, respectively, and any
additional interest rate protection agreement or agree
ments, entered into between the Transferor, the Trustee
and a Cap Provider, as the same may from time to time be
amended, restated, modified and in effect.
"Cap Proceeds Account" shall have the meaning
specified in subsection 3A(b) of this Series Supplement.
"Cap Provider" shall mean (i) a third party cap
provider having a senior unsecured debt rating of at
least "AA" by Standard & Poor's and "Aa2" by Moody's and
(ii) a third party cap provider or its corporate parent
having a short term rating from Standard & Poor's of A-1.
"Cap Receipt Amount" shall mean, with respect
to any Business Day the amount on deposit in the Cap
Proceeds Account.
"Cap Settlement Date" shall have the meaning
specified in subsection 3A(b) of this Series Supplement.
"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 Adjusted Invested Amount" shall mean,
with respect to any date of determination, an amount
equal to the Class A Invested Amount minus the Defeasance
Account Balance on such date of determination.
"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 1995-1 Certificateholders'
Interest evidenced by the Class A Certificate.
"Class A Certificate" shall mean the variable
funding certificate executed by the Transferor and authen
ticated by or on behalf of the Trustee, substantially in
the form of Exhibit A-1 hereto.
"Class A Certificate Rate" shall mean with re
spect to any Business Day, a per annum interest rate
equal to the rate which if multiplied by the Class A
Outstanding Principal Amount as of the close of business
on the preceding Business Day would produce, on the basis
of a 365- or 366-day year, as the case may be, an amount
equal to the Cost of Funds for the period from and in
cluding the immediately preceding Business Day to but ex
cluding such Business Day.
"Class A Costs" shall mean with respect to any
Business Day, (i) the Series 1995-1 Allocation Percentage
of the sum of (x) the Liquidity Bank Increased Costs (as
defined in the Collateral Trust Agreement), (y) OTC Arti
cle VI Costs (as defined in the Collateral Trust Agree
ment) and (z) any amounts described in subsection
5.3(a)(ii)(I)(a) of the Collateral Trust Agreement, in
each case to the extent such amount is due and payable
and has not previously been paid, and (ii) (a) the Series
1995-1 Non-Utilized Allocation Percentage of any Commit
ment Fees (as defined in the Liquidity Agreement) accrued
from and including the preceding Business Day to but
excluding such Business Day pursuant to Section 2.9 of
the Liquidity Agreement with respect to Unutilized Avail
able Commitments (as defined in the Liquidity Agreement)
plus (b) any such Commitment Fees allocated to the Class
A Certificate which accrued with respect to prior Busi
ness Days but have not been paid pursuant to Section 2.9
of the Liquidity Agreement.
"Class A Default Recognition Allocation Percent
age" shall mean, with respect to each Default Recognition
Date, the percentage equivalent of a fraction, the numer
ator of which is the Weighted Average Class A Adjusted In
vested Amount for the related Monthly Period and the
denominator of which is the Weighted Average Principal
Receivables in the Trust for the related Monthly Period.
"Class A Event of Default" shall have the mean
ing specified for the term "Event of Default" in the Li
quidity Agreement.
"Class A Floating Allocation Percentage" shall
mean, with respect to any Business Day, the percentage
equivalent of a fraction, the numerator of which is the
Class A Adjusted Invested Amount on such day after taking
into account all adjustments of the Class A Invested
Amount on such 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) the sum of the numerators with respect to all
Classes of all Series then outstanding used to calculate
the applicable allocation percentage.
"Class A Funding Purchase" shall have the
meaning specified in Section 4.14 of the Agreement.
"Class A Interest" shall mean the interest
distributable in respect of the Class A Certificate as
calculated in accordance with subsection 4.6(a) of the
Agreement.
"Class A Interest Adjustment" shall have the
meaning specified in Section 4.6A 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 principal amount of Class A Certificates purchased
pursuant to any Class A Funding Purchase pursuant to Sec
tion 4.14(b) of the Agreement, minus (b) the aggregate
amount of principal payments made to Class A Certificate
holders through and including such Business Day, minus
(c) the aggregate amount of Class A Investor Charge-Offs
for all prior Distribution Dates, plus (d) the sum of the
aggregate amount allocated with respect to Class A Inves
tor Charge-Offs and available on all prior Distribution
Dates pursuant to subsection 4.9(a)(viii) of the Agree
ment and, with respect to such subsection and pursuant to
subsections 4.10(a) and (b) and Section 4.15 of the Agree
ment, for the purpose of reinstating amounts reduced
pursuant to the foregoing clause (d) plus (e) the aggre
gate principal amount of any Additional Class A Invested
Amounts purchased pursuant to Section 6.15 of the Agree
ment.
"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 Finance Charge
Receivables and Receivables in Defaulted Accounts at any
time or Principal Receivables during the Revolving Period
(except for any portion of the Revolving Period that
occurs during the Class A Pay Down Period), the Class A
Floating Allocation Percentage and (b) with respect to
Principal Receivables during the Amortization Period and
the Class A Pay Down Period, the ABC Fixed/Floating
Allocation Percentage.
"Class A Maximum Invested Amount" shall mean
$412,400,000.
"Class A Outstanding Principal Amount" shall
mean with respect to the Class A Certificate, when used
with respect to any Business Day, an amount equal to (a)
the principal amount of Class A Certificates purchased
pursuant to any Class A Funding Purchase pursuant to Sec
tion 4.14(b) of the Agreement, plus (b) the aggregate
principal amount of any Additional Class A Invested
Amounts purchased by the Class A Certificateholder on or
prior to such Business Day pursuant to Section 6.15 of
the Agreement minus (c) the aggregate amount of principal
payments made to the Class A Certificateholder on or
prior to such Business Day.
"Class A Pay Down Period" shall have the mean
ing specified in Section 8A of this Series Supplement.
"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 Principal" shall mean the principal
distributable in respect of the Class A Certificate as
calculated in accordance with subsection 4.7(a) of the
Agreement.
"Class A Purchase Agreement" shall mean the
Class A Purchase Agreement, dated as of May 26, 1995, be
tween Fingerhut Owner Trust and the Transferor, as the
same may from time to time be amended, restated, modified
and in effect.
"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) the amount
described in subsection 4.9(a)(i)(y) for such Business
Day, (ii) the Class A Floating Allocation Percentage of
the Daily Portion of the Servicing Fee for the then cur
rent Monthly Period, (iii) the Class A Floating Alloca
tion Percentage of the Default Amount, if any, for such
Business Day and, to the extent not previously paid, for
any previous Business Day in such Monthly Period, (iv) on
each Transfer Date the Class A Percentage of the Series
Allocation Percentage of the Adjustment Payment required
to be made by the Transferor but not made on such Trans
fer Date and (v) the amount of unreimbursed Class A
Investor Charge-Offs over (y) the Available Series 1995-1
Finance Charge Collections plus any Excess Finance Charge
Collections from other Series and any Transferor Finance
Charge Collections allocated with respect to the amounts
described in clauses (x)(i) through (iv).
"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 1995-1 Certificateholders'
Interest evidenced by the Class B Certificates.
"Class B Certificate Rate" shall mean with re
spect to each Interest Accrual Period, a per annum rate
.625% in excess of LIBOR, as determined on the related
LIBOR Determination Date.
"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 Daily Principal Amount" shall have the
meaning specified in subsection 4.9(c)(ii) of the Agree
ment.
"Class B Default Recognition Allocation Percent
age" shall mean, with respect to each Default Recognition
Date, the percentage equivalent of a fraction, the numer
ator of which is the Weighted Average Class B Invested
Amount for the related Monthly Period and the denominator
of which is the Weighted Average Principal Receivables in
the Trust for the related Monthly Period.
"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) the sum of the numerators with respect to all Classes
of all Series then outstanding used to calculate the
applicable allocation percentage.
"Class B Full Invested Amount" shall mean
$64,806,000.
"Class B Funding Purchase" shall have the
meaning specified in Section 4.14A of the Agreement.
"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 Adjustment" shall have the
meaning specified in Section 4.6A 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 principal amount of Class B Certificates purchased
pursuant to any Class B Funding Purchase pursuant to Sec
tion 4.14(b) of the Agreement, minus (b) the aggregate
amount of principal payments made to Class B Certificate
holders prior to such Business Day, minus (c) the aggre
gate 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) and Section 4.15 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 Finance Charge
Receivables and Receivables in Defaulted Accounts at any
time or Principal Receivables during the Revolving Peri
od, the Class B Floating Allocation Percentage and (b)
with respect to Principal Receivables during the Amorti
zation Period, the ABC Fixed/Floating Allocation Percent
age.
"Class B Outstanding Principal Amount" shall
mean, when used with respect to any Business Day, an
amount equal to (a) the principal amount of Class B
Certificates purchased pursuant to any Class B Funding
Purchase pursuant to Section 4.14(b) of the Agreement,
minus (b) the aggregate amount of principal payments made
to Class B Certificateholders prior to such Business Day.
"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 the last day of the related Monthly Period
(determined after taking into account any increases or
decreases in the Class B Invested Amount which will occur
on the following Distribution Date) to the highest Class
B Invested Amount on or prior to the last day of such
Monthly Period during the Revolving Period.
"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 first Distribution Date
in an Amortization Period on which the Class A Invested
Amount equals or is reduced to zero or, if there are no
Principal Collections allocable to the Series 1995-1
Certificates remaining after payments have been made to
the Class A Certificate 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 Section 2.4(e), 9.2,
10.2, 12.1 or 12.2 of the Agreement or Section 3 of this
Series Supplement.
"Class B Purchase Agreement" shall mean the
Class B Purchase Agreement, dated as of May 26, 1995, be
tween the Transferor and the purchasers of the Class B
Certificates specified therein, as the same may from time
to time be amended, restated, modified and in effect.
"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) the Daily
Portion of the Class B Interest for the then current
Monthly Period, (ii) any Carryover Class B Interest
previously due but not paid to the Class B Certificate
holders on a prior Business Day, (iii) the Class B Float
ing 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 Business Day and, to the extent not previously paid,
for any previous Business Day in such Monthly Period, (v)
the Class B Percentage of the Series Allocation Percent
age of the Adjustment Payment required to be made by the
Transferor but not made on the related Transfer Date and
(vi) the unreimbursed amount by which the Class B Invest
ed Amount has been reduced on prior Business Days pursu
ant to clauses (c) and (d) of the definition of Class B
Invested Amount over (y) the Available Series 1995-1
Finance Charge Collections plus any Excess Finance Charge
Collections from other Series and any Transferor Finance
Charge Collections allocated with respect to the amounts
described in clauses (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 1995-1 Certificateholders'
Interest evidenced by the Class C Certificates.
"Class C Certificate Rate" shall mean with
respect to each Interest Accrual Period, a per annum rate
.75% in excess of LIBOR as determined on the related
LIBOR Determination Date.
"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 Default Recognition Allocation Per
centage" shall mean, with respect to each Default Recog
nition Date, the percentage equivalent of a fraction, the
numerator of which is the Weighted Average Class C In
vested Amount for the related Monthly Period and the
denominator of which is the Weighted Average Principal
Receivables in the Trust for the related Monthly Period.
"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) the sum of the numerators with respect to all Classes
of all Series then outstanding used to calculate the
applicable allocation percentage.
"Class C Full Invested Amount" shall mean
$35,349,000.
"Class C Funding Purchase" shall have the
meaning specified in Section 4.14 of the Agreement.
"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 Adjustment" shall have the
meaning specified in Section 4.6A 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 principal amount of Class C Certificates purchased
pursuant to any Class C Funding Purchase pursuant to Sec
tion 4.14(b) of the Agreement, minus (b) the aggregate
amount of principal payments made to Class C Certificate
holders prior to such Business Day, minus (c) the aggre
gate amount of Class C Investor Charge-Offs for all prior
Distribution Dates, minus (d) the aggregate amount of
Reallocated Class B Principal Collections and Reallocated
Class C Principal Collections for which the Class D
Invested Amount has not been reduced for all prior Busi
ness Days and plus (e) the sum of the aggregate amount
allocated and available on all prior Business Days pursu
ant to subsection 4.9(a)(xii) of the Agreement and, with
respect to such subsection, pursuant to subsections
4.10(a) and (b) and Section 4.15 of the Agreement, 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 Finance Charge
Receivables and Receivables in Defaulted Accounts at any
time or Principal Receivables during the Revolving Peri
od, the Class C Floating Allocation Percentage and (b)
with respect to Principal Receivables during the Amorti
zation Period, the ABC Fixed/Floating Allocation Percent
age.
"Class C Outstanding Principal Amount" shall
mean, when used with respect to any Business Day, an
amount equal to (a) the principal amount of Class C
Certificates purchased pursuant to any Class C Funding
Purchase pursuant to Section 4.14(b) of the Agreement,
minus (b) the aggregate amount of principal payments made
to Class C Certificateholders prior to such Business Day.
"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 the last day of the related Monthly Period
(determined after taking into account any increases or
decreases in the Class C Invested Amount which will occur
on the following Distribution Date) to the highest Class
C Invested Amount on or prior to the last day of such
Monthly Period during the Revolving Period.
"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 first 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 1995-1 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 Purchase Agreement" shall mean the
Class C Purchase Agreement, dated as of May 26, 1995, be
tween the Transferor and the Class C Certificate pur
chasers specified therein, as the same may from time to
time be amended, restated, modified and in effect.
"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) 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 Business Day and, to the extent
not previously paid, for any previous Business Day in
such Monthly Period, (v) the Class C Percentage of the
Series Allocation Percentage of the Adjustment Payment
required to be made by the Transferor but not made on the
related Transfer Date and (vi) 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 over (y) the
Available Series 1995-1 Finance Charge Collections plus
any Excess Finance Charge Collections from other Series
and any Transferor Finance Charge Collections allocated
with respect to the amounts described in clauses (x)(i)
through (v).
"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 1995-1 Certificateholders'
Interest evidenced by the Class D Certificate.
"Class D Certificate" 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 Daily Principal" shall have the mean
ing specified in Section 4.7(d) of the Agreement.
"Class D Default Recognition Allocation Percent
age" shall mean with respect to each Default Recognition
Date, the percentage equivalent of a fraction, the numera
tor of which is the Weighted Average Class D Invested
Amount for the related Monthly Period and the denominator
of which is the Weighted Average Principal Receivables in
the Trust for the related Monthly Period.
"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 on such day after taking into
account all adjustments of the Class D Invested Amount on
such 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) the sum of the
numerators with respect to all Classes of all Series then
outstanding used to calculate the applicable allocation
percentage.
"Class D Invested Amount" shall mean, when used
with respect to any Business Day, an amount equal to (a)
upon the initial issuance of the Class D Certificate the
initial amount designated by the Transferor (which shall
not be less than the Stated Class D Amount), plus (b) the
aggregate principal amount of any Additional Class D In
vested Amounts pursuant to Section 6.16 of the Agreement,
minus (c) the aggregate amount of principal payments made
to Class D Certificateholders prior to such Business Day,
minus (d) the aggregate amount of Class D Investor Charge-
Offs for all prior Distribution Dates, minus (e) the
aggregate amount of Reallocated Principal Collections for
all prior Business Days, plus (f) the sum of the aggre
gate amount allocated and available on all prior Business
Days pursuant to subsection 4.9(a)(xiii) of the Agreement
and, with respect 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 (d) and (e).
"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
(i) on any Business Day other than a Default Recognition
Date, for any Business Day an amount equal to the product
of (a) the Class D Floating Allocation Percentage appli
cable on such Business Day and (b) the aggregate Default
Amount identified since the prior reporting date and (ii)
on any Default Recognition Date, an amount equal to the
product of (a) the sum of the Class D Default Recognition
Allocation Percentage applicable on such Default Recogni
tion Date and (b) the Default Amount with respect to such
Default Recognition Date.
"Class D Investor Percentage" shall mean, for
any Business Day, (a) with respect to Finance Charge Re
ceivables and Receivables in Defaulted Accounts at any
time or Principal Receivables during the Revolving Peri
od, the Class D Floating Allocation Percentage and (b)
with respect to Principal Receivables during the Amorti
zation Period, the Class D Fixed/Floating Allocation
Percentage.
"Class D Maximum Required Amount" shall mean
$76,589,000.
"Class D Outstanding Principal Amount" shall
mean, when used with respect to any Business Day, an
amount equal to (a) upon the initial issuance of the
Class D Certificate, the initial amount designated by the
Transferor (which shall not be less than the Stated Class
D Amount), plus (b) the aggregate principal amount of any
Additional Class D Invested Amounts pursuant to Section
6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class D Certificateholders
prior to such Business Day.
"Class D Principal" shall mean the principal
distributable in respect of the Class D Certificate as
specified in subsection 4.7(d) of the Agreement.
"Class D Principal Payment Commencement Date"
shall mean the earlier of (a) the first Distribution Date
on which the Class C Invested Amount is paid in full or,
if there are no Principal Collections allocable to the
Series 1995-1 Certificates remaining after payments have
been made to the Class C Certificates on such Distribu
tion Date, the Distribution Date following the Distribu
tion 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 the date of initial
issuance of Certificates of Series 1995-1.
"Collateral Trust Agreement" shall mean the
Amended and Restated Collateral Trust Agreement dated as
of May 26, 1995, between Fingerhut Owner Trust and State
Street Bank and Trust Company, as Collateral Trustee, as
the same may from time to time be amended, restated,
modified and in effect.
"Commercial Paper" shall mean the promissory
notes issued by the Fingerhut Owner Trust in the commer
cial paper market pursuant to the Liquidity Agreement and
the Depositary Agreement.
"Cost of Funds" shall mean with respect to any
day the sum of (a) the greater of (i) the OT Allocation
Percentage of the sum of interest on Loans outstanding
and the Interest Component of outstanding Commercial
Paper accrued with respect to such day and (ii) the
Administrator's written estimate delivered to the Trustee
on the first Business Day preceding the first day of the
then current Monthly Period, as may be modified from time
to time during such Monthly Period, of the OT Allocation
Percentage of the average daily amount of interest that
will accrue on the Loans and Commercial Paper during such
Monthly Period; provided, however, that the amount deter
mined pursuant to this clause (a) (ii) shall not exceed
on any day (I) the product of (x) the OT Allocation
Percentage of the sum of the aggregate outstanding princi
pal amount of the Loans and the aggregate Principal Compo
nent of the Commercial Paper outstanding on such Business
Day after giving effect to all transactions on such Busi
ness Day, (y) the greater of (A) LIBOR prevailing on such
preceding Business Day plus .75% and (B) 12% and (z) a
fraction the numerator of which is one and the denomina
tor of which is the actual number of days in the then cur
rent calendar year minus (II) the sum of the amount
determined pursuant to clause (b) below and the OT Allo
cation Percentage of the Total Program Fees for such day,
(b) the OT Allocation Percentage of the amount of any Com
mitment Fees (as defined in the Liquidity Agreement)
accrued with respect to such day pursuant to Section 2.9
of the Liquidity Agreement with respect to Utilized Avail
able Commitments (as defined in the Liquidity Agreement),
and (c) the Series 1995-1 Allocation Percentage of the
Daily Portion of the Interest Amount (as defined in the
Owner Trust Agreement) accrued with respect to such day.
"Daily Portion" shall mean, with respect to any
amount determined pursuant hereto, the product of such
amount and a fraction the numerator of which shall be the
number of days from and including the preceding Business
Day to but excluding such Business Day and the denomina
tor of which shall be the number of days in the then
current Monthly Period.
"Defeasance Account" shall have the meaning
specified in Section 9A of this Series Supplement.
"Defeasance Account Balance" shall mean, with
respect to any date of determination, the principal
amount, if any, on deposit in the Defeasance Account on
such date of determination.
"Depositary" shall mean The First National Bank
of Chicago, any successor to the Depositary or such other
banking institution as the Fingerhut Owner Trust shall ap
point, with the prior written consent of the Majority
Lenders (as defined in the Liquidity Agreement).
"Depositary Agreement" shall mean the Amended
and Restated Depositary Agreement, dated as of May 26,
1995, between the Fingerhut Owner Trust and the Deposi
tary, as the same may from time to time be amended,
restated, modified and in effect.
"Distribution Date" shall mean July 20, 1995,
and the twentieth day of each month thereafter, or if
such day is not a Business Day, the next succeeding
Business Day; provided, however, that solely with respect
to the payment of principal with respect to the Class B
Certificates, Class C Certificates and Class D Certifi
cate during the Amortization Period, Distribution Date
shall mean the first Business Day of each Monthly Period
beginning with the Monthly Period next succeeding the
Monthly Period in which the Amortization Period Commence
ment Date occurs; provided further, that the final Dis
tribution Date with respect to the payment of principal
and interest shall be the Scheduled Series 1995-1 Termi
nation Date.
"Early Amortization Period" shall mean the
period beginning on the day on which a Pay Out Event
occurs or is deemed to have occurred 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 Series 1995-1 Termination Date.
"Election Date" shall have the meaning speci
fied in subsection 6.17(a) of the Agreement.
"Election Notice" shall have the meaning speci
fied in subsection 6.17(a) of the Agreement.
"Enhancement" shall mean, with respect to the
Class A Certificate, 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 Finance Charge Collections" shall mean,
with respect to any Business Day, as the context re
quires, either (x) the amount described in subsection
4.9(a)(xix) of the Agreement allocated to the Series 1995-
1 Certificates but available to cover shortfalls in
amounts paid from Finance Charge Collections for other
Series, if any, or (y) the aggregate amount of Finance
Charge Collections allocable to other Series in excess of
the amounts necessary to make required payments with
respect to such Series, if any, and available to cover
shortfalls with respect to the Series 1995-1 Certifi
cates.
