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 27, 1997 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 6, 1997, 46,202,244 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
FINGERHUT COMPANIES, INC.
FORM 10-Q
June 27, 1997
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 27, 1997 and June 28, 1996........................ 3
Consolidated Statements of Financial Position
(Unaudited) - June 27, 1997 and December 27, 1996 ......4
Consolidated Statements of Cash Flows (Unaudited)
twentysix weeks ended June 27, 1997 and
June 28, 1996.......................................... 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 1. Legal Proceedings ..................................... 21
Item 4. Submission of Matters to a Vote of Security Holders.... 21
Item 6. Exhibits and Reports on Form 8-K...................... 21
Signatures...................................................... 22
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of dollars, except share and per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
Revenues:
Net sales $ 340,726 $ 358,834 $ 630,263 $ 688,388
Finance income and
other securitization
income, net 55,489 27,127 115,966 55,665
-------
396,215 385,961 746,229 744,053
Costs and expenses:
Product cost 177,438 190,470 323,732 359,832
Administrative and
selling expenses 164,543 157,995 321,580 314,832
Provision for uncol-
lectible accounts 26,582 26,884 58,628 54,656
Interest expense, net 8,803 7,248 17,084 14,585
377,366 382,597 721,024 743,905
Earnings before income
taxes and minority
interest 18,849 3,364 25,205 148
Provision for income
taxes 7,296 1,219 9,664 54
Net earnings before
minority interest 11,553 2,145 15,541 94
Minority interest (1,644) - (3,071) -
Net earnings $ 9,909 $ 2,145 $ 12,470 $ 94
Earnings per share $ .20 $ .04 $ .26 $ .00
Dividends $ .04 $ .04 $ .08 $ .08
Weighted average shares 48,889,417 48,820,545 48,755,765 48,703,782
See accompanying Condensed Notes to Consolidated Financial Statements.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of dollars)
(Unaudited)
June 27, December 27,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 83,392 $ 61,003
Customer accounts receivable, net 565,099 596,560
Inventories, net 129,458 127,735
Promotional material 67,371 60,871
Deferred income taxes 159,565 166,879
Other 13,736 12,815
Total current assets 1,018,621 1,025,863
Property and equipment, net 272,134 285,182
Excess of cost over fair value of
net assets acquired, net 45,178 42,601
Customer lists, net 9,801 9,801
Other assets 15,974 26,251
$1,361,708 $1,389,698
LIABILITIES
Current liabilities:
Accounts payable $ 149,970 $ 164,557
Accrued payroll and employee benefits 31,108 46,723
Other accrued liabilities 60,699 78,239
Revolving credit facility 97,000 73,000
Other payables due to credit card
securitizations, net 77,471 36,619
Current portion of long-term debt 25,084 84
Current income taxes payable 5,204 60,721
Total current liabilities 446,536 459,943
Long-term debt, less current portion 246,435 271,481
Deferred income taxes 21,233 21,744
Other non-current liabilities 8,122 7,692
722,326 760,860
Minority interest 26,476 23,437
STOCKHOLDERS' EQUITY
Preferred stock - -
Common stock 460 462
Additional paid-in capital 288,809 288,793
Unearned compensation (1,099) (1,856)
Earnings reinvested 324,736 318,002
Total stockholders' equity 612,906 605,401
$1,361,708 $1,389,698
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 27, June 28,
1997 1996
Cash flows from operating activities:
Net earnings $ 12,470 $ 94
Adjustments to reconcile net earnings to
net cash provided (used) by operating activities:
Depreciation and amortization 26,622 24,497
Amortization of unearned compensation 757 1,896
Minority interest in earnings 3,039 -
Change in assets and liabilities:
Customer accounts receivable, net and other payables due to
credit card securitizations, net 72,313 37,585
Inventories, net (1,723) 12,622
Promotional material and other current assets (7,421) 10,572
Accounts payable (14,587) (30,347)
Accrued payroll and employee benefits (15,615) (18,810)
Accrued liabilities (17,540) (7,753)
Current income taxes payable (55,325) (43,751)
Deferred income taxes 6,803 9,802
Other 5,115 (1,473)
Net cash provided (used) by operating activities 14,908 (5,066)
Cash flows from investing activities:
Additions to property and equipment (10,559) (31,992)
Net cash used by investing activities (10,559) (31,992)
Cash flows from financing activities:
Repayments of long-term debt (46) (65,053)
Revolving credit facility 24,000 86,000
Issuance of common stock 1,099 1,255
Repurchase of common stock (3,325) (3,428)
Cash dividends paid (3,688) (3,700)
Net cash provided by financing activities 18,040 15,074
Net increase(decrease) in cash and cash
equivalents 22,389 (21,984)
Cash and cash equivalents at beginning of period 61,003 66,109
Cash and cash equivalents at end of period $ 83,392 $ 44,125
Supplemental noncash investing and financing activities:
Tax benefit from exercise of non-qualified
stock options, disqualified dispositions of Employee Stock Purchase
Plan Shares, and vesting of restricted stock $ 192 $ 241
Issuance of restricted stock $ - $ 4,790
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 17,199 $ 20,401
Cash paid during the period for income taxes $ 58,287 $ 34,140
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 and majority
owned subsidiaries, after elimination of all material
intercompany transactions and balances. Minority interest
represents minority stockholders' 17 percent share of the equity
in Metris Companies Inc. ("Metris").