"Extension" shall mean the procedure by which
the Investor Certificateholders consent to the extension
of the Revolving Period to the new Amortization Period
Commencement Date set forth in the Extension Notice,
pursuant to Section 6.17 of the Agreement.
"Extension Date" shall mean April 23, 1999 or
if an Extension has already occurred, the date of the
next Extension Date set forth in the Extension Notice
relating to the Extension then in effect (or, if any such
date is not a Business Day, the next preceding Business
Day).
"Extension Notice" shall have the meaning
specified in subsection 6.17(a) of the Agreement.
"Extension Opinion" shall have the meaning
specified in subsection 6.17(a) of the Agreement.
"Extension Tax Opinion" shall have the meaning
specified in subsection 6.17(a) of the Agreement.
"Face Amount" shall mean (i) with respect to
Commercial Paper issued on a discount basis, the face
amount stated therein, and (ii) with respect to Commer
cial Paper which is interest-bearing, the principal
amount of and interest accrued and to accrue on such
Commercial Paper to its stated maturity.
"FFSRI Note" shall have the meaning specified
in Section 18 of this Series Supplement.
"FFSRI Note Required Amount" shall have the
meaning specified in Section 18 of this Series Supple
ment.
"Fingerhut Owner Trust" shall mean the Delaware
business trust created pursuant to the Owner Trust Agree
ment.
"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 with respect to all Classes of all Series then
outstanding used to calculate the applicable allocation
percentage; provided, however, that during any Class A
Pay Down Period, the numerator used in the above calcula
tion shall be the sum of the Class A Invested Amount, the
Class B Invested Amount and the Class C Invested Amount
as of the day immediately preceding the commencement of
the Class A Pay Down Period.
"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.
"Interest Accrual Period" shall mean a Monthly
Period and, with respect to a Distribution Date, the pre
ceding Monthly Period; provided, however, that the ini
tial Interest Accrual Period shall be the period from the
Closing Date to and including the last day of the Monthly
Period preceding the initial Distribution Date.
"Interest Component" shall mean, with respect
to any Commercial Paper (i) issued on a discount basis,
the portion of the Face Amount of such Commercial Paper
representing the discount incurred in respect thereof and
(ii) issued on an interest-bearing basis, the interest
payable on such Commercial Paper (in each case including
the related Commercial Paper dealer fees payable in
connection with the issuance of such Commercial Paper).
"Interest Rate Caps" shall mean the interest
rate caps provided pursuant to Cap Agreements by one or
more Cap Providers to the Trustee on behalf of any of the
Certificateholders which shall entitle the Trust to re
ceive monthly payments equal to the product of (i) the
positive difference, if any, between LIBOR in effect for
each applicable Interest Period and 12%, (ii) the notion
al amount of such interest rate cap and (iii) the actual
number of days in the Interest Period divided by 360.
"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; provided, however, that for purposes of deter
mining the Servicing Fee and the Aggregate Invested
Amount, the Invested Amount shall mean an amount equal to
the sum of (a) the Class A Adjusted 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 Business Day.
"Investment Earnings" shall mean, with respect
to any Business Day, the investment earnings on amounts
on deposit in (i) the Payment Reserve Account, deposited
in the Collection Account pursuant to subsection 4.17(c)
and (ii) the Defeasance Account, deposited in the Col
lection Account pursuant to subsection 9A(a).
"Investment Period" shall have the meaning
specified in Section 4.14 of this Series Supplement.
"Investor Certificateholder" shall mean the
Holder of record of an Investor Certificate of Series
1995-1.
"Investor Certificates" shall mean the Class A
Certificate, the Class B Certificates, the Class C Cer
tificates and the Class D Certificate.
"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 Finance Charge Receivables
and Receivables in Defaulted Accounts at any time or Prin
cipal Receivables during the Revolving Period (except,
with respect to the Class A Certificates, for any portion
of the Revolving Period that occurs during the Class A
Pay Down Period), the Floating Allocation Percentage and
(b) with respect to Principal Receivables during the
Amortization Period and the Class A Pay Down Period, the
Fixed/Floating Allocation Percentage.
"Investor Reserve Account" shall have the
meaning specified in Section 4.18 hereof.
"LIBOR" shall mean, for any Interest Accrual
Period, the London interbank offered quotations for one-
month Dollar deposits determined by the Trustee for each
Interest Accrual Period in accordance with the provisions
of Section 4.16 of the Agreement.
"LIBOR Determination Date" shall mean the
second Business Day prior to the commencement of each
Interest Accrual Period; provided, however, that with
respect to the initial Interest Accrual Period for the
Class C Certificates, LIBOR Determination Date shall mean
a date selected by the Transferor which shall not be in
excess of two Business Days prior to the date of initial
issuance of Certificates of the applicable Class. 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.
"Liquidity Agreement" shall mean the Amended
and Restated Liquidity Agreement, dated as of May 26,
1995, by and among the Fingerhut Owner Trust, the several
banks signatory thereto, and Chemical Bank, as Adminis
trative Agent, as the same may from time to time be amend
ed, restated, modified and in effect.
"Liquidity Bank" shall mean any liquidity bank
providing liquidity for the Commercial Paper from time to
time pursuant to the Liquidity Agreement, as evidenced by
its execution thereof, and any successor or assignee
liquidity banks under the Liquidity Agreement.
"Loans" shall mean any loans made pursuant to
the Liquidity Agreement.
"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 1995-1 Certificates
shall begin on and include the Closing Date and shall end
on and include June 30, 1995.
"Negative Carry Amount" shall have the meaning
specified in subsection 4.10(a) of the Agreement.
"Net ABC Revolving Principal Collections" shall
have the meaning specified in Section 4.9(b) of the
Agreement.
"OT Allocation Percentage" shall mean, on any
date of determination, the percentage equivalent of a
fraction the numerator of which is the Class A Outstand
ing Principal Amount minus the Series 1995-1 Allocation
Percentage of the Aggregate OTC Amount (as defined in the
Liquidity Agreement) and the denominator of which is the
sum of the Class A Outstanding Principal Amount and all
other outstanding principal amounts of all other certifi
cates or securities or interests in receivables held by
the Owner Trust less the Aggregate OTC Amount (as defined
in the Liquidity Agreement) then outstanding; provided,
however, that if the denominator of the foregoing frac
tion is zero, then the OT Allocation Percentage shall be
zero.
"Owner Trust Agreement" shall mean the Amended
and Restated Owner Trust Agreement, dated as of May 26,
1995, between Fingerhut Receivables, Inc., as Depositor,
and Wilmington Trust Company as Owner Trustee, as the
same may from time to time be amended, restated, modified
and in effect.
"Paying Agent" shall mean, for the Series
1995-1 Certificates, the Trustee.
"Payment Reserve Account" shall have the mean
ing specified in subsection 4.17 of the Agreement.
"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 1995-1
Pay Out Event is deemed to occur pursuant to Section 8 of
this Series Supplement.
"Percentage" for each Liquidity Bank shall mean
its "Commitment Percentage" as defined in Section 1.1 of
the Liquidity Agreement.
"Portfolio Yield" shall mean for the Series
1995-1 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 1995-1 Finance
Charge Collections for such Monthly Period (not including
the amounts on deposit in the Payment Reserve Account, if
any and amounts on deposit in the Investor Reserve Ac
count, if any, 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.
"Principal Shortfalls" shall mean on any Busi
ness Day (i) prior to the Amortization Period Commence
ment Date other than during the Class A Pay Down Period,
zero, (ii) after the Amortization Period Commencement
Date, the Invested Amount of the class then receiving
principal payments after the application of Principal
Collections on such Business Day and (iii) during the
Class A Pay Down Period, the Class A Invested Amount
after the application of Principal Collections on such
Business Day.
"Qualified Substitute Arrangement" shall have
the meaning specified in Section 3A(d) of this Series
Supplement.
"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 4.15(c) of
the Agreement.
"Reallocated Class C Principal Collections"
shall have the meaning specified in subsection 4.15(b) of
the Agreement.
"Reallocated Class D Principal Collections"
shall have the meaning specified in subsection 4.15(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.
"Reference Banks" shall mean four major banks
in the London interbank market selected by the Trustee.
"Replacement Interest Rate Cap" shall mean one
or more Interest Rate Caps, which in combination with all
other Interest Rate Caps then in effect, after giving
effect to any planned cancellations of any presently
outstanding Interest Rate Caps satisfies the Transferor's
covenant contained in Section 3A of this Series Supple
ment to maintain Interest Rate Caps.
"Required Amount" shall have the meaning speci
fied in Section 4.10 of the Agreement.
"Reserve Application Date" shall mean the last
Business Day of each Monthly Period and each Determina
tion Date.
"Revolving Period" shall mean the period from
and including the Closing Date to, but not including, the
Amortization Period Commencement Date.
"Scheduled Series 1995-1 Termination Date"
shall mean May 30, 2003, unless a different date shall be
set forth in any Extension Notice.
"Series 1995-1" shall mean the Series of the
Fingerhut Financial Services Master Trust represented by
the Series 1995-1 Certificates.
"Series 1995-1 Allocation Percentage" shall
mean, on any date of determination, the percentage equiv
alent of a fraction the numerator of which is the Class A
Maximum Invested Amount and the denominator of which is
the sum of the Class A Maximum Invested Amount and the
other maximum invested amounts relating to all other
certificates, securities or interests in collateral held
by the Fingerhut Owner Trust.
"Series 1995-1 Non-Utilized Allocation Percent
age" shall mean, on any date of determination, the per
centage equivalent of a fraction the numerator of which
is the Class A Maximum Invested Amount minus the sum of
(x) the Class A Outstanding Principal Amount and (y) the
Series 1995-1 Allocation Percentage of the Aggregate OTC
Amount (as defined in the Liquidity Agreement) and the
denominator of which is the sum of (i) the Class A Maxi
mum Invested Amount minus the Class A Outstanding Princi
pal Amount plus (ii) the other maximum invested amounts
relating to all other certificates, securities or inter
ests in collateral held by the Fingerhut Owner Trust
minus the invested amounts or principal amounts relating
to all other series or interests in collateral held by
the Fingerhut Owner Trust minus (iii) the Aggregate OTC
Amount (as defined in the Liquidity Agreement).
"Series 1995-1 Certificates" shall mean the
Class A Certificate, the Class B Certificates, the Class
C Certificates and the Class D Certificate.
"Series 1995-1 Certificateholder" shall mean
the holder of record of any Series 1995-1 Certificate.
"Series 1995-1 Certificateholders' Interest"
shall have the meaning specified in Section 4.4 of the
Agreement.
"Series 1995-1 Pay Out Event" shall have the
meaning specified in Section 8 of this Series Supplement.
"Series 1995-1 Termination Date" shall mean the
earlier to occur of (i) the day after the Distribution
Date on which the Series 1995-1 Certificates are paid in
full, or (ii) the Scheduled Series 1995-1 Termination
Date.
"Series Servicing Fee Percentage" shall mean
2.00% per annum.
"Servicing Fee" shall mean for any Business
Day, an amount equal to the product of (i) a fraction the
numerator of which is the actual number of days from but
excluding the next preceding Business Day to and includ
ing such Business Day and the denominator of which is 365
or 366, as the case may be, (ii) the applicable Series
Servicing Fee Percentage and (iii) the Invested Amount on
such Business Day after giving effect to all transactions
on such Business Day.
"Shared Principal Collections" shall mean, as
the context requires, either (a) the amount allocated to
the Series 1995-1 Certificates which, in accordance with
subsections 4.9(b), 4.9(c)(v), and 4.9(e)(ii) of the
Agreement, may be applied in accordance with Section
4.3(d) of the Agreement or (b) the amounts allocated to
the investor certificates (other than Transferor Retained
Certificates) of other Series which the applicable Series
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
1995-1 Certificates.
"Specified Investor Reserve Amount" shall mean
an amount equal to 5% of the sum of the Class A Outstand
ing Principal Amount, the Class B Outstanding Principal
Amount, the Class C Outstanding Principal Amount and the
Class D Outstanding Principal Amount; provided, however,
that such percentage may be reduced at the option of the
Transferor at any time if the Trustee shall have received
written confirmation from each Rating Agency that the
reduction of such percentage will not cause such Rating
Agency to lower or withdraw its then current rating of
the Investor Certificates.
"Stated Class D Amount" shall mean on any date
of determination the greater of (i) zero and (ii) a
number rounded to the nearest dollar obtained by multi
plying the sum of the Class A Invested Amount, the Class
B Invested Amount and the Class C Invested Amount by a
fraction the numerator of which is 13 and the denominator
of which is 87; provided, however, that in no event shall
the Stated Class D Amount exceed the Class D Maximum
Required Amount; and provided further that during any
Early Amortization Period or Class A Pay Down Period the
Stated Class D Amount shall be equal to the Stated Class
D Amount immediately preceding the commencement of the
Early Amortization Period or Class A Pay Down Period.
"Termination Payment Date" shall mean the
earlier of the first Distribution Date following the
liquidation or sale of the Receivables as a result of an
Insolvency Event and the occurrence of the Scheduled
Series 1995-1 Termination Date.
"Total Program Fees" shall mean with respect to
any day, recurring fees payable to the Collateral Trustee
(as defined in the Liquidity Agreement), the Owner Trust
ee (as defined in the Liquidity Agreement), the Adminis
trative Agent (as defined in the Liquidity Agreement) and
the Depositary and Basic Administration Fees (as defined
in the Collateral Trust Agreement) that arise or accrue
on such day.
"Transferor Finance Charge Collections" shall
mean on any Business Day the product of (a) the Finance
Charge 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 Certificate, which the Transferor retains, but only to
the extent that and for so long as the Transferor is the
Holder of such Certificates.
"Transferor Retained Finance Charge Collec
tions" shall mean with respect to each Business Day other
than a Default Recognition Date, the amount specified in
subsection 4.9(a)(xix).
"Weighted Average Class A Adjusted Invested
Amount" shall mean with respect to any Monthly Period the
weighted average Class A Adjusted Invested Amount based
on the Class A Adjusted Invested Amount outstanding on
each Business Day after giving effect to all transactions
on such Business Day from but excluding the Default
Recognition Date related to the preceding Monthly Period
to and including the Default Recognition Date with re
spect to such Monthly Period.
"Weighted Average Class B Invested Amount"
shall mean with respect to any Monthly Period the weight
ed average Class B Invested Amount based on the Class B
Invested Amount outstanding on each Business Day after
giving effect to all transactions on such Business Day
from but excluding the Default Recognition Date related
to the preceding Monthly Period to and including the
Default Recognition Date with respect to such Monthly
Period.
"Weighted Average Class C Invested Amount"
shall mean with respect to any Monthly Period the weight
ed average Class C Invested Amount based on the Class C
Invested Amount outstanding on each Business Day after
giving effect to all transactions on such Business Day
from but excluding the Default Recognition Date related
to the preceding Monthly Period to and including the
Default Recognition Date with respect to such Monthly
Period.
"Weighted Average Class D Invested Amount"
shall mean with respect to any Monthly Period the weight
ed average Class D Invested Amount based on the Class D
Invested Amount outstanding on each Business Day after
giving effect to all transactions on such Business Day
from but excluding the Default Recognition Date related
to the preceding Monthly Period to and including the
Default Recognition Date with respect to such Monthly
Period.
"Weighted Average Principal Receivables" shall
mean with respect to any Monthly Period the weighted
average sum of the total amount of Principal Receivables
and the amount on deposit in the Excess Funding Account
on each Business Day after giving effect to all transac
tions on such Business Day from but excluding the Default
Recognition Date related to the preceding Monthly Period
to and including the Default Recognition Date with re
spect to such Monthly Period.
3. Reassignment Terms. The Series 1995-1
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 re
duced to an amount less than or equal to 10% of the sum
of the highest Class A Invested Amount, the highest Class
B Invested Amount and the highest Class C Invested Amount
during the Revolving Period. The deposit required in con
nection 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
1995-1 Certificates through the day prior to the Distri
bution Date on which the final distribution occurs.
SECTION 3A. Conveyance of Interest in Interest
Rate Cap; Cap Proceeds Account. (a) The Transferor
hereby covenants and agrees that, on or prior to the
issuance of any of the Class C Certificates, it shall
obtain and at all times prior to the close of business on
the Series 1995-1 Termination Date maintain one or more
Interest Rate Caps whose notional amounts singly or taken
as a group equal or exceed the Aggregate ABC Principal
Amount. The Transferor hereby assigns, sets-over, con
veys, pledges and grants a security interest and lien
(free and clear of all other Liens) to the Trustee for
the benefit of the Series 1995-1 Certificateholders, in
all of the Transferor's right, title and interest now
existing or hereafter arising in and to the Cap Agree
ments and the Interest Rate Caps arising thereunder,
together with the Cap Proceeds Account and all other
proceeds thereof, as collateral security for the benefit
of the Series 1995-1 Certificateholders. The Transferor
hereby further agrees to execute all such instruments,
documents and financing statements and take all such
further action requested by the Trustee to evidence and
perfect the assignment of the Cap Agreements and the
Interest Rate Caps pursuant to this Section 3A. The
Transferor agrees that each Interest Rate Cap shall
provide for payments to the Trustee and that the Trust's
interest in respect of such payments shall be deposited
into the Cap Proceeds Account.
(b) The Trustee, for the benefit of the Series
1995-1 Certificateholders, shall establish and maintain
with a Qualified Institution, which may be the Trustee,
in the name of the Trustee, on behalf of the Certificate
holders, a certain segregated trust account (the "Cap
Proceeds Account"). All amounts paid pursuant to the
Interest Rate Caps or any Qualified Substitute Arrange
ment on any Business Day (a "Cap Settlement Date") shall
be deposited in the Cap Proceeds Account. Any amounts
paid pursuant to the Interest Rate Caps or any Qualified
Substitute Arrangement on the first Business Day of any
Monthly Period shall be treated for all purposes herein,
including application in accordance with Section 4.9 of
the Agreement, as if they had been received on the last
Business Day of the preceding Monthly Period. Funds in
the Cap Proceeds Account shall be invested at the direc
tion of the Servicer, in Cash Equivalents with maturities
not later than the next succeeding Business Day. Any
earnings on such invested funds shall be deposited and
held in the Cap Proceeds Account and applied in the same
manner and priority as payments pursuant to the Interest
Rate Caps.
(c) In the event that the Cap Provider de
faults in its obligation to make a payment to the Trustee
under one or more Cap Agreements on any Cap Settlement
Date, the Trustee shall make a demand on such Cap Provid
er, or any guarantor, if applicable, demanding payment by
12:30 p.m., New York time, on such date. The Trustee
shall give notice to the Certificateholders upon the
continuing failure by any Cap Provider to perform its
obligation during the two Business Days following a
demand made by the Trustee on such Cap Provider, and
shall take such action with respect to such continuing
failure directed to be taken by the Certificateholders.
(d) In the event that the senior unsecured
debt rating of a Cap Provider is withdrawn or reduced
below AA by Standard & Poor's or is withdrawn or reduced
below Aa2 by Moody's, then within 30 days after receiving
notice of such decline in the creditworthiness of the Cap
Provider as determined by the Rating Agency, either (x)
the Cap Provider, with the prior written confirmation of
the Rating Agency that such arrangement will not result
in the reduction or withdrawal of the rating of the Class
A Certificates, the Class B Certificates or the Class C
Certificates, will enter into an arrangement the purpose
of which shall be to assure performance by the Cap Pro
vider of its obligations under the Interest Rate Cap; or
(y) the Servicer shall at its option either (i) with the
prior written confirmation of the Rating Agency that such
action will not result in a reduction or withdrawal of
the rating of the Class A Certificates, the Class B Cer
tificates or the Class C Certificates, (A) cause the Cap
Provider to pledge securities in the manner provided by
applicable law or (B) if permitted to do so, itself
pledge or cause to be pledged securities, which shall be
held by the Trustee or its agent free and clear of the
Lien of any third party, in a manner conferring on the
Trustee a perfected first Lien in such securities secur
ing the Cap Provider's performance of its obligations
under the applicable Interest Rate Cap, or (ii) provided
that a Replacement Interest Rate Cap or Qualified Substi
tute Arrangement meeting the requirements of Section
3A(e) has been obtained, direct the Trustee (A) to pro
vide written notice to the Cap Provider of its intention
to terminate the applicable Interest Rate Cap within such
30-day period and (B) to terminate the applicable Inter
est Rate Cap within such 30-day period, to request the
payment to it of all amounts due to the Trust under the
applicable Interest Rate Cap through the termination date
and to deposit any such amounts so received, on the day
of receipt, to the Cap Proceeds Account for the benefit
of the Certificateholders, or (iii) establish any other
arrangement (including an arrangement or arrangements in
addition to or in substitution for any prior arrangement
made in accordance with the provisions of this Section
3A(d)) satisfactory to the Rating Agency such that the
Rating Agency will not reduce or withdraw the rating of
the Class A Certificates, the Class B Certificates or the
Class C Certificates (a "Qualified Substitute Arrange
ment"); provided, however, that in the event at any time
any alternative arrangement established pursuant to
clause (x) or (y)(i) or (y)(iii) above shall cease to be
satisfactory to the Rating Agency then the provisions of
this Section 3A(d) shall again be applied and in connec
tion therewith the 30-day period referred to above shall
commence on the date the Servicer receives notice of such
cessation or termination, as the case may be.
(e) Unless an alternative arrangement pursuant
to clause (x) or (y)(i) of Section 3A(d) is being estab
lished, the Servicer shall use its best efforts to obtain
a Replacement Interest Rate Cap or Qualified Substitute
Arrangement meeting the requirements of this Section
3A(e) during the 30-day period referred to in Section
3A(d). The Trustee shall not terminate the Interest Rate
Cap unless, prior to the expiration of the 30-day period
referred to in said Section 3A(d), the Servicer delivers
to the Trustee (i) a Replacement Interest Rate Cap or
Qualified Substitute Arrangement, (ii) to the extent
applicable, an Opinion of Counsel as to the due autho
rization, execution and delivery and validity and enforce
ability of such Replacement Interest Rate Cap or
Qualified Substitute Arrangement, as the case may be, and
(iii) a letter from the Rating Agency confirming that the
termination of the Interest Rate Cap and its replacement
with such Replacement Interest Rate Cap or Qualified
Substitute Arrangement will not adversely affect its
rating of the Class A Certificates, the Class B Certif
icates or the Class C Certificates.
(f) The Servicer shall notify the Trustee and
the Rating Agency within five Business Days after obtain
ing knowledge that the senior unsecured debt rating of
the Cap Provider has been withdrawn or reduced by Stan
dard & Poor's or Moody's.
(g) Notwithstanding the foregoing, the
Servicer may at any time obtain a Replacement Interest
Rate Cap, provided that the Servicer delivers to the
Trustee (i) an Opinion of Counsel as to the due authori
zation, execution and delivery and validity and enforce
ability of such Replacement Interest Rate Cap and (ii) a
letter from the Rating Agency confirming that the termi
nation of the then current Interest Rate Cap and its
replacement with such Replacement Interest Rate Cap will
not adversely affect its rating of the Class A Certifi
cates, the Class B Certificates or the Class C Certifi
cates.
(h) The Trustee hereby appoints the Adminis
trator to perform the duties of the calculation agent
under the Interest Rate Cap and the Servicer accepts such
appointment.
(i) The Trustee, on behalf of the Certificate
holders, upon notification from the Servicer shall, sell
all or a portion of the Interest Rate Caps subject to the
following conditions having been met:
(x) the Aggregate Interest Rate Caps
Notional Amount after giving effect to such sale shall
equal or exceed the Aggregate ABC Principal Amount as of
the date of such sale after giving effect to all payments
and allocations made pursuant to this Agreement;
(y) such sale will not result in a down
grading or withdrawal of the then current rating on any
class of the Certificates by the Rating Agencies; and
(z) the minimum notional amount denomi
nation of any Interest Rate Cap to be sold is $500,000.
The Servicer shall have the duty of obtaining a
fair market value price for the sale of the Trust's
rights under any Interest Rate Cap, notifying the Trustee
of prospective purchasers and bids, and selecting the
purchaser of such Interest Rate Cap. The Trustee upon
receipt of the purchase price in the Collection Account
shall execute all documentation necessary to effect the
transfer of the Trust's rights under the Interest Rate
Cap and to release the Lien of the Trustee on the Inter
est Rate Cap and proceeds thereof.
Funds deposited in the Collection Account in
respect of the sale of all or a portion of an Interest
Rate Cap shall be applied as Principal Collections allo
cable to Series 1995-1 and shall be applied on the next
Distribution Date in accordance with subsections 4.7(a),
(b) and (c) and 4.9(b), (c) and (e).
4. Delivery and Payment for the Series 1995-
1 Certificates. The Transferor shall execute and deliver
the Series 1995-1 Certificates to the Trustee for
authentication in accordance with Section 6.1 of the
Agreement. The Trustee shall deliver the Series 1995-1
Certificates to or upon the order of the Transferor when
authenticated in accordance with Section 6.2 of the
Agreement.
5. Form of Delivery of Series 1995-1
Certificates. The Class A Certificate, the Class B
Certificates, the Class C Certificates and the Class D
Certificate shall be delivered as Registered Certificates
as provided in Section 6.1 of the Agreement.
6. Article IV of Agreement. Sections 4.1,
4.2 and 4.3 of the Agreement shall read in their entirety
as provided in the Agreement. Article IV of the Agree
ment (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 1995-1 Certificates:
II. RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
A. Rights of Certificateholders. The
Series 1995-1 Certificates shall represent undivided
interests in the Trust, including the right to receive,
to the extent necessary to make the required payments
with respect to such Series 1995-1 Certificates at the
times and in the amounts specified in this Agreement, (a)
the Floating Allocation Percentage and the Fixed/Floating
Allocation Percentage (as applicable from time to time)
of Collections (including Finance Charge Collections)
available in the Collection Account, (b) funds allocable
to the Series 1995-1 Certificates on deposit in the Exces
s Funding Account and (c) funds on deposit in the
Interest Funding Account, the Principal Account, the Dis
tribution Account, the Cap Proceeds Account, the Payment
Reserve Account and the Defeasance Account (for such Se
ries, the "Series 1995-1 Certificateholders' Interest").
The Class B Invested Amount, the Class C Invested Amount
and the Class D Invested Amount shall be subordinated to
the Class A Certificate; the Class C Invested Amount and
the Class D Invested Amount shall be subordinated to the
Class B Certificates; 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. Except in connection with a
payment of Class D Daily Principal pursuant to subsection
4.9(f) of this Agreement, the Class D Certificate 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.
B. Collections and Allocation;
Payments on Exchangeable Transferor Certificate.
a. Collections and Allocations. The Servicer will
apply or will instruct the Trustee to apply all funds on
deposit in the Collection Account and the Excess Funding
Account allocable to the Series 1995-1 Certificates, and
all funds on deposit in the Interest Funding Account, the
Principal Account, the Cap Proceeds Account, the Distribu
tion Account, the Payment Reserve Account and the
Defeasance Account maintained for this Series, as de
scribed in this Article IV. On each Business Day, (i)
the amount of Finance Charge Collections available in the
Collection Account allocable to Series 1995-1
Certificates shall be determined by multiplying the
aggregate amount of such Finance Charge Collections by
the Floating Allocation Percentage, (ii) the amount of
Principal Collections available in the Collection Account
allocable to the Series 1995-1 Certificates shall be
determined by multiplying the aggregate amount of such
Principal Collections by (x) during the Revolving Period,
the Floating Allocation Percentage and (y) during any
Amortization Period, the Fixed/Floating Allocation Per
centage, and (iii) the Receivables in Defaulted Accounts
allocable to the Series 1995-1 Certificates shall be
determined by multiplying the aggregate amount of such Re
ceivables in Defaulted Accounts by the Floating Alloca
tion Percentage.
b. Payments to the Holder of the Exchangeable
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 1995-1
Certificates, and the Servicer shall allocate and pay Col
lections in accordance with the Daily Report with respect
to such Business Day to the Holder of the Exchangeable
Transferor Certificate as follows:
(1) For each Business Day with respect to the
Revolving Period, in addition to amounts allocated and
paid to the Holder of the Exchangeable Transferor
Certificate pursuant to subsection 4.3(b) of the Agree
ment, an amount equal to (x) 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 for such
Business Day minus (z) the amount of any Class D Daily
Principal for such Business Day;
(2) 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 allo
cated and paid to the Holder of the Exchangeable Transfer
or Certificate pursuant to subsection 4.3(b) of the Agree
ment, 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 for such
Business Day minus (z) the amount of any Class D Daily
Principal for such Business Day; and
(3) For each Business Day on and after the day on
which Principal Collections are being deposited 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(e) 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 Finance Charge Receivables or Principal Receiv
ables as provided in the Agreement.
C. Determination of Interest for the Series
1995-1 Certificates. (a) The amount of interest (the
"Class A Interest") allocable to the Class A Certificate
with respect to any Business Day shall be an amount equal
to the sum of (x) the Series 1995-1 Allocation Percentage
of the Total Program Fees accrued from and including the
preceding Business Day to but excluding such Business Day
and (y) the product of (i) the Class A Certificate Rate
and (ii) a fraction the numerator of which is the actual
number of days from and including the immediately preced
ing Business Day to but excluding such Business Day and
the denominator of which is 365 or 366, as the case may
be, and (iii) the Class A Outstanding Principal Amount on
such Business Day after giving effect to all transactions
on such Business Day.
On each Business Day, the Servicer shall deter
mine an amount (the "Class A Interest Shortfall") equal
to the excess, if any, of (x) the Class A Interest for
such Business Day plus the Class A Interest Shortfall for
the preceding Business Day over (y) the amount available
to be paid to the Class A Certificateholder in respect of
Class A Interest on such Business Day. The Class A Inter
est Shortfall shall initially be zero.
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 such 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.
On the Determination Date preceding each Distri
bution 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 (the
"Class C Interest") allocable to the Class C Certificates
with respect to any Interest Accrual Period shall be an
amount equal to the product of (i) the Class C Certifi
cate Rate and (ii) a fraction the numerator of which is
the actual number of days in such 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.
On the Determination Date preceding each Distri
bution 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 4.6A Determination of the Class A
Interest Adjustment. On each Business Day on which any
obligations of the Trust to the Class A Certificateholder
remain outstanding, the Servicer shall compute the ex
cess, if any, of (i) the amount payable pursuant to
subsection 4.9(a)(i) over (ii) the aggregate amounts actu
ally paid to the Class A Certificateholder pursuant to
subsection 4.9(a)(i) on such Business Day. The greater
of zero and the amount of the excess, if any, computed in
the immediately preceding sentence shall be the "Class A
Interest Adjustment" for such Business Day and the
Servicer shall provide the Trustee with written notice by
facsimile or otherwise of the Class A Interest Adjust
ment. If the Class A Interest Adjustment is greater than
zero, the Trustee shall withdraw from the Interest Fund
ing Account and deposit in the Distribution Account an
amount equal to the lesser of the aggregate amounts
deposited in the Interest Funding Account pursuant to
subsections 4.9(a)(iii) and 4.9(a)(x) of the Agreement
during the then current Monthly Period on and prior to
such Business Day (less the amount of any prior withdraw
als therefrom pursuant to this third sentence of Section
4.6A on each prior Business Day in the then current
Monthly Period) and the Class A Interest Adjustment (the
greater of any such amount withdrawn and zero, the "Class
C Interest Adjustment" for such Business Day). If the
Class A Interest Adjustment for such Business Day exceeds
the Class C Interest Adjustment for such Business Day,
the Trustee shall withdraw from the Interest Funding
Account and deposit in the Distribution Account an amount
equal to the lesser of (i) the aggregate amounts deposit
ed in the Interest Funding Account pursuant to subsection
4.9(a)(ii) and 4.9(a)(ix) of the Agreement during the
then current Monthly Period on and prior to such Business
Day (less the amount of any prior withdrawals therefrom
pursuant to this fourth sentence of Section 4.6A on each
prior Business Day in the then current Monthly Period and
(ii) the difference between the Class A Interest Adjust
ment and the Class C Interest Adjustment (the greater of
any such amount withdrawn and zero, the "Class B Interest
Adjustment" for such Business Day).
D. Determination of Principal Amounts. (a)
The amount of principal (the "Class A Principal") distrib
utable from the Distribution Account with respect to the
Class A Certificate on each Business Day with respect to
(A) the Revolving Period (except for any portion of the
Revolving Period during a Class A Pay Down Period) shall
be an amount equal to the sum of (x) amounts deposited
into the Principal Account from the Defeasance Account
pursuant to Section 9A of this Series Supplement and (y)
the amount, if any, specified in the last sentence of
Section 3A(i) of this Series Supplement and (B) the Amor
tization Period or the Class A Pay Down Period shall be
equal to 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 Princi
pal Collections (less the amount of Reallocated Class B
Principal Collections and Reallocated Class C Principal
Collections) with respect to such Business Day, (ii) any
amount on deposit in the Excess Funding Account allocated
to the Class A Certificate pursuant to subsection 4.9(d)
with respect to such Business Day, (iii) the amount, if
any, allocated to the Class A Certificate pursuant to
subsections 4.9(a)(v), (vii), (viii), (xi), and (xii) of
the Agreement and, with respect to such subsections,
pursuant to subsections 4.10(a) and (b) and 4.15(a), (b)
and (c) on such Business Day, (iv) the amount of Shared
Principal Collections allocated to the Class A Certifi
cate with respect to such Business Day pursuant to Sec
tion 4.3(d) and (v) the amount, if any, specified in the
last sentence of Section 3A(i) of this Series Supplement;
provided, however, that with respect to any Business Day,
Class A Principal may not exceed the Class A Invested
Amount; provided, further, that with respect to the
Scheduled Series 1995-1 Termination Date, the Class A
Principal shall be an amount equal to the Class A Invest
ed Amount.
a. The amount of principal (the "Class B Princi
pal") distributable from the Distribution Account with
respect to the Class B Certificates on each Distribution
Date, beginning with the Class B Principal Payment Com
mencement Date, shall equal an amount calculated as fol
lows: 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 in the Amortization Period fol
lowing the date on which an amount equal to the Class A
Invested Amount is paid to the Class A Certificateholder
in respect of Class A Principal, the ABC Fixed/Floating
Allocation Percentage 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 B Certificates pursuant to subsection 4.9(d) with
respect to the preceding Monthly Period, (iii) the
amount, if any, allocated to the Class B Certificates
pursuant to subsections 4.9(a)(v), (vii), (xi) and (xii)
of the Agreement and, with respect to such subsections,
pursuant to subsections 4.10(a) and (b) and 4.15(a) and
(b) of the Agreement with respect to such Distribution
Date, (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(d) of
the Agreement on and after the Class B Principal Payment
Commencement Date and (v) the amount, if any, specified
in the last sentence of Section 3A(i) of this Series
Supplement; provided, further, that with respect to any
Distribution Date, Class B Principal may not exceed the
Class B Invested Amount; provided, further, that with re
spect to the Scheduled Series 1995-1 Termination Date,
the Class B Principal shall be an amount equal to the
Class B Invested Amount.
b. The amount of principal (the "Class C Principal")
distributable from the Distribution Account with respect
to the Class C Certificates on each Distribution Date,
beginning with the Class C Principal Payment Commencement
Date, shall be an amount equal to and 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 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 allocated to the
Class C Certificates pursuant to subsection 4.9(d) with
respect to the preceding Monthly Period, (iii) the
amount, if any, allocated to the Class C Certificates
pursuant to subsections 4.9(a)(v), (vii) and (xii) of the
Agreement and, with respect to such subsections, pursuant
to subsections 4.10(a) and (b) and 4.15(a) on such Busi
ness Day, (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(d) of
the Agreement on and after the Class C Principal Payment
Commencement Date and (v) the amount, if any, specified
in the last sentence of Section 3A(i) of this Series
Supplement; provided that with respect to any Distribu
tion Date, Class C Principal may not exceed the Class C
Invested Amount; provided, further, that with respect to
the Scheduled Series 1995-1 Termination Date, the Class C
Principal shall be an amount equal to the Class C Invest
ed Amount.
c. The amount of principal (the "Class D Principal")
distributable from the Distribution Account with respect
to the Class D Certificate on each Distribution Date
beginning with the Class D Principal Payment Commencement
Date, or in the case of distributions of Class D Daily
Principal pursuant to the last proviso of this subsection
4.7(d), on each Business Day, shall be an amount equal to
and calculated as follows: the sum of (i) an amount
equal to the product of the Class D Fixed/Floating Allo
cation Percentage of Principal Collections (less the
amount of Reallocated 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 Percentage 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 Certificate pursuant to subsection 4.9(d) with
respect to the preceding Monthly Period, and (iii) the
amount, if any, allocated to the Class D Certificate
pursuant to subsections 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, howev
er, that with respect to the Scheduled Series 1995-1
Termination Date, the Class D Principal shall be an
amount equal to the Class D Invested Amount; provided
further, that on any Business Day during any period other
than an Early Amortization Period or Class A Pay Down
Period, the Transferor may designate that either (x) an
amount up to the lesser of (i) the excess of the Class D
Invested Amount over the Stated Class D Amount on such
day after taking into account all adjustments of the
Class A Invested Amount on such day and (ii) (I) during
the Revolving Period an amount equal to (x) the product
of the Class D Floating Allocation Percentage and the
amount of Principal Collections on such Business Day
minus (y) Reallocated Class D Principal Collections on
such Business Day or (II) after the Amortization Period
Commencement Date 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) Reallocated Class D Principal Collections on
such Business Day (such designated amount, the "Class D
Daily Principal") shall be distributed in accordance with
subsection 4.9(f) or (y) an amount up to the excess of
the Class D Invested Amount over the Stated Class D
Amount on such day after taking into account all adjust
ments of the Class A Invested Amount on such day, shall
be subtracted from the Class D Invested Amount and added
to the Transferor Interest.
E. Shared Principal Collections. Shared
Principal Collections allocated to the Series 1995-1
Certificates and to be applied pursuant to subsections
4.9 (b), 4.9(c)(i)(z), 4.9(c)(ii)(z), 4.9(c)(iii)(z),
4.9(c)(iv)(z) and 4.9(e)(i)(z) for any Business Day
shall mean an amount equal to the sum of (i) 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 1995-1
Certificates for such Business Day and the denominator of
which is the aggregate amount of Principal Shortfalls for
all Series for such Business Day and (ii) Shared Princi
pal Collections for all Series for such Business Day,
less the amount thereof to be applied with respect to
Principal Shortfalls for all Series for such Business
Day, which the Transferor has opted to apply to the
Variable Funding Certificates of Series 1995-1 in
accordance with Section 4.3(d) of the Agreement.
G. Application of Funds. (a) On each
Business Day, the Servicer shall deliver to the Trustee a
Daily Report in which it shall instruct the Trustee to
withdraw, and the Trustee, acting in accordance with such
instructions, shall withdraw from the Collection Account
and the Cap Proceeds Account, to the extent of the sum of
(v) prior to the Pay Out Commencement Date, the Floating
Allocation Percentage of Finance Charge Collections
available in the Collection Account or, on and after the
Pay Out Commencement Date, the Fixed/Floating Allocation
Percentage of Finance Charge Collections available in the
Collection Account, (w) Investment Earnings on deposit in
the Collection Account, (x) amounts on deposit in the Pay
ment Reserve Account, if any, if and to the extent so
designated by the Transferor, (y) the Cap Receipt Amount,
if any, for such Business Day and (z) on each Reserve
Application Date amounts on deposit in the Investor
Reserve Account, if any (the "Available Series 1995-1 Fi
nance Charge Collections") the amounts set forth in sub
sections 4.9(a)(i) through 4.9(a)(xix) in the following
priority.
(1) Class A Interest. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first from
the Cap Proceeds Account to the extent of the Cap Receipt
Amount and then from the Collection Account and then from
the Payment Reserve Account and then, on each Reserve
Application Date, from the Investor Reserve Account and
pay to the Class A Certificateholders on such Business
Day, to the extent of the Available Series 1995-1 Finance
Charge Collections, an amount equal to the lesser of (x)
the Available Series 1995-1 Finance Charge Collections
and (y) the sum of (A) the lesser of (I) the Class A
Interest for such Business Day and (II) the product of
(i) the greater of LIBOR then in effect plus 0.75% per
annum and 12% per annum and (ii) a fraction the numerator
of which is the number of days from and including the
preceding Business Day to but excluding such Business Day
and the denominator of which is the actual number of days
in the then current calendar year and (iii) the Class A
Outstanding Principal Balance as of the close of business
on the preceding Business Day plus (B) the excess, if
any, of the amount payable to the Class A Certificate
holders pursuant to clause (A) on each prior Business Day
over the amount which has been paid to the Class A
Certificateholders with respect thereto on each prior
Business Day.
(2) Class B Interest. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall allocate to the
Class B Certificates and withdraw first from the Cap
Proceeds Account to the extent of the remaining Cap
Receipt Amount for such Business Day, and then from the
Collection Account and then from the Payment Reserve
Account and then, on each Reserve Application Date, from
the Investor Reserve Account and deposit into the
Interest Funding Account, to the extent of the Available
Series 1995-1 Finance Charge 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 1995-1 Finance Charge Col
lections and (y) the sum of (A) the Daily Portion of
Class B Interest to be distributed on the Distribution
Date following such Monthly Period plus (B) the excess,
if any, of the amount required to be deposited pursuant
to clause (A) above on each prior Business Day over the
amount on deposit in the Interest Funding Account with re
spect thereto on such Business Day plus (C) an amount
equal to the portion of Carryover Class B Interest attrib
utable to amounts required to be deposited pursuant to
clause (A) above that were not so deposited prior to such
Business Day minus the amounts required to be deposited
pursuant to clause (B) above.
(3) Class C Interest. On each Business Day during a
Monthly Period, the Trustee, acting in accordance with
instructions from the Servicer, shall allocate to the
Class C Certificates and withdraw first from the Cap
Proceeds Account, to the extent of the remaining Cap
Receipt Amount for such Business Day and then from the
Collection Account and then from the Payment Reserve
Account and then, on each Reserve Application Date, from
the Investor Reserve Account and deposit into the
Interest Funding Account, to the extent of the Available
Series 1995-1 Finance Charge 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 1995-1 Finance Charge
Collections and (y) the sum of (A) the Daily Portion of
Class C Interest to be distributed on the Distribution
Date following such Monthly Period plus (B) the excess,
if any, of the amount required to be deposited pursuant
to clause (A) above on each prior Business Day over the
amount on deposit in the Interest Funding Account with re
spect thereto on such Business Day plus (C) an amount
equal to the portion of Carryover Class C Interest
attributable to amounts required to be deposited pursuant
to clause (A) above that were not so deposited prior to
such Business Day minus the amounts required to be depos
ited pursuant to clause (B) above.
(4) Servicing Fee. On each Business Day, the Trustee,
acting in accordance with instructions from the Servicer,
shall withdraw first from the Cap Proceeds Account to the
extent of the remaining Cap Receipt Amount and then from
the Collection Account and then from the Payment Reserve
Account and then, on each Reserve Application Date, from
the Investor Reserve Account and distribute to the
Servicer, to the extent of any Available Series 1995-1
Finance Charge 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 1995-1 Finance Charge
Collections and (y) the Servicing Fee for such Business
Day plus any Servicing Fee due with respect to any prior
Business Day but not distributed to the Servicer
(5) ABC Investor Default Amount. On each Business
Day, the Trustee, acting in accordance with instructions
from the Servicer, shall withdraw first from the Cap
Proceeds Account to the extent of the remaining Cap
Receipt Amount second, only if such day is a Default
Recognition Date, from the Transferor an amount equal to
the aggregate Transferor Retained Finance Charge
Collections for each day during the related Monthly
Period and then from the Collection Account and then from
the Payment Reserve Account and then, on each Reserve
Application Date, from the Investor Reserve Account, to
the extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to the withdraw
als pursuant to subsections 4.9(a)(i) through (iv), an
amount equal to the lesser of (x) any such remaining
Available Series 1995-1 Finance Charge 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) during
the Revolving Period (except for any portion of the
Revolving Period during a Class A Paydown Period) treated
as Shared Principal Collections, (B) during the Amorti
zation Period or the Class A Pay Down 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 Certificateholder on the next Distribution
Date, (C) during the Amortization Period, on and after
the day on which such deposit to the Principal Account
with respect to the Class A Invested Amount has been made
and on and prior to the day on which an amount equal to
the Class B Invested Amount is deposited in the Principal
Account, to be deposited in the Principal Account for pay
ment to the Class B Certificateholders on the next
Distribution Date, (D) during the Amortization Period on
and after the day on which such deposit to the Principal
Account with respect to the Class 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
Principal Account, to be deposited in the Principal Ac
count for payment to the Class C Certificateholders on
the next Distribution Date and (E) on and after the day
such deposit to the Principal Account with respect to
Class C Invested Amount has been made, to be paid to the
Class D Certificateholders.
(6) Class D Investor Default Amount. On each Business
Day, the Trustee, acting in accordance with instructions
from the Servicer, shall withdraw first from the Cap
Proceeds Account to the extent of the remaining Cap
Receipt Amount, second, if such day is a Default
Recognition Date, from the Transferor an amount equal to
the aggregate Transferor Retained Finance Charge
Collections for each day during the related Monthly
Period and then from the Collection Account and then from
the Payment Reserve Account and then, on each Reserve
Application Date, from the Investor Reserve Account, to
the extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to the withdraw
als pursuant to subsections 4.9(a)(i) through (v), an
amount equal to the lesser of (x) any such remaining
Available Series 1995-1 Finance Charge Collections and
(y) the sum of (1) the aggregate Class D Investor 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
Amortization 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.
(7) Adjustment Payment Shortfalls. On each Business
Day, the Trustee, acting in accordance with instructions
from the Servicer, shall withdraw first from the Cap
Proceeds Account to the extent of the remaining Cap
Receipt Amount and then from the Collection Account and
then from the Payment Reserve Account and then, on each
Reserve Application Date, from the Investor Reserve
Account, to the extent of any Available Series 1995-1
Finance Charge 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 1995-1 Finance Charge
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 (except for any portion of
the Revolving Period during a Class A Paydown Period), to
be treated as Shared Principal Collections, (ii) during
the Amortization Period or the Class A Pay Down 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 Certificateholder 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 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 Principal
Account, to be 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, to be paid to the Class D
Certificateholders.
(8) Reimbursement of Class A Investor Charge-Offs. On
each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first from
the Cap Proceeds Account to the extent of the remaining
Cap Receipt Amount and then from the Collection Account
and then from the Payment Reserve Account, on each
Reserve Application Date, and then from the Investor
Reserve Account, to the extent of any Available Series
1995-1 Finance Charge 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 1995-1 Finance
Charge Collections and (y) the unreimbursed Class A
Investor Charge-Offs, if any; such amount will be applied
to reimburse Class A Investor Charge-Offs, and, during
the Revolving Period (except for any portion of the
Revolving Period during a Class A Paydown Period), will
be treated as Shared Principal Collections, and during
the Amortization Period or the Class A Pay Down Period on
and prior to the day on which an amount equal to the
Class A Invested Amount is deposited in the Principal
Account will be deposited in the Principal Account for
distribution to the Class A Certificateholders on the
next Distribution Date.
(9) Unpaid Class B Interest. On each Business Day,
the Trustee, acting in accordance with the instructions
from the Servicer, shall allocate to the Class B
Certificates and withdraw first from the Cap Proceeds
Account, to the extent of the remaining Cap Receipt
Amount for such Business Day and then from the Collection
Account and then from the Payment Reserve Account and
then, on each Reserve Application Date, from the Investor
Reserve Account and deposit in the Interest Funding
Account, to the extent of the Available Series 1995-1
Finance Charge 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 1995-1 Finance Charge Col
lections and (y) the sum of (1) the excess of the Daily
Portion of the product of (i) the Class B Certificate
Rate and (ii) a fraction the numerator of which is the
actual number of days in the then current Interest
Accrual Period and the denominator of which is 360 and
(iii) the Class B Outstanding Principal Amount as of the
close of business on the first day of such Interest
Accrual Period, over the amount on deposit in the Inter
est Funding Account or previously paid to the Class B
Certificateholders with respect thereto and (2) any addi
tional 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.
(10) Unpaid Class C Interest. On each Business Day,
the Trustee, acting in accordance with the instructions
from the Servicer, shall allocate to the Class C
Certificates and withdraw first from the Cap Proceeds
Account, to the extent of the remaining Cap Receipt
Amount for such Business Day and then from the Collection
Account and then from the Payment Reserve Account and
then, on each Reserve Application Date, from the Investor
Reserve Account and deposit in the Interest Funding
Account, to the extent of any Available Series 1995-1
Finance Charge 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 1995-1 Finance Charge Col
lections and (y) the sum of (1) the excess of the Daily
Portion of the product of (i) the Class C Certificate
Rate and (ii) a fraction the numerator of which is the
actual number of days in the then current Interest
Accrual Period and the denominator of which is 360 and
(iii) the Class C Outstanding Principal Amount as of the
close of business on the first day of such Interest
Accrual Period over the amount on deposit in the Inter
est Funding Account or previously paid to the Class C
Certificateholders with respect thereto and (2) any addi
tional 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.
(11) Reimbursement of Class B Investor Charge-Offs. On
each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first from
the Cap Proceeds Account to the extent of the remaining
Cap Receipt Amount for such Business Day and then from
the Collection Account and then from the Payment Reserve
Account and then, on each Reserve Application Date, from
the Investor Reserve Account, to the extent of any
Available Series 1995-1 Finance Charge 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
1995-1 Finance Charge 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 Revolving
Period (except for any portion of the Revolving Period
during a Class A Paydown Period), to be treated as Shared
Principal Collections, (ii) during the Amortization
Period or the Class A Pay Down Period, on and prior to
the day on which an amount equal to the Class A Invested
Amount is deposited in the Principal Account, to be
deposited in the Principal Account for distribution to
the Class A Certificateholders on the next Distribution
Date, and (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 depos
ited in the Principal Account for payment to the Class B
Certificateholders on the next Distribution Date.
(12) Reimbursement of Class C Investor Charge-Offs. On
each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first from
the Cap Proceeds Account to the extent of the remaining
Cap Receipt Amount for such Business Day and then from
the Collection Account and then from the Payment Reserve
Account and then, on each Reserve Application Date, from
the Investor Reserve Account, to the extent of any Avail
able Series 1995-1 Finance Charge Collections remaining
after giving effect to the withdrawals pursuant to subsec
tions 4.9(a)(i) through (xi), an amount equal to the
lesser of (x) any remaining Available Series 1995-1 Finan
ce Charge 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 (except for any
portion of the Revolving Period during a Class A Paydown
Period), to be treated as Shared Principal Collections,
(ii) during the Amortization Period or the Class A Pay
Down 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 Ac
count for distribution to the Class A Certificateholders
on the next Distribution Date, (iii) during the Amorti
zation Period, on and prior to the day on which an amount
equal to the Class B Invested Amount is deposited in the
Principal Account, to be deposited in the Principal Ac
count for distribution to the Class B Certificateholders
on the next Distribution Date and (iv) during the Amorti
zation 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 C Invested Amount is deposited
in the Principal Account, to be deposited in the Prin
cipal Account for payment to the Class C Certificatehold
ers on the next Distribution Date.
(13) Reimbursement of Class D Investor Charge-Offs. On
each Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first from
the Cap Proceeds Account to the extent of the remaining
Cap Receipt Amount for such Business Day and then from
the Collection Account and then from the Payment Reserve
Account and then, on each Reserve Application Date, from
the Investor Reserve Account, to the extent of any
Available Series 1995-1 Finance Charge 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
1995-1 Finance Charge Collections and (y) the
unreimbursed amount by which the Class D Invested Amount
has been reduced on prior Business Days pursuant to
clauses (d) and (e) of the definition of Class D Invested
Amount, if any, such amount, (i) during the Revolving
Period to be paid to the Transferor and (ii) during the
Amortization Period, to be deposited in the Principal
Account for payment pursuant to Section 4.9(c) of the
Agreement.
(14) Investor Reserve Account. On each Business Day, the
Trustee acting in accordance with instructions from the
Servicer, shall withdraw first from the Cap Proceeds
Account to the extent of the remaining Cap Receipt Amount
for such Business Day and then from the Collection
Account and then from the Payment Reserve Account, to the
extent of any Available Series 1995-1 Finance Charge
Collections remaining after giving effect to withdrawals
pursuant to subsections 4.9(a)(i) through (xiii), an
amount equal to the lesser of (x) any such remaining
Available Series 1995-1 Finance Charge Collections and
(y) the amount by which the Specified Investor Reserve
Amount exceeds the amount on deposit in the Investor
Reserve Account, and deposit such amount, if any, into
the Investor Reserve Account.
(15) Additional Class A Interest. On each Business Day
during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer, shall
withdraw first from the Cap Proceeds Account to the
extent of the remaining Cap Receipt Amount for such
Business Day and then from the Collection Account and
then from the Payment Reserve Account and pay to the
Class A Certificateholder on such Business Day, to the
extent of the Available Series 1995-1 Finance Charge Col
lections remaining after giving effect to the withdrawal
pursuant to subsections 4.9(a)(i) through (xiii), an
amount equal to the lesser of (x) any such remaining
Available Series 1995-1 Finance Charge Collections and
(y) the excess, if any, of (1) the sum of Class A Inter
est for such Business Day and the Class A Interest
Shortfall for the preceding Business Day over (2) the
amounts previously deposited into the Interest Funding
Account on such Business Day pursuant to subsection
4.9(a)(i).
(16) Class A Costs. On each Business Day, the Trustee
acting in accordance with instructions from the Servicer,
shall withdraw first from the Cap Proceeds Account to the
extent of the remaining Cap Receipt Amount for such
Business Day and then from the Collection Account and
then from the Payment Reserve Account and pay to the
Class A Certificateholder, to the extent of any Available
Series 1995-1 Finance Charge Collections remaining after
giving effect to the withdrawals pursuant to subsections
4.9(a)(i) through (xiv), an amount equal to the lesser of
(x) any such remaining Available Series 1995-1 Finance
Charge Collections and (y) the Class A Costs for such
Business Day and any such amounts that remain unpaid from
previous days to the extent not included in Class A Costs
for such Business Day.
(17) Class B Increased Costs. On each Business Day,
the Trustee acting in accordance with instructions from
the Servicer, shall withdraw first from the Cap Proceeds
Account to the extent of the remaining Cap Receipt Amount
for such Business Day and then from the Collection Ac
count and then from the Payment Reserve Account, to the
extent of any Available Series 1995-1 Finance Charge Col
lections remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (xv), an amount
equal to the lesser of (x) any such remaining Available
Series 1995-1 Finance Charge Collections and (y) amounts
payable to Class B Certificateholders pursuant to Section
16 of this Series Supplement for payment to such Class B
Certificateholders.
(18) Class C Increased Costs. On each Business Day,
the Trustee acting in accordance with instructions from
the Servicer, shall withdraw first from the Cap Proceeds
Account to the extent of the remaining Cap Receipt Amount
for such Business Day and then from the Collection Ac
count and then from the Payment Reserve Account, to the
extent of any Available Series 1995-1 Finance Charge Col
lections remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (xvi), an
amount equal to the lesser of (x) any such remaining
Available Series 1995-1 Finance Charge Collections and
(y) amounts payable to Class C Certificateholders pursu
ant to Section 16 of this Series Supplement for payment
to such Class C Certificateholders.
(19) Payment Reserve Account. On each Business Day,
the Trustee acting in accordance with instructions from
the Servicer, shall withdraw first from the Cap Proceeds
Account to the extent of the remaining Cap Receipt Amount
for such Business Day and then from the Collection Ac
count, to the extent of any Available Series 1995-1 Fi
nance Charge Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.9(a)(i) through
(xvii) an amount equal to the lesser of (x) any such re
maining Available Series 1995-1 Finance Charge Collec
tions and (y) the amount designated by the Transferor in
writing (which include facsimile transmission) in its in
structions to the Trustee on such Business Day and
deposit such amount, if any, into the Payment Reserve
Account.
(20) Excess Finance Charge Collections. Any amounts re
maining in the Cap Proceeds Account or the Collection Ac
count to the extent of any Available Series 1995-1 Fi
nance Charge Collections remaining after giving effect to
the withdrawals pursuant to subsection 4.9(a)(i) through
(xviii), shall be treated as Excess Finance Charge Collec
tions, and the Servicer shall direct the Trustee in
writing on each Business Day to withdraw such amounts
from the Cap Proceeds Account, if applicable, and the
Collection Account and the Payment Reserve Account and to
first make such amounts available to pay to Certificate
holders of other Series to the extent of shortfalls, if
any, in amounts payable to such certificateholders from
Finance Charge Collections allocated to such other Se
ries, then to pay any unpaid commercially reasonable
costs and expenses of a Successor Servicer, if any, and
then on each Business Day other than the Default Recogni
tion Date, pay to the Transferor to be treated as "Trans
feror Retained Finance Charge Collections," and, on each
Default Recognition Date pay any remaining Excess Finance
Charge Collections to the Transferor.
b. For each Business Day with respect to the
Revolving Period (except for any portion of the Revolving
Period during a Class A Paydown Period), the funds on
deposit in the Collection Account to the extent of the
lesser of (A) the Class A Invested Amount and (B) the sum
of (x) 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) the amount of Principal Collections on such
Business Day (such product the "ABC Revolving Principal
Collections") less the amount of Reallocated Class C Prin
cipal Collections and Reallocated Class B Principal
Collections on such Business Day (the ABC Revolving
Principal Collections less the Class C Reallocated Princi
pal Collections and the Class B Reallocated Principal
Collections on the related Business Day, the "Net ABC
Revolving Principal Collections"), (y) the amount then on
deposit in the Collection Account pursuant to subsection
3A(i) of this Series Supplement and (z) the amount of
Shared Principal Collections allocated to the Series 1995-
1 Certificates in accordance with Section 4.8 on such
Business Day may, at the option of the Transferor or
shall, if the Aggregate ABC Principal Amount exceeds the
Aggregate Interest Rate Caps Notional Amount on such
Business Day, pursuant to instructions delivered to the
Servicer and the Trustee by facsimile or other similar
means of documented communication, be deposited into the
Defeasance Account and applied as provided in Section
9A(b) of this Series Supplement. During the Revolving
Period (except for any portion of the Revolving Period
during a Class A Pay Down Period), an amount equal to the
Net ABC Revolving Principal Collections less any amount
deposited to the Defeasance Account pursuant to the imme
diately preceding sentence shall 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 Section 4.3(d) of the Agree
ment.
c. For each Business Day on and after the Amorti
zation Period Commencement Date, the amount of funds on
deposit in the Collection Account and the other amounts
described below will be distributed, pursuant to the writ
ten direction of the Servicer in the Daily Report for
such Business Day in the following priority:
(1) 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 Invest
ed Amount) equal to the sum of (v) the product of the ABC
Fixed/Floating Allocation Percentage and Principal Collec
tions in the Collection Account at the end of the preced
ing 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 Certificate on
such Business Day pursuant to subsection 4.9(d), (x)
amounts to be paid pursuant to subsections 4.9(a)(v),
(vii), (viii), (xi), (xii) and (xiii) of the Agreement
from Available Series 1995-1 Finance Charge Collections
and from amounts available pursuant to subsections
4.10(a) and (b) and 4.15(a), (b) and (c) of the Agreement
on such Business Day, (y) any amounts specified in the
last sentence of Section 3A(i) of this Series Supplement
and (z) the amount of Shared Principal Collections
allocated to the Series 1995-1 Certificates in accordance
with Section 4.8 on such Business Day, will be paid to
the Class A Certificateholder;
(2) on and after the day on which an amount equal to
the Class A Invested Amount has been paid to the Class A
Certificateholder, 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
Collections on such Business Day), (w) any amount on
deposit in the Excess Funding Account allocated to the
Class B Certificates on such Business Day pursuant to sub
section 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 Finance Charge Collections and from
amounts available pursuant to subsections 4.10(a) and (b)
and 4.15(a) and (b) of the Agreement with respect to such
Business Day, (y) any amounts specified in the last
sentence of Section 3A(i) of this Series Supplement and
(z) the amount of Shared Principal Collections allocated
to the Series 1995-1 Certificates in accordance with Sec
tion 4.8 on such Business Day (such sum, the "Class B
Daily Principal Amount") will be deposited into the Prin
cipal Account;
(3) 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 pursuant
to subsection 4.9(d), (x) the amount, if any, allocated
to be paid to the Class C Certificates pursuant to subsec
tions 4.9(a)(v), (vii), (xii) and (xiii) of the Agreement
from Available Series Finance Charge Collections and from
amounts available pursuant to subsections 4.10(a) and (b)
and 4.15(a) of the Agreement with respect to such Busi
ness Day, (y) any amounts specified in the last sentence
of Section 3A(i) of this Series Supplement and (z) the
amount of Shared Principal Collections allocated to the
Series 1995-1 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;
(4) 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 Alloc
ation Percentage and Principal Collections in the Collec
tion 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 allo
cated to the Class D Certificate on such Business Day
pursuant to subsection 4.9(d), (y) the amount, if any,
allocated to be paid to the Class D Certificate pursuant
to subsections 4.9(a)(vi), (vii) and (xiii) of the
Agreement from Available Series Finance Charge
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 1995-1
Certificates in accordance with Section 4.8 on such Busi
ness Day (such sum, the "Class D Daily Principal Amount")
will be distributed to the Class D Certificateholders;
and
(5) 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(d) of the Agree
ment.
d. On the first Business Day of the Amortization
Period, funds on deposit in the Excess Funding Account
will be deposited in the Principal Account, provided that
if any other Series enters its Amortization Period, as
defined in its related Series Supplement, the amount of
the foregoing deposit shall be equal to the product of an
amount equal to the amount of funds on deposit in the
Excess Funding Account and a fraction the numerator of
which is the Invested Amount and the denominator of which
is equal to the sum of the invested amounts of each
Series then entering its related Amortization Period as
defined in its related Series Supplement. Amounts
deposited in the Principal Account pursuant to the
foregoing sentence will be allocated in the following
order of priority: (i) to the Class A Certificate in an
amount not to exceed the Class A Principal after sub
tracting therefrom any amounts to be paid to the Class A
Certificateholders with respect thereto pursuant to sub
sections 4.9(c)(i)(v), (y), and (z), (ii) to the Class B
Certificates in an amount not to exceed the Class B
Principal after subtracting therefrom any amounts to be
deposited in the Principal Account with respect thereto
pursuant to subsections 4.9(c)(ii)(v), (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),
(y) and (z). On and after the Class D Principal Payment
Commencement Date any amounts remaining on deposit in the
Excess Funding Account and allocated to the Series 1995-1
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)(w), (y) and (z).
e. For each Business Day during the Class A Pay Down
Period:
(1) funds on deposit in the Collection Account will
be, pursuant to the written direction of the Servicer in
the Daily Report for such Business Day, paid to the Class
A Certificateholder in respect of the Class A Principal
in an amount (not in excess of the Class A Invested
Amount) equal to the sum of (w) the product of the ABC
Fixed/Floating Allocation Percentage and Principal Collec
tions in the Collection Account at the end of the preced
ing Business Day (less the amount thereof to be applied
as Reallocated Class B Principal Collections or
Reallocated Class C Principal Collections on such Busi
ness Day), (x) amounts to be paid pursuant to subsections
4.9(a)(v), (vii), (viii), (xi), (xii) and (xiii) of the
Agreement from Available Series 1995-1 Finance Charge Col
lections and from amounts available pursuant to subsec
tions 4.10(a) and (b) and 4.15(a), (b) and (c) of the
Agreement on such Business Day, (y) any amounts specified
in the last sentence of Section 3A(i) of this Series Sup
plement and (z) the amount of Shared Principal Collec
tions allocated to the Series 1995-1 Certificates in
accordance with Section 4.8 of the Agreement on such Busi
ness Day;
(2) an amount equal to the excess, if any, of (A)
the sum of the amounts described in clauses (i)(w) and
(x) above over (B) the Class A Principal will be treated
as Shared Principal Collections and applied as provided
in subsection 4.3(d) of the Agreement.
f. On each Business Day on which Class D Daily
Principal has been allocated pursuant to subsection
4.7(d) of the Agreement, funds on deposit in the Collec
tion Account in an amount equal to the Class D Daily
Principal Amount designated by the Transferor with re
spect to such Business Day will be distributed to the
Class D Certificateholders.
H. Coverage of Required Amount for the
Series 1995-1 Certificates. (a) To the extent that any
amounts are on deposit in the Excess Funding Account on
any Business Day, the Servicer shall apply, in the manner
specified for application of Available Series 1995-1
Finance Charge Collections in subsections 4.9(a)(i)
through (xvii), Transferor Finance Charge Collections in
an amount equal to the excess of (x) the product of (a)
the Base Rate, (b) the amounts on deposit in 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
Excess Funding Account are invested (the "Negative Carry
Amount").
a. To the extent that on any Business Day payments
are being made pursuant to any of subsections 4.9(a)(i)
through (xvii), respectively, and the full amount to be
paid pursuant to any such subsection receiving payments
on such Business Day is not paid in full on such Business
Day, the Servicer shall apply, in the manner specified
for application of Available Series 1995-1 Finance Charge
Collections in subsections 4.9(a)(i) through (xvii), all
or a portion of the Excess Finance Charge Collections
from other Series with respect to such Business Day
allocable to the Series 1995-1 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
1995-1 Finance Charge Collections and Transferor Finance
Charge Collections on such Business Day (the "Required
Amount"). Excess Finance Charge Collections allocated to
the Series 1995-1 Certificates for any Business Day shall
mean an amount equal to the product of (x) Excess Finance
Charge 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 Finance Charge Collections for all Series for such
Business Day.
I. 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 preceding Monthly Period allocable to the Series 1995-
1 Certificates and deposit such amount in the Distribu
tion Account. On each Business Day, the Paying Agent
shall pay in accordance with Section 5.1 of the Agreement
to Class A Certificateholders from the Distribution
Account an amount equal to the sum of the Class C
Interest Adjustment, if any, and the Class B Interest
Adjustment, if any, deposited into the Distribution
Account pursuant to Section 4.6A. On each Distribution
Date, the Paying Agent shall pay in accordance with
Section 5.1 of the Agreement (x) to the Class B Certifi
cateholders from the Distribution Account the amount
deposited into the Interest Funding Account during the
preceding Monthly Period pursuant to subsections
4.9(a)(ii) and (ix) and Sections 4.10 and 4.15 less the
aggregate Class B Interest Adjustment made with respect
to the related Interest Accrual Period and (y) the Class
C Certificateholders from the Distribution Account the
amount deposited into the Interest Funding Account pursu
ant to subsections 4.9(a)(iii) and (x) and Sections 4.10
and 4.15 during the preceding Monthly Period less the
aggregate Class C Interest Adjustment made in the related
Interest Accrual Period.
J. Payment of Certificate Principal.
a. 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 Certificate 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.
b. 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 1995-1 Certificates (after giving effect to
transfers pursuant to subsection 4.12(b)). On the Class
C Principal Payment Commencement Date, after the payment
of any principal amounts to the Class B Certificates 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.
c. 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.
d. On each Business Day the Trustee acting in
accordance with instructions from the Servicer set forth
in the Daily Report for such Business Day shall make pay
ments of principal to the Class D Certificateholders of
Class D Daily Principal, if any, designated by the Trans
feror pursuant to Section 4.7(d) of the Agreement.
Any amounts remaining in the Principal Account
and allocable to the Series 1995-1 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(d) of the Agreement.
K. 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 1995-1 Fi
nance Charge Collections applied to the payment thereof
pursuant to subsections 4.9(a)(v), (vi) and (vii) of the
Agreement and the amount of Transferor Finance Charge Col
lections and Excess Finance Charge Collections allocated
thereto pursuant to Section 4.10 of the Agreement, and
the amount of Reallocated Principal Collections applied
with respect thereto pursuant to Section 4.15 of the
Agreement, the Class D Invested Amount will be reduced by
the amount by which the remaining aggregate Investor
Default Amount and Series Allocation Percentage of unpaid
Adjustment Payments exceed the amount applied with re
spect thereto during such preceding Monthly Period (a
"Class D Investor Charge-Off").
a. In the event that any such reduction of the Class
D Invested Amount would cause the Class D Invested Amount
to be a negative number, the Class D Invested 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 Adjustment Payments for
such Monthly Period (a "Class C Investor Charge-Off").
b. In the event that any such reduction of the Class
C Invested Amount would cause the Class C Invested Amount
to be a negative number, the Class C Invested Amount will
be reduced to zero, and, the Class B Invested Amount will
be reduced by the amount by which the Class C Invested
Amount would have been reduced below zero, but not more
than the remaining aggregate Investor Default Amount and
Series Allocation Percentage of unpaid Adjustment
Payments for such Monthly Period (a "Class B Investor
Charge-Off").
c. In the event that any such reduction of the Class
B Invested Amount would cause the Class B Invested Amount
to be a negative number, the Class B Invested Amount will
be reduced to zero, and the Class A Invested Amount will
be reduced by the amount by which the Class B Invested
Amount would have been reduced below zero, but not more
than the remaining aggregate Investor Default Amount and
Series Allocation Percentage of unpaid Adjustment
Payments for such Monthly Period (a "Class A Investor
Charge-Off").
L. . Increases in the Invested Amount During
the Investment Period. (a) The "Investment Period"
shall be the period, if any, beginning on the Closing
Date and ending upon the issuance of Class A Certificates
in an initial amount of at least $12,400,000.
a. On any Business Day during the Investment
Period, the Transferor may require that: the Persons
obligated to purchase the Class C Certificates pursuant
to the Class C Purchase Agreement purchase a principal
amount of Class C Certificates equal to the Class C Full
Invested Amount (a "Class C Funding Purchase"); the Per
sons obligated to purchase the Class B Certificates pursu
ant to the Class B Purchase Agreement purchase a
principal amount of Class B Certificates equal to the
Class B Full Invested Amount (a "Class B Funding Pur
chase"); and that the Person obligated to purchase the
Class A Certificate purchase a principal amount of the
Class A Certificate according to the terms of the Class A
Certificate Purchase Agreement less than or equal to the
Class A Maximum Invested Amount, but in no event less
than $12,400,000 (a "Class A Funding Purchase"); provid
ed, however, that any Class A Funding Purchase, Class B
Funding Purchase or Class C Funding Purchase may be
required only upon satisfaction of the following condi
tions: (i) that the purchase of the Class C Funding
Purchase be made in a single purchase on a single Busi
ness Day and prior to or contemporaneously with the issu
ance of the Class B Certificates; (ii) that the Class B
Funding Purchase be made in a single purchase on a single
Business Day and prior to or contemporaneously with the
issuance of the Class A Certificate; (iii) that the Class
A Funding Purchase be made only after or contempo
raneously with the Class B Funding Purchase or Class C
Funding Purchase; (iv) that immediately following the
issuance of each of the Class C Certificates, the Class B
Certificates and the Class A Certificate, the Class D
Invested Amount be equal to or greater than the Stated
Class D Amount; (v) that all of the conditions placed
upon the issuance of a Series pursuant to Section 6.9(b)
of the Agreement be satisfied with respect to the
applicable Class or Classes of Certificates as if such
Class or Classes of Certificates were a Series, except
for the requirement to deliver a Series Supplement (as
defined in the Agreement); and (vi) that the Transferor
have given the purchasers of the Class C Certificates,
the Class B Certificates or the Class A Certificates, as
applicable at least five Business Days' notice of the
date on which the purchase is to be made in accordance
with this Section 4.14A.
Upon satisfaction of the above conditions, and
in accordance with Section 6.9 of the Agreement to the
extent applicable, the Trustee shall issue the Class C
Certificates in the case of a Class C Funding Purchase,
the Class B Certificates in the case of a Class B Fund
ing Purchase, and the Class A Certificates in the case
of a Class A Funding Purchase, as applicable, upon re
ceipt of payment therefor.
M. Reallocated Principal Collections for
the Series 1995-1 Certificates. (a) On each Business
Day, the Servicer will determine an amount equal to the
least 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 Amorti
zation 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 1995-1 Finance Charge Collections pursu
ant to subsection 4.9(a).
a. On each Business Day, the Servicer will determine
an amount equal to the least 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 Amortization 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 Reallo
cated Class D Principal Collections applied with respect
thereto for such Business Day and (b) the Class B Re
quired Amount for such Business Day over the amount of
Reallocated Class D Principal Collections applied with
respect thereto for such Business Day (such amount called
"Reallocated Class C Principal Collections") and shall
apply Principal Collections in an amount equal to such
amount first to the remaining components 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 components from Available
Series 1995-1 Finance Charge Collections pursuant to
subsection 4.9(a).
b. On each Business Day, the Servicer will determine
an amount equal to the least 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 Amortization 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 Re
quired 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") and shall
apply Principal Collections 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 1995-1 Finance Charge
Collections pursuant to subsection 4.9(a).
N. Determination of LIBOR. (a) "LIBOR"
shall mean, for a specific Interest Accrual Period, the
rate for deposits in United States dollars for one month
(commencing on the first day of the relevant Interest
Accrual Period) which appears on Telerate Page 3750 as of
11:00 A.M., London time, on the LIBOR Determination Date
for such Interest Accrual Period. If such rate does not
appear on Telerate Page 3750, the rate for such Interest
Accrual Period will be determined on the basis of the
rates at which deposits in the United States dollars are
offered by the Reference Banks at approximately 11:00
a.m., London time, on such LIBOR Determination Date to
prime banks in the London interbank market for a period
equal to one month (commencing on the first day of Inter
est Accrual Period). The Trustee will request the prin
cipal London office of each such bank to provide a quota
tion of its rate. If at least two such quotations are
provided, the rate for such Interest Accrual Period will
be the arithmetic mean of the quotations. If fewer than
two quotations are provided as requested, the rate for
such Interest Accrual Period will be the arithmetic mean
of the rates quoted by four major banks in New York City,
selected by the Trustee, at approximately 11:00 a.m., New
York City time, on the LIBOR Determination Date for loans
in United States dollars to leading European banks for a
period equal to one month (commencing on the first day of
such Interest Accrual Period).
a. The Class B Certificate Rate and the Class C
Certificate Rate applicable to the then current and the
immediately preceding Interest Accrual Periods may be
obtained by any Series 1995-1 Certificateholder by
telephoning the Trustee at its Corporate Trust Office at
(302) 451-2500.
b. On each LIBOR Determination Date, the Trustee
shall send to the Servicer by facsimile notification of
LIBOR for the following Interest Accrual Period.
O. Payment Reserve Account
a. The Servicer shall 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
"Payment 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 Payment Reserve Account
and in all proceeds thereof. The Payment 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 Payment Reserve
Account ceases to be a Qualified Institution, the Trustee
shall within 20 Business Days establish a new Payment Re
serve Account meeting the conditions specified above with
a Qualified Institution, and shall transfer any cash or
any investments to such new Payment Reserve Account.
From the date such new Payment Reserve Account is estab
lished, it shall be the "Payment Reserve Account."
(b) The Transferor, at its discretion, may
withdraw on any Determination Date a part or all of any
amounts remaining in the Payment Reserve Account after
giving effect to any withdrawals required to be made
under Section 4.9(a) above.
(c) Funds on deposit in the Payment 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 Payment Reserve
Account on any Business Day, after giving effect to any
withdrawals from the Payment 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.
On each Business Day following a deposit of funds to the
Payment Reserve Account, the aggregate proceeds of any
such investment shall be deposited in the Collection
Account and treated as Investment Proceeds for applica
tion as Available Series 1995-1 Finance Charge Collec
tions.
P. Establishment of Investor Reserve
Account.
(a) The Servicer, for the benefit of the
Investor Certificateholders, shall, on the Closing Date,
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 Investor Certificateholders, the "Investor Reserve
Account," which shall be a segregated trust account with
the corporate trust department of such Qualified Institu
tion, bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the
Investor Certificateholders. The Trustee shall possess
all right, title and interest in all funds on deposit
from time to time in the Investor Reserve Account and in
all proceeds thereof. The Investor Reserve Account
shall be under the sole dominion and control of the
Trustee for the benefit of the Investor Certificate
holders. If, at any time, the institution holding the
Investor Reserve Account ceases to be a Qualified Insti
tution, the Trustee shall within 10 Business Days estab
lish a new Investor Reserve Account meeting the condi
tions specified above with a Qualified Institution, and
shall transfer any cash or any investments to such new
Investor Reserve Account. From the date such new Inves
tor Reserve Account is established, it shall be the
"Investor Reserve Account."
(b) On the Closing Date the Trustee, at the
direction of the Servicer, shall apply the proceeds from
the issuance of the Certificates to fund the Investor Re
serve Account in an amount equal to the Specified Inves
tor Reserve Amount on the Closing Date. On the date of
issuance of any Additional Class A Invested Amount, the
Trustee shall, at the direction of the Servicer, deposit
in the Investor Reserve Account in accordance with Sec
tion 6.15 proceeds of such issuance in an amount equal
to the excess of the Specified Investor Reserve Amount
following the issuance of the Additional Class A Invest
ed Amount (and any related increase in the Class D In
vested Amount) over the Specified Investor Reserve
Amount prior to the issuance of Additional Class A In
vested Amount. In addition, the Servicer shall on each
Business Day deposit in the Investor Reserve Account an
amount equal to the excess of the Specified Investor
Reserve Amount over the amount on deposit in the Inves
tor Reserve Account to the extent of funds available
therefor pursuant to subsection 4.9(a)(xiv). Funds on
deposit in the Investor Reserve Account shall be with
drawn by the Servicer and applied in accordance with
Section 4.9(a). Amounts on deposit in the Investor Re
serve Account may be subsequently released therefrom to
the extent that the amount on deposit in the Investor
Reserve Account exceeds the Specified Investor Reserve
Amount and shall be paid to the Transferor.
(c) Funds on deposit in the Investor 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 Investor Reserve
Account on any Distribution Date, after giving effect to
any withdrawals from the Investor 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 Reserve Application Date. The proceeds
of any such investments 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 Reserve
Application Date. On each Business Day following a de
posit of funds to the Investor Reserve Account, to the
extent that the amount on deposit in the Investor Re
serve Account exceeds the Specified Investor Reserve
Amount, the aggregate proceeds of any such investment
shall be deposited in the Collection Account and treated
as Investment Proceeds for application as Available
Series 1995-1 Finance Charge Collections.
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 1995-
1 Certificates:
III. DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS
A. Distributions. (a) On each Business
Day, the Paying Agent shall distribute (in accordance
with the Settlement Statement delivered by the Servicer
to the Trustee and the Paying Agent pursuant to subsec
tion 3.4(c)) to the Class A 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 aggregate Undivided Interests represented
by the Class A Certificate held by such Certificate
holder) of amounts on deposit in the Distribution Account
as are payable to the Class A Certificateholder pursuant
to Section 4.11 of the Agreement and amounts deposited in
the Principal Account pursuant to subsection 9A(b) of
this Supplement and amounts on deposit in the Principal
Account pursuant to subsection 4.9(c)(i) of the Agreement
by wire transfer 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 such
Business Day; provided, however, that the final payment
in retirement of the Class A Certificate will be made
only upon presentation and surrender of the Class A
Certificate at the office or offices specified in the
notice of such final distribution delivered by the Trust
ee pursuant to Section 12.3.
a. 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 Cer
tificateholder of record on the preceding Record Date
(other than as provided in subsection 2.4(e) or in Sec
tion 12.3 respecting a final distribution) such Certifi
cateholder's pro rata share (based on the aggregate
Undivided Interests represented by Class B Certificates
held by such Certificateholder) of amounts on deposit in
the Distribution Account as are payable to the Class B
Certificateholders pursuant to Sections 4.11 and 4.12 of
the Agreement by wire transfer 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; provided, however,
that the final payment in retirement of the Class B
Certificates will be made only upon presentation and
surrender of the Class B Certificates at the office or
offices specified in the notice of such final distribu
tion 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 C Cer
tificateholder of record on the preceding Record Date
(other than as provided in subsection 2.4(e) or in Sec
tion 12.3 respecting a final distribution) such Certifi
cateholder's pro rata share (based on the aggregate
Undivided Interests represented by Class C Certificates
held by such Certificateholder) of amounts on deposit in
the Distribution Account as are payable to the Class C
Certificateholders pursuant to Sections 4.11 and 4.12 of
the Agreement by wire transfer to each Class C Certifi
cateholder 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 pay
ment 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 Trust
ee pursuant to Section 12.3.
B. Certificateholders' Statement. (a) On
the 20th 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 Certificateholder 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 Deter
mination Date setting forth the following information:
(1) the total amount distributed;
(2) the amount of such distribution allocable to
Certificate Principal;
(3) the amount of such distribution allocable to
Certificate Interest;
(4) the amount of Principal Collections received in
the Collection Account during the preceding Monthly
Period and allocated in respect of the Class A Certifi
cate, the Class B Certificates, the Class C Certificates
and the Class D Certificate, respectively;
(5) the amount of Finance Charge Collections processed
during the preceding Monthly Period and allocated in
respect of the Class A Certificate, the Class B
Certificates, the Class C Certificates and the Class D
Certificate, respectively;
(6) the aggregate amount of Principal Receivables, the
Invested Amount, the Class A Invested 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, as of the end of the day on
the last day of the related Monthly Period;
(7) the aggregate outstanding balance of Receivables
which are current, 30-59, 60-89, and 90 days and over
delinquent as of the end of the day on the last day of
the related Monthly Period;
(8) the aggregate Investor Default Amount for the
preceding Monthly Period;
(9) the aggregate amount of Class A Investor Charge-
Offs, Class B Investor Charge-Offs, Class C Investor
Charge-Offs and Class D Investor Charge-Offs for the
preceding Monthly Period;
(10) the amount of the Servicing Fee for the preceding
Monthly Period;
(11) the Class B Pool Factor and the Class C Pool
Factor as of the end of the last day of the Monthly
Period immediately preceding the Determination Date;
(12) the amount of unreimbursed Reallocated Class B
Principal Collections, Reallocated Class C Principal
Collections and Reallocated Class D Principal Collections
for the related Monthly Period;
(13) the aggregate amount of funds in the Excess
Funding Account as of the last day of the Monthly Period
immediately preceding the Distribution Date;
(14) the Aggregate Interest Rate Caps Notional Amount
and the amount deposited in the Cap Proceeds Account dur
ing the related Monthly Period.
b. Annual Certificateholders' Tax Statement. On or
before January 31 of each calendar year, beginning with
calendar year 1996, the Paying Agent shall distribute to
each Person who at any time during the preceding calendar
year was a Series 1995-1 Certificateholder, a statement
prepared by the Servicer containing the information re
quired to be contained in the regular report to Series
1995-1 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 1995-1 Certificateholder, together
with, on or before January 31 of each year, beginning in
1996, 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 1995-1 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 7A. Article VI of the Agreement.
Article VI (except for Sections 6.01 through 6.14 there
of) shall read in its entirety as follows and shall be
applicable only to the Series 1995-1:
IV. THE CERTIFICATES
A. Additional Class A Invested Amounts.
The Class A Certificateholder agrees, by acceptance of
the Class A Certificate, that the Transferor may from
time to time, other than after a Pay Out Commencement
Date, request that such Class A Certificateholder ac
quire on any Business Day additional undivided interests
in the Trust in specified amounts (such amounts, the
"Additional Class A Invested Amounts"); provided,
however, that if such an increase in the Class A
Invested Amount would cause a Trust Pay Out Event or a
Series 1995-1 Pay Out Event to occur, then the amount of
the increase in the Class A Invested Amount shall be
limited on such Business Day to the maximum increase in
the Class A Invested Amount that may be obtained without
causing either a Trust Pay Out Event or a Series 1995-1
Pay Out Event to occur; and provided further, that in no
case shall the Class A Invested Amount be increased
above the Class A Maximum Invested Amount. The Addition
al Class A Invested Amounts on any Business Day shall
not exceed an amount equal to the excess of the aggre
gate amount of Principal Receivables over the greater of
(a) the sum of (i) the aggregate invested amount of each
Series then outstanding as of such day including the
Class A Certificate (prior to the addition of such Addi
tional Class A Invested Amount) minus amounts on deposit
in the Principal Account for any Series, if any, and
(ii) the Minimum Transferor Interest as of such day or
(b) the Minimum Aggregate Principal Receivables. The
Class A Certificateholder shall acquire such Additional
Class A Invested Amount, only if (a) the Class D Invest
ed Amount following the acquisition of such Additional
Class A Invested Amount shall be at least equal to the
Stated Class D Amount (including increases to the Class
D Invested Amount pursuant to Section 6.16 of the Agree
ment), (b) the notional amount of the Interest Rate Caps
shall be at least equal to the Aggregate ABC Principal
Amount after giving effect to the proposed increase in
the Class A Invested Amount, (c) after giving effect to
the proposed increase in the Class A Invested Amount no
Series 1995-1 Pay Out Event shall occur as a result of
such increase and (d) the conditions precedent to issu
ance of Commercial Paper or making a Revolving Loan (as
defined in the Liquidity Agreement) pursuant to the Li
quidity Agreement have been met. If the Class A Certifi
cateholder acquires such Additional Class A Invested
Amount, such Class A Certificateholder shall pay an
amount equal to the Additional Class A Invested Amount
to the Trustee and, in consideration of such
Certificateholder's payment of the Additional Class A
Invested Amount, the Servicer shall appropriately note
such Additional Class A Invested Amount (and the in
creased Class A Invested Amount) on the next succeeding
Servicer's report and direct the Trustee in writing to
first make any required deposit to the Investor Reserve
Account pursuant to subsection 4.18(b) and second pay to
the Transferor an amount equal to the remaining proceeds
in an amount not to exceed such Additional Class A In
vested Amount, and the Invested Amount of the Class A
Certificate will be equal to the Invested Amount of the
Class A Certificate stated in such Servicer's report.
The purchase of any Additional Class A Invest
ed Amount shall be in an aggregate principal amount that
is not less than $1,000,000 or integral multiples of
$1,000,000 in excess thereof.
The outstanding amounts of any Additional
Class A Invested Amount purchased by the Class A Certif
icateholder shall be evidenced by a Class A Certificate
to be issued on the Closing Date substantially in the
form of Exhibit A-1 hereto. The Class A Certificatehold
er shall be and is hereby authorized to record on the
grid attached to its Class A Certificate (or at such
Class A Certificateholder's option, in its internal
books and records) the date and amount of any Additional
Class A Invested Amount purchased by it, and each repay
ment thereof; provided that failure to make any such
recordation on such grid or any error in such grid shall
not adversely affect the Class A Certificateholder's
rights with respect to its Class A Invested Amount and
its right to receive interest payments in respect of the
Class A Invested Amount held by the Class A Certificate
holder.
B. Additional Class D Invested Amounts.
a. On any Business Day while any Series 1995-1
Certificates are outstanding, the Transferor may elect
to increase the Class D Invested Amount (such additional
amounts, "Additional Class D Invested Amounts") by writ
ten notice to the Trustee on such date which notice
shall specify the effective date and the amount of such
increase in the Class D Invested Amount; provided, howev
er, that if such an increase in the Class D Invested
Amount would cause a Trust Pay Out Event or a Series
1995-1 Pay Out Event to occur, then the amount of the
increase in the Class D Invested Amount shall be limited
on such Business Day to the maximum increase in the
Class D Invested Amount that may be obtained without
causing either a Trust Pay Out Event or a Series 1995-1
Pay Out Event to occur; and provided further, that in no
case shall the Class D Invested Amount be increased
above the Class D Maximum Required Amount; provided
further that no such increase in the Class D Invested
Amount shall be permitted under this Section 6.16 un
less: (i) after giving effect to the proposed increase
in Class D Invested Amount the Transferor Interest shall
equal or exceed the Minimum Transferor Interest, (ii)
no Series 1995-1 Pay Out Event will occur as a result of
such increase in the Class D Invested Amount and (iii)
such increase in the Class D Invested Amount shall be
made concurrently with a Class A Funding Purchase, Class
B Funding Purchase or Class C Funding Purchase pursuant
to Section 4.14(b) of the Agreement or an increase in
the Class A Invested Amount pursuant to Section 6.15 of
the Agreement.
C. Extension. (a) If a Pay Out Event has
not occurred or has occurred but has been remedied on or
before the 30th Business Day preceding the Extension
Date, the Transferor, in its sole discretion, may deliv
er to the Trustee on or before such date a notice sub
stantially in the form of Exhibit E (the "Extension
Notice") to this Series Supplement. The Trustee shall
deliver a copy of the Extension Notice and all documents
annexed thereto to the Investor Certificateholders of
record on the date of receipt thereof. The Transferor
shall state in the Extension Notice that it intends to
extend the Revolving Period until the later Amortization
Period Commencement Date set forth in the Extension
Notice. The Extension Notice shall also set forth the
next Extension Date. The following documents shall be
annexed to the Extension Notice: (i) a form of the
Opinion of Counsel addressed to the Transferor and the
Trustee to the effect that despite the extension the
Trust will not be treated as an association taxable as a
corporation (the "Extension Tax Opinion"); (ii) a form
of the Opinion of Counsel addressed to the Transferor
and the Trustee (the "Extension Opinion") to the effect
that (A) the Transferor has the corporate power and
authority to effect the Extension, (B) the extension has
been duly authorized by the Transferor, and (C) all
conditions precedent to the Extension required by this
Section 6.17 have been fulfilled; (iii) a form of
Investor Certificateholder Election Notice substantially
in the form of Exhibit F (the "Election Notice") to this
Series Supplement; and (iv) a schedule setting forth the
Aggregate Interest Rate Caps Notional Amount for the
period or periods as indicated from the Extension Date
through the new Scheduled Series 1995-1 Termination
Date, each as specified in the related Extension Notice.
In addition, the Extension Notice shall state that any
Investor Certificateholder electing to approve the Ex
tension must do so on or before the Election Date (as
defined below) by returning the annexed Election Notice
properly executed to the Trustee in the manner described
below. The Extension Notice shall also state that an
Investor Certificateholder may withdraw any such elec
tion in whole or in part on or before the Election Date,
and the Transferor, in its sole discretion, may, prior
to the Election Date, withdraw its election to extend
the Revolving Period. Any Holder that elects to approve
an Extension hereunder shall deliver a duly executed
Election Notice to the Trustee at the address designated
in the Extension Notice on or before 3:00 p.m., New York
City time, on or before the fifth Business Day preceding
the Extension Date (such Business Day constituting the
"Election Date").
a. No extension shall occur unless each of the
following conditions have been satisfied prior to the
close of business on the Election Date: (i) no Pay Out
Event shall have occurred and be continuing, (ii) there
shall have been delivered to the Trustee (A) the Exten
sion Tax Opinion and the Extension Opinion, each ad
dressed to the Trustee and (B)(1) written confirmation
from each Rating Agency rating the Class A Certificates
that the Extension will not cause such Rating Agency to
lower or withdraw its then current rating of such Inves
tor Certificates, (2) written confirmation from each
Rating Agency rating the Class B Certificates that the
Extension will not cause such Rating Agency to lower or
withdraw its then current rating of such Investor Cer
tificates, and (3) written confirmation from each Rating
Agency rating its Class C Certificates that the exten
sion will not cause such Rating Agency to lower or with
draw its then current rating of such Investor Certifi
cates, (iii) each of the holders of the Class A Certifi
cates, the Class B Certificates, and the Class C Certif
icates shall have elected to approve the Extension by re
turning to the Trustee on or before the Election Date
the executed Election Notice annexed to the Extension
Notice delivered to the Certificateholders pursuant to
subsection 6.17(a) of the Agreement. If, by the close
of business on the Election Date, all of the conditions
stated in this subsection 6.17(b) of the Agreement have
not been satisfied and all such documents delivered to
the Trustee pursuant to this subsection 6.17(b) of the
Agreement are not in form satisfactory to it, or if the
Transferor has notified the Trustee, prior to the Elec
tion Date, that the Transferor has exercised its right
to withdraw its election of an Extension, no Extension
shall occur.
b. The execution by the required number of Inves
tor Certificateholders of the applicable Election Notice
and return thereof to the Trustee by the required Date
and time, the continued election by the Transferor to
extend the Revolving Period at the Election Date, and
the compliance with all of the provisions of this Sec
tion 6.17, shall evidence an extension or renewal of the
obligations represented by the Investor Certificates,
and not a novation or extinguishment of such obligations
or a substitution with respect thereto.
c. To the extent required by applicable laws and
regulations, as evidenced by an Opinion of Counsel de
livered by the Transferor to the Trustee, the provisions
of this Section 6.17 shall or may be modified to comply
with all applicable laws and regulations in effect at
the time of the Extension.
SECTION 8. Series 1995-1 Pay Out Events. If
any one of the following events shall occur with respect
to the Series 1995-1 Certificates:
d. 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 Agree
ment or this Series Supplement, which failure has a
material adverse effect on the Series 1995-1 Certificate
holders and which continues unremedied for a period of
60 days (or, in the case of a covenant pursuant to
Section 3A of this Series Supplement, 30 days) after
the date on which written notice of such failure, re
quiring 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 1995-1 Certifi
cates evidencing Undivided Interests aggregating not
less than 50% of any of the Class A Invested Amount, the
Class B Invested Amount or the Class C Invested Amount,
and continues to affect materially and adversely the
interests of the Series 1995-1 Certificateholders for
such period;
e. any representation or warranty made by the
Transferor in the Agreement or this Series Supplement,
(i) shall prove to have been incorrect in any material
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 1995-1 Certificates
evidencing Undivided Interests aggregating more than 50%
of any of the Class A Invested Amount, the Class B
Invested Amount or the Class C Invested Amount, and (ii)
as a result of which the interests of the Series 1995-1
Certificateholders are materially and adversely affected
and continue to be materially and adversely affected for
such period; provided, however, that a Series 1995-1 Pay
Out Event pursuant to this subsection 8(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;
f. the average of the Portfolio Yields for any
three consecutive Monthly Periods is reduced to a rate
which is less than the weighted average Base Rates for
such three consecutive Monthly Periods;
g. (i) the Transferor Interest shall be less than
the Minimum Transferor Interest, (ii) the Series Alloca
tion Percentage of the sum of the total amount of Princi
pal Receivables plus amounts on deposit in the Excess
Funding Account shall be less than (B) the sum of the
Class A Outstanding Principal Amount, the Class B
Outstanding Principal Amount, the Class C Outstanding
Principal Amount and the Class D Outstanding Principal
Amount or (iii) the total amount of Principal Receiv
ables and the amount on deposit in the Excess Funding
Account shall be less than the Minimum Aggregate Princi
pal Receivables, in each case as of any Determination
Date;
h. any Servicer Default shall occur which would
have a material adverse effect on the Series 1995-1 Cer
tificateholders; or
i. the amount on deposit in the Excess Funding
Account as a percentage of the sum of the aggregate
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 1995-1 Certificates evidencing Undivided Inter
ests aggregating more than 50% of any of the Class A
Invested Amount, the Class B Invested Amount or the
Class C Invested Amount by notice then given in writing
to the Trustee, the Transferor, the Cap Provider and the
Servicer may declare that a pay out event (a "Series
1995-1 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 1995-1 Pay Out
Event shall occur without any notice or other action on
the part of the Trustee or the Series 1995-1 Certificate
holders immediately upon the occurrence of such event.
SECTION 8A. Class A Pay Down Period. If (i)
an OTC Termination Event (as defined in the Owner Trust
Agreement) or a Class A Event of Default shall have
occurred and the Trustee shall have received written no
tice from Owner Trust Certificateholders (as defined in
the Owner Trust Agreement) and Lenders (as defined in
the Liquidity Agreement) whose aggregate Voting Inter
ests (as defined in the Collateral Trust Agreement)
exceed 50 percent of the total Voting Interests or (ii)
the principal amount of the FFSRI Note shall be less
than the FFSRI Note Required Amount or (iii) the Trans
feror shall sell, transfer, assign, pledge, hypothecate,
participate or otherwise convey or encumber the FFSRI
Note and such action shall not be completely revoked or
otherwise remedied within five days, or (iv) the Trans
feror shall permit to exist any Lien (other than a Per
mitted Lien) on the FFSRI Note not created with the
Transferor's consent and such Lien shall not be com
pletely removed, revoked or otherwise remedied within 30
days, then the "Class A Pay Down Period" shall commence
without notice or any action on the part of the Trustee
or the Class A Certificateholder immediately upon the oc
currence of such event and continue until the earlier of
(i) the payment in full of the Class A Certificates and
(ii) the Amortization Period Commencement Date.
SECTION 9. Series 1995-1 Termination. The
right of the Series 1995-1 Certificateholders to receive
payments from the Trust will terminate on the first Busi
ness Day following the Series 1995-1 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 1995-1 Certificateholders shall remain
entitled to receive proceeds of such sale when such sale
occurs.
j. During the Revolving Period (except for
any portion of the Revolving Period during a Class A Pay
Down Period), the Holder of the Exchangeable Transferor
Certificate may specify upon an Exchange, pursuant to
Section 6.9 of the Agreement, that the purchaser of a
newly issued Series deposit payment therefor, in full or
in part, in the Defeasance Account in an amount not to
exceed the Class A Invested Amount on such date. On the
Closing Date the Trustee shall, for the benefit of the
Class A Certificateholder, establish and maintain with a
Qualified Institution in the name of the Trust, a cer
tain segregated trust account (the "Defeasance Ac
count"). Any amounts on deposit in the Defeasance Ac
count on any Business Day shall be invested at the
direction of the Servicer in Cash Equivalents which
mature on the next succeeding Business Day. On each
Business Day following a deposit of funds to the
Defeasance Account, the aggregate proceeds of any such
investment shall be deposited in the Collection Account
and treated as Investment Proceeds for application as
Available Series 1995-1 Finance Charge Collections.
k. Upon the direction of the Servicer any
amounts, up to the Class A Invested Amount, on deposit
in the Defeasance Account may, or upon the occurrence of
a Pay Out Event the amount on deposit in the Defeasance
Account shall, be deposited in the Principal Account for
distribution on the next Business Day to be applied to
the payment of Class A Principal. Such amounts shall be
applied and paid in accordance with Sections 4.7, 4.12
and 5.1 of the Agreement. Subsequent to any reduction
of the Class A Invested Amount as a result of payments
pursuant to this Section 9A, the Class A Invested Amount
may be increased pursuant to the terms and conditions
set forth in Section 6.15 of the Agreement.
SECTION 10. Legends; Transfer and Exchange;
Restrictions on Transfer of Series 1995-1 Certificates;
Tax Treatment.
(a) Each Class A Certificate shall bear a legend
substantially in the following form:
THIS CERTIFICATE (OR ITS PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REG
ISTRATION 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. THE TRANSFER OF
THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS
SET FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
(b) Each Class A Certificate, Class B Certificate,
Class C Certificate and Class D Certificate shall bear a
legend substantially in the following form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT FINANCIAL SERVICES RECEIV
ABLES, 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 A CERTIFICATE, 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 SUB
JECT 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 PROVISIONS OF TITLE I OF ERISA, (II)
A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTER
NAL 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.
(c) Each Class B and 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 INSTITUTIONAL 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, RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, OR TO THE TRANSFER
OR. EACH CERTIFICATE OWNER BY ACCEPTING A BENEFI
CIAL 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.
(d) Each Class C Certificate shall bear a legend
substantially in the following form:
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF A
CLASS C CERTIFICATE (OR ANY INTEREST THEREIN) SHALL
BE MADE UNLESS THE TRANSFEROR AND THE SERVICER
SHALL HAVE GRANTED THEIR PRIOR CONSENT THERETO,
WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD.
(e) 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 FINAN
CIAL SERVICES 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 OUT
STANDING SERIES OF INVESTOR CERTIFICATES OR THE
TAXABILITY (OR TAX CHARACTERIZATION) OF THE TRUST
UNDER FEDERAL, MINNESOTA OR DELAWARE INCOME TAX
LAWS. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT
TO CERTAIN CONDITIONS SET FORTH IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
(f) Upon surrender for registration of transfer of
a Class B Certificate or Class C Certificate at the of
fice of the Transfer Agent and Registrar, accompanied by
a certification by the Class B Certificateholder or
Class C Certificateholder, as applicable, 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
instrument of transfer in the form approved by the Trans
feror and the Trustee (it being understood that, until
notice to the contrary is given to Class B Certificate
holders or 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 B Certificate or Class C Certifi
cate), executed by the registered owner, in person or by
such Class B Certificateholder's or Class C
Certificateholder's attorney thereunto duly authorized
in writing, such Class B Certificate or Class C Certifi
cate shall be transferred upon the register, and the
Transferor shall execute, and the Trustee shall authen
ticate and deliver, in the name of the designated
transferees one or more new registered Class C Certifi
cates of any authorized denominations and of a like
aggregate principal amount and tenor. Transfers and
exchanges of Class B Certificates or Class C Certifi
cates shall be subject to such restrictions as shall be
set forth in the text of the Class B Certificates or
Class C Certificates and such reasonable regulations as
may be prescribed by the Transferor. Successive regis
trations and registrations of transfers as aforesaid may
be made from time to time as desired, and each such
registration shall be noted on the register.
(g) Fingerhut Financial Services 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 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 any interest in or portion of the Class D
Certificate be transferred to FCI. As a condition to
transfer of an interest in or portion of the Class D
Certificate the transferee shall be required to agree
not to institute against, or join any other Person in
instituting against, the Trust any bankruptcy, reor
ganization, arrangement, insolvency or liquidation pro
ceeding, 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.
(h) No transfer of a Class B Certificate, Class C
Certificate or Class D Certificate will be permitted 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 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 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 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 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.
(i) The Class B Certificateholders or Class C Cer
tificateholders shall comply with their obligations
under Section 3.7 of the Agreement with respect to the
tax treatment of the Class B Certificates or Class C Cer
tificates, except to the extent that a relevant taxing
authority has disallowed such treatment.
(j) In accordance with Section 6.2 of the
Agreement, no sale, assignment, participation, pledge,
hypothecation, transfer or other disposition of a Class
C Certificate (or any interest therein) shall be made
unless the Transferor and the Servicer shall have grant
ed their prior consent thereto, which consent may not be
unreasonably withheld; provided, however, that for
purposes of this sentence, it shall in all cases be rea
sonable for the Transferor or the Servicer to withhold
consent to such proposed sale, assignment, participa
tion, pledge, hypothecation, transfer or other disposi
tion of all or any part of a Class C Certificate (or any
interest therein) if the transaction would, if effected,
give rise to any adverse tax consequence, as determined
in the sole and absolute discretion of the Transferor or
the Servicer.
l. As supplemented by this Series
Supplement, the Agreement is in all respects ratified
and confirmed and the Agreement as so supplemented by
this Series Supplement shall be read, taken, and
construed as one and the same instrument.
m. For so long as any of the Class B Certif
icates or 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 B
Certificateholders or Class C Certificateholders, as
applicable, and to any prospective purchaser of Class B
Certificates or Class C Certificates designated by such
a Class B Certificateholder or Class C Certificateholder
upon the request of such Class B Certificateholder or
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 Securities Act.
SECTION 12. 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 13. GOVERNING LAW. THIS SERIES SUP
PLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE WITHOUT REFERENCE TO ITS CON
FLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 14. 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.
SECTION 15. Amendments. Solely with respect
to any amendment pursuant to Section 13.1(b) of the
Agreement and any consent required pursuant thereto from
the Holders of Investor Certificates of Series 1995-1,
this Series Supplement and the Agreement may 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 the Se
ries 1995-1 Certificates and (y) not less than 51% of
each of the Class A Invested Amount, the Class B Invest
ed Amount and the Class C Invested Amount to the extent
that such classes would be adversely affected, for the
purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this
Series Supplement or the Agreement or of modifying in
any manner the rights of the Certificateholders of any
Class of the Series 1995-1 Certificates then issued and
outstanding; provided, however, that no such amendment
under this Section 15 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 Class 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 Certificate of such Class without the consent
of the related Investor Certificateholders or (iii)
reduce the aforesaid percentage required to consent to
any such amendment, in each case without the consent of
all such Investor Certificateholders.
n. Notwithstanding any other provision
herein, if after the Effective Date (as defined in the
Liquidity Agreement), any change in applicable law or
regulation or in the interpretation or administration
thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not
having the force of law) shall change the basis of
taxation of payments to any Class B or Class C
Certificateholder that is a commercial bank or
controlled by a commercial bank of the principal of or
interest on any Class B or Class C Certificate (other
than changes in respect of taxes imposed on the overall
net income of such Certificateholder by the jurisdiction
in which such Certificateholder has its principal office
or by any political subdivision or taxing authority
therein), or shall impose, modify or deem applicable any
reserve, special deposit or similar requirement against
assets of, deposits with or for the account of or credit
extended by such Certificateholder, or shall impose on
such Certificateholder or the London interbank market
any other condition affecting this Series Supplement or
any Class B or Class C Certificate owned by such Certif
icateholder, and the result of any of the foregoing
shall be to increase the cost to such Certificateholder
of holding any Class B or Class C Certificate or to
reduce the amount of any sum received or receivable by
such Certificateholder hereunder (whether of principal
or interest) in respect thereof by an amount deemed by
such Certificateholder to be material, then the Trustee
will pay to such Certificateholder upon demand such
additional amount or amounts as will compensate such
Certificateholder for such additional costs incurred or
reduction suffered. Any Class B or Class C Certificate
holder claiming any additional amounts payable pursuant
to this Section 16 shall use reasonable efforts (consis
tent with legal and regulatory restrictions) to file any
certificate or document requested by the Transferor or
the Trustee or to change the jurisdiction of its appli
cable lending office if the making of such a filing or
change would avoid the need for or reduce the amount of
any additional amount which may thereafter accrue and
would not, in the sole determination of such Certifi
cateholder, be otherwise disadvantageous to such Certif
icateholder.
o. If any Class B or Class C Certificatehold
er that is a commercial bank or controlled by a commer
cial bank shall have determined that the adoption after
the Effective Date (as defined in the Liquidity
Agreement) of any other law, rule, regulation or guide
line regarding capital adequacy, or any change in any of
the foregoing or in the interpretation or administration
of any of the foregoing by any Governmental Authority,
central bank or comparable agency charged with the in
terpretation or administration thereof, or compliance by
any such Certificateholder (or any lending office of
such Certificateholder) or any such Certificateholder's
holding company with any request or directive regarding
capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the
rate of return on such Certificateholder's capital or on
the capital of such Certificateholder's holding company,
if any, as a consequence of this Series Supplement or
the Class B or Class C Certificates owned by such Cer
tificateholder to a level below that which such Certifi
cateholder or such Certificateholder's holding company
could have achieved but for such adoption, change or
compliance (taking into consideration such Certificate
holder's policies and the policies of such Certificate-
holder's holding company with respect to such capital
adequacy) by an amount deemed by such Certificateholder
to be material, then from time to time the Trustee shall
pay to such Certificateholder such additional amount or
amounts as will compensate such Certificateholder or
such Trustee's holding company for any such reduction
suffered after the date hereof.
p. A certificate of a Class B or Class C Certifi
cateholder setting forth such amount or amounts, along
with such Certificateholder's method of computation of
such amounts, as shall be necessary to compensate such
Certificateholder as specified in paragraph (a) or (b)
above, as the case may be, shall be delivered to the
Trustee and shall be conclusive absent manifest error.
The Trustee shall pay each Certificateholder the amount
shown as due on any such certificate delivered by it no
later than the Distribution Date immediately succeeding
the date of delivery of such certificate.
q. Failure on the part of any eligible Class B or
Class C Certificateholder to demand compensation for any
increased costs or reduction in amounts received or
receivable or reduction in return on capital with re
spect to any period shall not constitute a waiver of
such Certificateholder's right to demand compensation
with respect to such period or any other period; provid
ed, however, that no Certificateholder shall be entitled
to compensation for any such increased costs or reduc
tions unless it shall have submitted a certificate under
paragraph (c) above with respect thereto not more than
90 days after the date that such Certificateholder knows
that such increased costs have been incurred or such
reduction suffered. Notwithstanding any other provision
of this Section 16, no Certificateholder shall demand
compensation for any increased cost or reduction re
ferred to above if it shall not at the time be the gen
eral policy of such Certificateholder to demand such
compensation in similar circumstances under comparable
provisions of other credit agreements, and each Certifi
cateholder shall in good faith endeavor to allocate in
creased costs or reductions fairly among all of its
affected commitments and credit extensions (whether or
not it seeks compensation from all affected borrowers).
The protection of this Section 16 shall be available to
each Class B or Class C Certificateholder that is a
commercial bank or controlled by a commercial bank re
gardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, guideline
or other change or condition which shall have occurred
or been imposed.
r. The amounts owing by the Trustee pursuant to
this Section 16 shall be payable solely from amounts
available therefor pursuant to subsections 4.9(a)(xvi)
and (xvii) of the Agreement.
SECTION 17. Replacement of Certain Investor
Certificateholders. In the event that (i) a Class B or
Class C Certificateholder requests compensation pursuant
to Section 16, (ii) a Holder of Investor Certificates (a
"Non-Consenting Holder") does not consent to an amend
ment, supplement, waiver or other modification with
respect to this Series Supplement or to the Agreement,
as provided in Section 15 within the time period speci
fied for delivery of such consent pursuant to the docu
mentation associated therewith and the amendment, sup
plement, waiver or other modification is not approved in
accordance with said Section 15, or (iii) an Investor
Certificateholder fails to approve any Extension re
quested by the Transferor pursuant to Section 6.17 of
the Agreement, the Transferor shall have the right to re
place such Holder with a Person or Persons meeting the
requirements of Section 10, by giving three Business
Days prior written notice to the Trustee and such Hold
er, specifying the date on which such Holder's Certifi
cates shall be transferred; provided, however that, (a)
such transfer shall not conflict with any law, rule or
regulation or order of any court or other Governmental
Authority, and (b) in the case of clause (ii) above, all
Non-Consenting Holders with respect to any one proposed
amendment, supplement, waiver or other modification or
Extension must be concurrently replaced in accordance
with this Section 17. In the event of the replacement
of an Investor Certificateholder, such Investor Certifi
cateholder agrees to assign, without recourse, its
rights and obligations hereunder to a replacement Holder
selected by the Transferor upon payment by the replace
ment Holder to such Investor Certificateholder in imme
diately available funds of the principal amount of such
Investor Certificateholder's outstanding Certificates
and any interest accrued and unpaid thereon and all
other amounts owing to such Investor Certificateholder
hereunder and to execute and/or deliver any certifica
tion or other document required to be delivered pursuant
to Section 10.
SECTION 18. FFSRI Note. The Transferor has
received a note from Fingerhut Companies, Inc. in the
amount of $18,000,000 (such note, together with any addi
tional notes of Fingerhut Companies, Inc. held by the
Transferor at any time, the "FFSRI Note"). The Trans
feror hereby agrees that at no time shall the principal
amount of the FFSRI Note be less than $15,500,000 (the
"FFSRI Note Required Amount"). The FFSRI Note may not
be sold, transferred, assigned, pledged, hypothecated,
participated or otherwise conveyed or encumbered, nor
may the Transferor grant any security interest in the
FFSRI Note.
IN WITNESS WHEREOF, the Transferor, the
Servicer and the Trustee have caused this Series 1995-1
Supplement to be duly executed by their respective offi
cers as of the day and year first above written.
FINGERHUT FINANCIAL SERVICES
RECEIVABLES, INC.
Transferor
By:_______________________
Name:
Title:
DIRECT MERCHANTS CREDIT CARD BANK, N.A.
Servicer
By:_________________________
Name:
Title:
THE BANK OF NEW YORK (DELAWARE)
Trustee
By:_________________________
Name:
Title:
EXHIBIT A-1
[FORM OF VARIABLE FUNDING CERTIFICATE]
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 CER
TIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURI
TIES LAW OF ANY STATE AND MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS
REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRA
TION UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAW. THE TRANSFER OF
THIS CERTIFICATE IS SUBJECT TO CERTAIN CONDI
TIONS SET FROTH IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
EACH PURCHASER REPRESENTS AND WARRANTS
FOR THE BENEFIT OF FINGERHUT FINANCIAL SERVIC
ES RECEIVABLES, INC. THAT, UNLESS SUCH PURCHAS
ER, 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 A CER
TIFICATE 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 OBLIGA
TION IN ADDITION TO THOSE UNDERTAKEN IN THE
POOLING AND SERVICING AGREEMENT, SUCH PURCHAS
ER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS
DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIRE
MENT 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. Percentage Interest: ___%
FINGERHUT FINANCIAL SERVICES MASTER TRUST
VARIABLE FUNDING TRUST
CERTIFICATE, SERIES 1995-1, 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 open end or revolving credit receiv
ables generated or to be generated by Direct Merchants
Credit Card Bank, N.A. (the "Bank" 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 Financial Services Receivables, Inc., the
Bank or any affiliate of either of them.)
This certifies that _________ (the "Certif
icateholder") is the registered owner of a fractional
undivided interest in the Fingerhut Financial Services
Master Trust (the "Trust") issued pursuant to the Pool
ing and Servicing Agreement, dated as of May __, 1995
(the "Pooling and Servicing Agreement"; such term to
include any amendment thereto) by and between Fingerhut
Financial Services Receivables, Inc., as Transferor (the
"Transferor"), the Bank , as the Servicer, and The Bank
of New York (Delaware), as Trustee (the "Trustee"), and
the Series 1995-1 Supplement, dated as of May __, 1995
(the "Series 1995-1 Supplement"), among the Transferor,
the Bank, as Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1995-
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 Section 3A of the Series
1995-1 Supplement and Section 4.4 of the Agreement.
This Certificate does not purport to summarize
the Agreement and reference is made to the 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 entitled the "Fingerhut
Financial Services Master Trust Variable Funding Trust
Certificate, Series 1995-1, Class A" (the "Class A Cer
tificate"), and represents a fractional undivided inter
est in the Trust, and is issued under and is subject to
the terms, provisions and conditions 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 Certificateholder is bound. In
the case of any conflict between terms specified in this
Certificate and terms specified in the Agreement, the
terms of the Agreement shall govern.
The Transferor has structured the Agreement,
the Class A Certificate, the Fingerhut Financial Servic
es Master Trust Floating Rate Accounts Receivable Trust
Certificates, Series 1995-1, Class B (the "Class B Cer
tificates") and the Fingerhut Financial Services Master
Trust Accounts Receivable Trust Certificates, Series
1995-1, Class C (the "Class C Certificates") with the
intention that the Class A Certificate, the Class B
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 Certificate (a
"Class A Certificateholder") or any interest therein by
acceptance of its Certificate or any interest therein,
agrees to treat the Class A Certificate for purposes of
federal, state and local income or franchise taxes and
any other tax imposed on or measured by income, as in
debtedness.
Except in limited circumstance described in
the third succeeding paragraph no principal will be pay
able to the Class A Certificateholder before the first
Business Day in the Amortization Period. No principal
will be payable to the Class B Certificateholders, or
Class C Certificateholders until all principal payments
have been made to the Class A Certificateholders. Ex
cept in connection with a payment of Class D Daily Prin
cipal, the Class D Certificate will not have the right
to receive payments of principal until the Class A In
vested Amount, the Class B Invested Amount and the Class
C Invested Amount have been paid in full.
Upon issuance, the Class A Certificate repre
sents the right to receive, on each Business Day, an
amount equal to the lesser of (x) the Available Series
1995-1 Finance Charge Collections for such Business Day
and (y) the sum of (A) the lesser of (I) the sum of (a)
the Total Program Fees, and (b) the product of (i) the
Class A Certificate Rate, (ii) a fraction the numerator
of which is the actual number of days from and including
the next preceding Business Day to but excluding such
Business Day and the denominator of which is 365 or 366,
as the case may be, and (iii) the Class A Outstanding
Principal Amount as of the closed of business on the
preceding Business Day and (II) the product of (X) the
greater of LIBOR as then in effect plus 0.75% per annum
and __% per annum and (Y) a fraction the numerator of
which is the number of days from and including the pre
ceding Business Day to but excluding such Business Day
and the denominator of which is the actual number of
days in the then current calendar year and (iii) the
Class A Outstanding Principal Balance as of the close of
business on the preceding Business Day plus (B) the
excess, if any, of the amount payable to the Class A
Certificateholders pursuant to clause (A) on each prior
Business Day over the amount which has been paid to the
Class A Certificateholders with respect thereto on each
prior Business Day.
Unless there is any Extension, on the earlier
of April 23, 1999 and the Pay Out Commencement Date, in
terest and principal will be distributed to the Class A
Certificateholders on each Business Day prior to the
Series Termination Date. If in accordance with Section
6.17 of the Agreement, the Transferor elects to issue an
Extension Notice and the conditions precedent for Exten
sion specified therein have been satisfied, no principal
will be payable with respect to the Class A Certificate
until the date specified in such Extension Notice or in
the last of any subsequent Extension Notices. Interest
for any Business Day due but not paid on any Business
Day will be due on the next succeeding Business Day.
On any Business Day during the Revolving Peri
od, except during a Class A Pay Down Period, the Trans
feror may specify an amount, not to exceed the Net ABC
Revolving Principal Collections, to be deposited into
the Defeasance Account. Any amounts so deposited, shall
be paid to the Class A Certificateholder in accordance
with Section 9A of the Agreement and upon payment shall
reduce the Class A Invested Amount by an amount equal to
any such payment. In addition the Transferor may speci
fy, upon the issuance of a new Series pursuant to an
Exchange made at any time during the Revolving Period,
except during a Class A Pay Down Period, that the pro
ceeds of such issuance be deposited into the Defeasance
Account for payment to the Class A Certificateholder
pursuant to Section 9A of the Agreement. The Class A
Invested Amount will be reduced by an amount equal to
the amount of any such payments made.
In addition, pursuant to Section 6.15 of the
Agreement, the holders of this Certificate may from time
to time be required, prior to the commencement of the
Amortization Period for the Certificates or the Class A
Paydown Period, to purchase Additional Class A Invested
Amounts on the terms and conditions specified therein.
The holder of this Certificate is authorized to record
on the grid attached to its Class A Certificate (or at
such Certificateholder's option, in its internal books
and records) the date and amount of any Additional In
vested Amount purchased by it, and each repayment there
of; provided that failure to make any such recordation
on such grid or any error in such grid shall not ad
versely affect such Certificateholder's rights with
respect to its Class A Invested Amount and its right to
receive interest payments in respect of the Class A
Invested Amount held by such Certificateholder.
"Class A Invested Amount" means, when used
with respect to any Business Day, an amount equal to (a)
the initial principal amount of Class A Certificates pur
chased pursuant to any Class A Funding Purchase pursuant
to Section 4.14(b) of the Agreement, minus (b) the
aggregate amount of principal payments made to Class A
Certificateholders through and including 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 re
spect to Class A Investor Charge-Offs and available on
all prior Distribution Dates pursuant to subsection
4.9(a)(viii) of the Agreement and, with respect to such
subsection and pursuant to subsections 4.10(a) and (b)
and Section 4.15 of the Agreement for the purpose of
reinstating amounts reduced pursuant to the foregoing
clause (d) plus (e) the aggregate principal amount of
any Additional Class A Invested Amounts purchased pursu
ant to Section 6.15 of the Agreement.
Subject to the Agreement, payments of princi
pal are limited to the unpaid Class A Invested Amount of
the Class A Certificate, which may be less than the
unpaid balance of the Class A Certificate pursuant to
the terms of the Agreement. All principal of and inter
est on the Class A Certificate is due and payable no
later than May 30, 2003 (the "Series 1995-1 Termination
Date"). After the Series 1995-1 Termination Date nei
ther the Trust nor the Transferor will have any further
obligation to distribute principal or interest on the
Class A Certificate. 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 allo
cable to the Investor Certificates), and shall pay the
proceeds to the Class A Certificateholders pro rata in
final payment of the Class A Certificate, then to the
Class B Certificateholders pro rata in final payment of
the Class B Certificates, then to the Class C Certifi
cateholders pro rata in final payment of the Class C
Certificates and finally to the Class D Certificatehold
ers pro rata in final payment of the Class D Certifi
cate.
Unless the certificate of authentication here
on 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 FINANCIAL SERVICES
RECEIVABLES, INC.
By:____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is the Class A Certificate referred to in
the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:___________________________
Name:
Title:
Date Beginning Additions Payments Ending
Principal Principal
Balance Balance
Exhibit A-2
[FORM OF CLASS B 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 SECURITIES LAW. THE HOLDER HEREOF,
BY PURCHASING THIS CERTIFICATE, AGREES THAT
THIS CERTIFICATE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COM
PLIANCE WITH THE SECURITIES ACT AND OTHER AP
PLICABLE LAWS AND ONLY PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT TO AN INSTITUTIONAL
INVESTOR THAT THE HOLDER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL 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 IN
FORMED, IN EACH CASE, THAT THE REOFFER, RE
SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, OR TO THE TRANSFER
OR. EACH CERTIFICATE OWNER BY ACCEPTING A
BENEFICIAL INTEREST IN THIS CERTIFICATE IS
DEEMED TO REPRESENT THAT IT IS A QIB PURCHAS
ING FOR ITS OWN ACCOUNT OR A QIB PURCHASING
FOR THE ACCOUNT OF ANOTHER QIB.
EACH PURCHASER REPRESENTS AND WARRANTS
FOR THE BENEFIT OF FINGERHUT FINANCIAL SERVIC
ES RECEIVABLES, INC. THAT, UNLESS SUCH PURCHAS
ER, 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 CER
TIFICATE 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 OBLIGA
TION IN ADDITION TO THOSE UNDERTAKEN IN THE
POOLING AND SERVICING AGREEMENT, SUCH PURCHAS
ER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS
DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIRE
MENT 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. Percentage Interest: ___%
FINGERHUT FINANCIAL SERVICES MASTER TRUST
FLOATING RATE ACCOUNTS RECEIVABLE TRUST
CERTIFICATE, SERIES 1995-1, 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 open end or revolving credit receiv
ables generated or to be generated by Direct Merchants
Credit Card Bank, N.A. (the "Bank" 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 Financial Services Receivables, Inc., the
Bank or any affiliate of either of them.)
This certifies that _________ (the "Certif
icateholder") is the registered owner of a fractional
undivided interest in the Fingerhut Financial Services
Master Trust (the "Trust") issued pursuant to the Pool
ing and Servicing Agreement, dated as of May __, 1995
(the "Pooling and Servicing Agreement"; such term to
include any amendment thereto) by and between Fingerhut
Financial Services Receivables, Inc., as Transferor (the
"Transferor"), the Bank, as the Servicer, and The Bank
of New York (Delaware), as Trustee (the "Trustee"), and
the Series 1995-1 Supplement, dated as of May __, 1995
(the "Series 1995-1 Supplement"), among the Transferor,
the Bank, as Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1995-
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 Section 3A of the Series
1995-1 Supplement and Section 4.4 of the Agreement.
This Certificate does not purport to summarize
the Agreement and reference is made to the 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 Financial Services Master
Trust Floating Rate Accounts Receivable Trust Certifi
cates, Series 1995-1, Class B" (the "Class B Certifi
cates"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is sub
ject to the terms, provisions and conditions 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 Certificateholder is
bound. In the case of any conflict between terms speci
fied in this Certificate and terms specified in the
Agreement, the terms of the Agreement shall govern.
The Transferor has structured the Agreement,
the Class B Certificates, the Fingerhut Financial Ser
vices Master Trust Variable Funding Trust Certificate,
Series 1995-1, Class A (the "Class A Certificate") and
the Fingerhut Financial Services Master Trust Accounts
Receivable Trust Certificates, Series 1995-1, Class C
(the "Class C Certificates") with the intention that the
Class A Certificate, the Class B Certificates and the
Class C Certificates will qualify under applicable tax
law as indebtedness, and both the Transferor and each
holder of a Class B Certificate (a "Class B Certificate
holder") or any interest therein by acceptance of its
Certificate or any interest therein, agrees to treat the
Class B Certificate for purposes of federal, state and
local income or franchise taxes and any other tax im
posed on or measured by income, as indebtedness.
No principal will be payable to the Class B
Certificateholders until the Class B Principal Payment
Commencement Date, which is the Distribution Date either
on or following the Distribution Date, on which the
Class A Invested Amount had been paid in full. No prin
cipal will be payable to the Class B Certificateholders
until all principal payments have been made to the Class
A Certificateholders. No principal payments will be
made to the Class C Certificateholder until the Distri
bution Date either on or following the Distribution Date
on which the Class B Invested Amount has been paid in
full. Except in connection with a payment of Class D
Daily Principal, the Class D Certificate 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.
Each Class B Certificate represents the right
to receive interest at the rate of .__% per annum above
LIBOR (as determined on the related LIBOR Determination
Date, and such rate, as in effect from time to time, the
"Class B Certificate Rate" ) on the 20th day of each
month after the issuance of the Class B Certificates, or
if such day is not a business day, on the next succeed
ing 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 Certificate Rate and (c) the Class
B Invested Amount as of the close of business on the
first day of the related Interest Accrual Period; pro
vided, however, that with respect to any Distribution
Date occurring in the Pre-Funding Period, the amount
described in clause (c) above shall be the Class B Out
standing Principal Amount on the first day of the Pre-
Funding Period.
Interest for any Distribution Date will in
clude 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 Dis
tribution 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 plus 2%.
"Class B Invested Amount" shall mean, when
used with respect to any Business Day, an amount equal
to (a) the principal amount of Class B Certificates
purchased pursuant to any Class B Funding Purchase pursu
ant to Section 4.14(b) of the Agreement, minus (b) the
aggregate amount of principal payments 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 Busi
ness Days, and plus (e) the sum of the aggregate amount
allocated and available on all prior Business Days pursu
ant to subsection 4.9(a)(xi) of the Agreement and, with
respect to such subsection and pursuant to subsections
4.10(a) and (b) and Section 4.15 of the Agreement, for
the purpose of reinstating amounts reduced pursuant to
the foregoing clauses (c) and (d).
Subject to the Agreement, payments of princi
pal are limited to the unpaid Class B Invested Amount of
the Class B Certificate, which may be less than the
unpaid balance of the Class B Certificate pursuant to
the terms of the Agreement. All principal of and inter
est on the Class B Certificate is due and payable no
later than May 30, 2003, unless a different date is set
forth in the Extension Notice (the "Series 1995-1 Termi
nation Date"). After the Series 1995-1 Termination Date
neither the Trust nor the Transferor will have any fur
ther obligation to distribute principal or interest on
the Class B Certificate. In the event that the Class B
Invested Amount is greater than zero on the Series 1995-
1 Termination 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 allo
cable to the Investor Certificates), and shall pay the
proceeds to the Class A Certificateholders pro rata in
final payment of the Class A Certificate, then to the
Class B Certificateholders pro rata in final payment of
the Class B Certificates, then to the Class C Certifi
cateholders pro rata in final payment of the Class C
Certificates and finally to the Class D Certificatehold
ers pro rata in final payment of the Class D Certifi
cate.
Unless the certificate of authentication here
on 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 FINANCIAL
SERVICES
RECEIVABLES, INC.
By:____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates referred to
in the within-mentioned Pooling and Servicing Agreement.
THE BANK OF NEW YORK (DELAWARE)
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 SECURITIES LAW. THE HOLDER HEREOF,
BY PURCHASING THIS CERTIFICATE, AGREES THAT
THIS CERTIFICATE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COM
PLIANCE WITH THE SECURITIES ACT AND OTHER AP
PLICABLE LAWS AND ONLY PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT TO AN INSTITUTIONAL
INVESTOR THAT THE HOLDER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL 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 IN
FORMED, IN EACH CASE, THAT THE REOFFER, RE
SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE
IN RELIANCE ON RULE 144A, OR TO THE TRANSFER
OR. EACH CERTIFICATE OWNER BY ACCEPTING A
BENEFICIAL INTEREST IN THIS CERTIFICATE IS
DEEMED TO REPRESENT THAT IT IS A QIB PURCHAS
ING FOR ITS OWN ACCOUNT OR A QIB PURCHASING
FOR THE ACCOUNT OF ANOTHER QIB.
EACH PURCHASER REPRESENTS AND WARRANTS
FOR THE BENEFIT OF FINGERHUT FINANCIAL SERVIC
ES RECEIVABLES, INC. THAT, UNLESS SUCH PUR
CHASER, AT ITS EXPENSE, DELIVERS TO THE TRUST
EE, THE SERVICER AND THE TRANSFEROR AN OPINION
OF COUNSEL SATISFACTORY TO THEM TO THE EFFECT
THAT THE PURCHASE OR HOLDING OF A CLASS C CER
TIFICATE 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 OBLIGA
TION IN ADDITION TO THOSE UNDERTAKEN IN THE
POOLING AND SERVICING AGREEMENT, SUCH PURCHAS
ER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS
DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIRE
MENT 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 SALE, ASSIGNMENT, PARTICIPATION,
PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DIS
POSITION OF A CLASS C CERTIFICATE (OR ANY IN
TEREST THEREIN) SHALL BE MADE UNLESS THE
TRANSFEROR AND THE SERVICER SHALL HAVE GRANTED
THEIR PRIOR CONSENT THERETO, WHICH CONSENT MAY
NOT BE UNREASONABLY WITHHELD.
No. Percentage Interest: ___%
FINGERHUT FINANCIAL SERVICES MASTER TRUST
FLOATING RATE ACCOUNTS RECEIVABLE TRUST
CERTIFICATE, SERIES 1995-1, 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 open end or revolving credit receiv
ables generated or to be generated by Direct Merchants
Credit Card Bank, N.A. (the "Bank" 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 Financial Services Receivables, Inc.,
Fingerhut or any affiliate of either of them.)
This certifies that _________ (the "Certif
icateholder") is the registered owner of a fractional
undivided interest in the Fingerhut Financial Services
Master Trust (the "Trust") issued pursuant to the Pool
ing and Servicing Agreement, dated as of May __, 1995
(the "Pooling and Servicing Agreement"; such term to
include any amendment thereto) by and between Fingerhut
Financial Services Receivables, Inc., as Transferor (the
"Transferor"), the Bank, as the Servicer, and The Bank
of New York (Delaware), as Trustee (the "Trustee"), and
the Series 1995-1 Supplement, dated as of May __, 1995
(the "Series 1995-1 Supplement"), among the Transferor,
the Bank, as Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1995-
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 Section 3A of the Series
1995-1 Supplement and Section 4.4 of the Agreement.
This Certificate does not purport to summarize
the Agreement and reference is made to the 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 Financial Services Master
Trust Floating Rate Accounts Receivable Trust Certifi
cates, Series 1995-1, Class C" (the "Class C Certifi
cates"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is sub
ject to the terms, provisions and conditions 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 Certificateholder is
bound. In the case of any conflict between terms speci
fied in this Certificate and terms specified in the
Agreement, the terms of the Agreement shall govern.
The Transferor has structured the Agreement,
the Class C Certificates, the Fingerhut Financial Ser
vices Master Trust Variable Funding Trust Certificate,
Series 1995-1, Class A (the "Class A Certificate") and
the Fingerhut Financial Services Master Trust Accounts
Receivable Trust Certificates, Series 1995-1, Class B
(the "Class B Certificates") with the intention that the
Class A Certificate, the Class B Certificates and the
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 Certificate
holder") or any interest therein by acceptance of its
Certificate or any interest therein, agrees to treat the
Class C Certificate for purposes of federal, state and
local income or franchise taxes and any other tax im
posed on or measured by income, as indebtedness.
No principal will be payable to the Class C
Certificateholders until the Class C Principal Payment
Commencement Date, which is the Distribution Date either
on or following the Distribution Date, on which the
Class B Invested Amount had been paid in full. No prin
cipal will be payable to the Class C Certificateholders
until all principal payments have been made to the Class
B Certificateholders. Except in connection with a pay
ment of Class D Daily Principal, the Class D Certificate
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.
Each Class C Certificate represents the right
to receive interest at the rate of .__% per annum above
LIBOR (as determined on the related LIBOR Determination
Date, and such rate, as in effect from time to time, the
"Class C Certificate Rate" ) on the 20th day of each
month after the issuance of the Class C Certificates, or
if such day is not a business day, on the next succeed
ing 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 C Certificate Rate and (c) the Class
C Invested Amount as of the close of business on the
first day of the related Interest Accrual Period; pro
vided, however, that with respect to any Distribution
Date occurring in the Pre-Funding Period, the amount
described in clause (c) above shall be the Class C Out
standing Principal Amount on the first day of the Pre-
Funding Period.
Interest for any Distribution Date will in
clude 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 Dis
tribution 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 plus 2%.
"Class C Invested Amount" shall mean, when
used with respect to any Business Day, an amount equal
to (a) the principal amount of Class C Certificates
purchased pursuant to any Class C Funding Purchase pursu
ant to Section 4.14(b) of the Agreement, minus (b) the
aggregate amount of principal payments 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 Section 4.15 of the
Agreement, for the purpose of reinstating amounts re
duced pursuant to the foregoing clauses (c) and (d).
Subject to the Agreement, payments of princi
pal are limited to the unpaid Class C Invested Amount of
the Class C Certificate, which may be less than the
unpaid balance of the Class C Certificate pursuant to
the terms of the Agreement. All principal of and inter
est on the Class C Certificate is due and payable no
later than May 30, 2003 unless a different date is set
forth in the Extension Notice (the "Series 1995-1 Termi
nation Date"). After the Series 1995-1 Termination Date
neither the Trust nor the Transferor will have any fur
ther obligation to distribute principal or interest on
the Class C Certificate. In the event that the Class C
Invested Amount is greater than zero on the Series 1995-
1 Termination 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 allo
cable to the Investor Certificates), and shall pay the
proceeds to the Class A Certificateholders pro rata in
final payment of the Class A Certificate, then to the
Class B Certificateholders pro rata in final payment of
the Class B Certificates, then to the Class C Certifi
cateholders pro rata in final payment of the Class C
Certificates and finally to the Class D Certificatehold
ers pro rata in final payment of the Class D Certifi
cate.
Unless the certificate of authentication here
on 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 FINANCIAL SERVICES
RECEIVABLES, INC.
By:_____________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class C Certificates
referred to in the within-mentioned Pooling and Servic
ing Agreement.
THE BANK OF NEW YORK (DELAWARE)
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 REGISTERED PURSU
ANT TO OR EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND ANY OTHER APPLICABLE SECURI
TIES LAW. FINGERHUT FINANCIAL SERVICES RECEIV
ABLES, INC. SHALL BE PROHIBITED FROM TRANSFER
RING ANY INTEREST IN OR PORTION OF THIS CER
TIFICATE 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 FEDER
AL, MINNESOTA OR DELAWARE INCOME TAX CHARAC
TERIZATION OF ANY OUTSTANDING SERIES OF INVES
TOR CERTIFICATES OR THE TAXABILITY (OR TAX
CHARACTERIZATION) OF THE TRUST UNDER FEDERAL,
MINNESOTA OR DELAWARE INCOME TAX LAWS. THE
TRANSFER OF THIS CERTIFICATE IS SUBJECT TO
CERTAIN CONDITIONS SET FORTH IN THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.
EACH PURCHASER REPRESENTS AND WARRANTS
FOR THE BENEFIT OF FINGERHUT FINANCIAL SERVIC
ES 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 FINANCIAL SERVICES MASTER TRUST
FLOATING RATE ACCOUNTS RECEIVABLE TRUST
CERTIFICATE, SERIES 1995-1, 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 open end or revolving credit receiv
ables generated or to be generated by Direct Merchants
Credit Card Bank, N.A. (the "Bank" 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 Financial Services Receivables, Inc.,
Fingerhut or any affiliate of either of them.)
This certifies that FINGERHUT FINANCIAL SER
VICES RECEIVABLES, INC. (the "Certificateholder") is the
registered owner of a fractional undivided interest in
the Fingerhut Financial Services Master Trust (the
"Trust") issued pursuant to the Pooling and Servicing
Agreement, dated as of May __, 1995 (the "Pooling and
Servicing Agreement"; such term to include any amendment
or Series Supplement thereto) by and between Fingerhut
Financial Services Receivables, Inc., as Transferor (the
"Transferor"), the Bank, as the Servicer, and The Bank
of New York (Delaware), as Trustee (the "Trustee"), and
the Series 1995-1 Supplement, dated as of May __, 1995
(the "Series 1995-1 Supplement"), among the Transferor,
the Bank, as Servicer and the Trustee (the Pooling and
Servicing Agreement, as supplemented by the Series 1995-
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 Section 3A of the Series
1995-1 Supplement and Section 4.4 of the Agreement.
This Certificate does not purport to summarize
the Agreement and reference is made to the 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 Financial Services Master
Trust Floating Rate Accounts Receivable Trust Certifi
cates, Series 1995-1, Class D" (the "Class D Certifi
cate"), each of which represents a fractional undivided
interest in the Trust, and is issued under and is sub
ject to the terms, provisions and conditions 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 Certificateholder is
bound.
Fingerhut Financial Services 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 adversely affect the Federal, Minneso
ta or Delaware income tax characterization of any out
standing Series of Investor Certificate or the taxabili
ty (or tax characterization) of the Trust under Federal,
Minnesota or Delaware income tax laws.
Except in connection with a payment of Class D
Daily Principal, 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 following the Distribution Date on which the Class
C Invested Amount had been paid in full. No principal
will be payable to the Class D Certificateholders until
all principal payments have first been made to the Class
A Certificateholders and then on and after the Class B
Principal Payment Commencement Date, after all principal
payments have been made to the Class B Certificatehold
ers 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 Certificate.
"Class D Invested Amount" shall mean, when
used with respect to any Business Day, an amount equal
to (a) upon the initial issuance of the Class D Certifi
cate the initial amount designated by the Transferor
(which shall not be less than the Stated Class D
Amount), plus (b) the aggregate principal amount of any
Additional Class D Invested Amounts pursuant to Section
6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class D Certificateholders
prior to such Business Day, minus (d) the aggregate
amount of Class D Investor Charge-Offs for all prior
Distribution Dates, minus (e) the aggregate amount of
Reallocated Principal Collections for all prior Business
Days, plus (f) the sum of the aggregate amount allocated
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 (d) and (e).
Subject to the Agreement, payments of princi
pal are limited to the unpaid Class D Invested Amount of
the Class D Certificate, which may be less than the
unpaid balance of the Class D Certificate pursuant to
the terms of the Agreement. All principal of and inter
est on the Class D Certificate is due and payable no
later than May 30, 2003 (the "Series 1995-1 Termination
Date"). After the Series 1995-1 Termination Date nei
ther 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 1995-
1 Termination 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 allo
cable to the Investor Certificates), and shall pay the
proceeds to the Class A Certificateholders pro rata in
final payment of the Class A Certificate, then to the
Class B Certificateholders pro rata in final payment of
the Class B Certificates, then to the Class C Certifi
cateholders pro rata in final payment of the Class C
Certificates and finally to the Class D Certificatehold
ers pro rata in final payment of the Class D Certifi
cate.
Unless the certificate of authentication here
on 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 FINANCIAL SERVICES
RECEIVABLES, INC.
By:________________________
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class D Certificate re
ferred to in the within-mentioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK (DELAWARE)
By:________________________
Name:
Title:
EXHIBIT B
[RESERVED]
EXHIBIT C
[Form of Monthly Certificateholders' Statement]
EXHIBIT D
Form of 144A Exchange Notice and Certification
, 199
Fingerhut Financial Services Receivables, Inc.
4400 Baker Road
Suite F480
Minnetonka, MN 55343
Attention:
[Trustee]
{Trustee Address]
Ladies and Gentlemen:
This is to notify you as to the transfer of $
of Floating Rate Accounts Receivable Trust Certificates,
Series 1995-1, Class C (the "Class C Certificates") of
Fingerhut Financial Services Master Trust (the "Compa
ny").
The undersigned is the holder of the Certifi
cates and with this notice hereby deposits with the
Trustee $ principal amount of Class C Cer
tificates and requests that Class C Certificates in the
same principal amount be issued and executed by the
Company and authenticated by the Trustee and registered
to the purchaser on , 19 , as speci
fied in the Pooling and Servicing Agreement, as supple
mented by the Series 1995-1 Supplement thereto, as fol
lows:
Name: Denominations:
Address:
Taxpayer I.D. No.:
The undersigned represents and warrants that
the undersigned (i) reasonably believes the purchaser is
a "qualified institutional buyer," as defined in Rule
144A under the Securities Act of 1933 (the "Act"), (ii)
such purchaser has acquired the Certificates in a trans
action effected in accordance with the exemption from
the registration requirements of the Act provided by
Rule 144A and, (iii) if the purchaser has purchased the
Certificates for one or more accounts for which it is
acting as fiduciary or agent, (A) each such account is a
qualified institutional buyer and (B) each such account
is acquiring Notes for its own account or for one or
more institutional accounts for which it is acting as
fiduciary or agent in a minimum amount equivalent to not
less than U.S. $250,000 for each such account.
Very truly yours,
[NAME OF HOLDER OF CERTIFICATE]
By:
[Name], [Chief Financial
or other Executive Officer]
Exhibit E
FORM OF EXTENSION NOTICE
FINGERHUT CARD MASTER TRUST, SERIES 1995-1
The undersigned, a duly authorized representa
tive of Fingerhut Financial Services Receivables, Inc.,
a Delaware corporation (the "Transferor"), as Transferor
pursuant to the Pooling and Servicing Agreement dated as
of May __, 1995 (the "Pooling and Servicing Agreement"),
by and between the Transferor, as transferor, Direct
Merchants Credit Card Bank, N.A., as servicer (the
"Servicer"), and ___________________________, as trustee
(the "Trustee"), as supplemented by the Series 1995-1
Supplement, dated May __, 1995 (the "Series 1995-1 Sup
plement"), by and between the Transferor, the Servicer
and the Trustee (the Pooling and Servicing Agreement, as
supplemented by the Series 1995-1 Supplement, or as the
Pooling and Servicing Agreement may from time to time be
amended, supplemented, or modified, the "Agreement"),
does hereby notify the Trustee (or any successor Trust
ee) and the Investor Certificateholders:
D. Capitalized terms used but not defined in this
Certificate shall have the respective meanings set forth
in the Agreement. References herein to certain sections
and subsections are references to the respective sec
tions and subsections of the Agreement.
E. The undersigned is a [Vice President] or more
senior officer of the Transferor who is duly authorized
to execute and deliver this Certificate on behalf of the
Transferor.
F. This Certificate is being delivered pursuant to
Section 6.17(a) of the Agreement.
G. The Transferor is the Transferor under the Agree
ment.
H. No Pay Out Event has occurred that has not been
remedied pursuant to the provisions of the Agreement.
I. The Certificate is being delivered to the Trustee
on or before the date specified in subsection 6.17(a)
for delivery.
J. NOTIFICATION OF EXTENSION
Pursuant to subsection 6.17(a) and in respect
of [ , ] (the "Current Extension Date"), the
Transferor hereby notifies the Trustee and the Investor
Certificateholders of the Transferor's intention to
extend the Revolving Period in respect of Series 1995-1
on the Current Extension Date pursuant to the provisions
of Section 6.17, until the date set forth below (such
extension, the "Extension").
K. REQUIREMENTS TO COMPLETE EXTENSION
(1) Annexed hereto is an election notice (an
"Election Notice") to be returned by any Investor
Certificateholder electing to approve the Extension. No
Extension shall occur unless Investor Certificateholders
holding at least more than fifty percent of each of the
aggregate principal amount of Class A Certificates,
Class B Certificates, Class C Certificates and Class D
Certificate, respectively, shall return properly exe
cuted Election Notices approving the Extension by the
Election Date (as defined below). Any Investor Certifi
cateholder electing to approve the Extension must deliv
er a properly executed Election Notice at the office of
the Trustee, [ ] on or before 3:00 p.m.,
[ ] time, on [ , ] (the "Election Date").
Any Investor Certificateholder may withdraw any Election
Notice delivered by it to the Trustee by notifying the
Trustee in writing at the address set forth in the previ
ous sentence on or prior to the Election Date.
(2) THE EXTENSION SHALL NOT OCCUR UNTIL PRIOR
SATISFACTION OF CERTAIN CONDITIONS PRECEDENT BY THE
CLOSE OF BUSINESS ON THE ELECTION DATE, INCLUDING THE
APPROVAL OF SUCH EXTENSION BY THE INVESTOR CERTIFICATE
HOLDERS HOLDING THE REQUIRED AGGREGATE PRINCIPAL AMOUNT
OF CLASS A CERTIFICATES, CLASS B CERTIFICATES, CLASS C
CERTIFICATES AND Class D Certificate, THAT NO PAY OUT
EVENT SHALL HAVE OCCURRED AND BE CONTINUING, AND THAT
CERTAIN LEGAL OPINIONS AND RATING AGENCY CONFIRMATIONS
SHALL HAVE BEEN DELIVERED TO THE TRANSFEROR AND THE
TRUSTEE PURSUANT TO SECTION 6.17(b). THE TRANSFEROR MAY
IN ITS SOLE DISCRETION WITHDRAW THIS EXTENSION NOTICE AT
ANY TIME ON OR PRIOR TO THE ELECTION DATE BY DELIVERING
NOTICE OF SUCH WITHDRAWAL IN WRITING TO THE TRUSTEE. IF
ANY SUCH NOTICE OF WITHDRAWAL SHALL BE SO DELIVERED, NO
EXTENSION SHALL OCCUR.
L. NEW PROVISIONS TO BECOME EFFECTIVE ON THE
EXTENSION DATE
(1) The new Amortization Period Commencement Date
shall be the earlier of (a) [ , ]
or (b) the Pay Out Commencement Date.
(2) The new Extension Date shall be
[ , ].
(4) The new Scheduled Series
1995-1 Termination Date shall be [ ,
].]
(5) The new Class A Expected Payment Date is
______.
(6) The new Class B Expected Payment Date is
______.
(7) The new Class C Expected Payment Date is
______.
(9) The following are additional
provisions that will apply to the Investor Certificates
on and after the Extension Date:
INSERT PROVISIONS]
M. Annexed hereto are the following:
(1) the form of Extension Tax Opinion.
(2) the form of Extension Opinion.
(3) the Election Notice.
IN WITNESS WHEREOF, the undersigned has duly
executed this certificate this [ ] day of
[ , ].
FINGERHUT FINANCIAL SERVICES
RECEIVABLES, INC.
By:_________________________
Name:
Title:
EXHIBIT F
FORM OF INVESTOR CERTIFICATEHOLDER ELECTION NOTICE
[INSERT NAME
AND ADDRESS OF TRUSTEE]
Re: Fingerhut Financial Services Master Trust:
Election Notice to Extend Series 1995-1
Ladies and Gentlemen:
The undersigned hereby elects to approve the
extension of the Revolving Period for Series 1995-1
until the Amortization Period Commencement Date set
forth in the Extension Notice dated [ ,
] (the "Extension Notice") and delivered to the under
signed pursuant Section 6.17(a) of the Pooling and Ser
vicing Agreement, dated as of May __, 1995, including
the Series 1995-1 Supplement thereto, dated as of May _
_, 1995, each by and among Fingerhut Financial Services
Receivables, Inc., as transferor, Direct Merchants Cred
it Card Bank, N.A., as servicer, and
________________________, as trustee (the "Pooling and
Servicing Agreement"). The undersigned hereby acknowl
edges that, commencing on the Current Extension Date (as
defined in the Extension Notice), the terms and provi
sions of the Pooling and Servicing Agreement shall be
modified as set forth in the Extension Notice.
IN WITNESS WHEREOF, the undersigned registered
owner(s) has [have] executed this Election Notice as of
the date set forth below.
Dated:
Name(s):_______________________
Address:_______________________
(Please Print)
Signature(s):__________________
TABLE OF CONTENTS
PAGE
SECTION 1. Designation 1
SECTION 2. Definitions 1
SECTION 3. Reassignment Terms 31
SECTION 3A. Conveyance of Interest in Interest
Rate Cap; Cap Proceeds Account 31
SECTION 4. Delivery and Payment for the Series 1995-1
Certificates 36
SECTION 5. Form of Delivery of Series 1995-1
Certificates 36
SECTION 6. Article IV of Agreement 36
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS 36
Section 4.4 Rights of Certificateholders 36
Section 4.5 Collections and Allocation;
Payments on Exchangeable Transferor
Certificate 37
Section 4.6 Determination of Interest for
the Series 1995-1 Certificates 39
Section 4.6A Determination of the Class A
Interest Adjustment 41
Section 4.7 Determination of Principal
Amounts 42
Section 4.8 Shared Principal Collections 46
Section 4.9 Application of Funds 46
Section 4.10 Coverage of Required Amount
for the Series 1995-1 Certificates 63
Section 4.11 Payment of Certificate Interest 63
Section 4.12 Payment of Certificate Principal 64
Section 4.13 Investor Charge-Offs 65
Section 4.14 Increases in the Invested
Amount During the Investment Period 67
Section 4.15 Reallocated Principal Collec-
tions for the Series 1995-1
Certificates 68
Section 4.16 Determination of LIBOR 69
Section 4.17 Payment Reserve Account 70
Section 4.18 Establishment of Investor Reserve
Account 73
SECTION 7. Article V of the Agreement 71
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS 72
Section 5.1 Distributions 72
Section 5.2 Certificateholders' Statement 73
SECTION 7A. Article VI of the Agreement 75
ARTICLE VI
THE CERTIFICATES 76
Section 6.15 Additional Class A Invested
Amounts 76
Section 6.16 Additional Class D Invested
Amounts 77
Section 6.17 Extension 78
SECTION 8. Series 1995-1 Pay Out Events 80
SECTION 8A. Class A Pay Down Period 83
SECTION 9. Series 1995-1 Termination 83
SECTION 9A. Class A Pre-Payment 83
SECTION 10. Legends; Transfer and Exchange; Restric-
tions on Transfer of Series 1995-1
Certificates; Tax Treatment 84
SECTION 11. Ratification of Agreement 88
SECTION 12. Counterparts 89
SECTION 13. GOVERNING LAW 89
SECTION 14. Instructions in Writing 89
SECTION 15. Amendments 89
SECTION 16. Increased Costs 90
SECTION 17. Replacement of Certain Investor
Certificateholders 92
SECTION 18. FFSRI Note 93
EXHIBITS
EXHIBIT A-1 Form of Variable Funding Certificate
EXHIBIT A-2 Form of Class B Investor Certificate
EXHIBIT A-3 Form of Class C Investor Certificate
EXHIBIT A-4 Form of Class D Investor Certificate
EXHIBIT B [RESERVED]
EXHIBIT C Form of Monthly Certificateholders' Statement
EXHIBIT D Form of 144A Exchange Notice and Certification
EXHIBIT E Form of Extension Notice
EXHIBIT F Form of Investor Certificateholder Election Notice