The consolidated financial statements as of June 27, 1997 and
June 28, 1996, and for the thirteen and twenty-six weeks ended
June 27, 1997 and June 28, 1996, 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 1996 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.
During the first quarter of 1997, the Company implemented
Statement of Financial Accounting Standards No. 125 (FAS 125),
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." FAS 125 did not have a material
effect on the consolidated financial statements.
In February 1997, the FASB issued Statement of Financial
Accounting Standards No. 128 (FAS 128), "Earnings Per Share."
This Statement is effective for financial statements issued for
periods ending after December 15, 1997 and supersedes APB Opinion
No. 15, "Earnings Per Share." The Statement replaces the
presentation of primary EPS with a presentation of basic EPS. It
also requires dual presentation of basic and diluted EPS on the
face of the income statement as well as requires companies to
restate prior-period EPS for all periods in which an income
statement is presented.
The Company has reviewed this Statement and notes that it will
affect the computation and presentation of EPS. However, the
Company has not completed all of the detailed computations and
analysis necessary to determine the definitive impact on prior
period EPS as well as the calculation of EPS going forward. The
Company intends to adopt this Statement prospectively, in the
fourth quarter of 1997, as early application is not permitted.
2. Reclassifications
Customer allowances, which were previously included in the
Consolidated Statements of Earnings under the caption
"Administrative and selling expenses," have been reclassified as
a reduction of "Net sales" for all periods presented. This
reclassification totaled $9.5 million for the thirteen weeks
ended June 28, 1996, and $14.8 million for the respective twenty-
six week period.
Certain expenses, which were previously classified as "Discount
on sale of accounts receivable", have been reclassified as a
reduction of "Finance income and other securitization income,
net." This reclassification totaled $16.l million for the
thirteen weeks ended June 28, 1996, and $30.9 million for the
respective twenty-six week period. In addition, that portion of
the "Provision for uncollectible accounts" relating to accounts
receivable sold have been reclassed and netted with "Finance
income and other securitization income, net." This
reclassification totaled $34.4 million for the thirteen weeks
ended June 28, 1996, and $63.0 million for the respective twenty-six
week period. Lastly, collection costs associated with the receivables
sold were reclassified out of "Administrative and selling expenses" and
netted with "Finance income and other securitization income,
net." This reclassification totaled $3.6 million for the thirteen
weeks ended June 28, 1996, and $5.1 million for the respective
twenty-six week period. These reclassifications, in addition to
certain balance sheet reclassifications, were made in order to
present the accounting for securitizations consistently between
the Company's two segments.
All prior-period financial information has been restated to
conform with the current period's presentation, and the
reclassifications had no effect on net earnings.
3. 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 fluctuating interest rates
associated with the floating rate certificates issued by the
Fingerhut Master Trust and the floating and fixed rate
certificates issued by the Metris Master Trust. If a derivative
financial instrument or the instrument it is hedging is sold or
terminated, the Company will recognize a gain or loss resulting
from the transaction in the period the derivative is sold or
terminated. The Company has not sold or terminated any derivative
financial instruments.
4. Earnings per share
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.
5. Customer accounts receivable, net
Customer accounts receivable, net of amounts sold, consisted of the
following:
(In thousands of dollars) June 27, December27,
1997 1996
Customer installment receivables $ 441,175 $ 560,931
Reserve for uncollectible accounts,
net of anticipated recoveries (93,709) (117,296)
Reserve for returns and exchanges (11,869) (13,319)
Other reserves (16,747) (19,820)
Net collectible amount 318,850 410,496
Unearned finance income (21,913) (23,969)
Customer installment
receivables, net $ 296,937 $ 386,527
Credit card and other receivables, net 286,417 222,862
Reserve for uncollectible accounts,
net of anticipated recoveries (18,255) (12,829)
Credit card and other receivables, net 268,162 210,033
Total customer accounts receivable, net $ 565,099 $ 596,560
Certain balance sheet reclassifications were made during
the current period in order to present the accounting for
securitizations consistently between the Company's two segments.
As a result, certain December 27, 1996 balance sheet items
related to Metris' credit card securitizations were reclassified.
Specifically, $49.2 million was reclassified from Credit card and
other receivables, net to "Other payables due to credit card
securitizations, net" ($46.6 million), "Other accrued
liabilities" ($2.5 million) and "Other current assets" ($.1
million).
6. Stockholders' equity
During the twenty-six week period ended June 27, 1997, 78,459
shares of common stock were issued related to the exercise of
employee stock options and 27,275 shares of common stock were
issued under the Fingerhut Companies, Inc. Employee Stock
Purchase Plan. The Company also repurchased at prevailing market
prices 228,900 shares of its common stock for an aggregate of
$3.3 million. The total shares of common stock outstanding as of
June 27, 1997 was 46,030,296.
7. Subsequent events
On July 17, 1997, the Company declared a cash dividend in the
amount of $.04 per share, aggregating approximately $1.8 million,
payable on August 14, 1997, to the shareholders of record as of the
close of business on July 31, 1997.
In the fiscal month ended July 25, 1997, the Company issued
16,805 shares of common stock under the Fingerhut Companies, Inc.
Employee Stock Purchase Plan and 42,023 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 27, 1997 AND JUNE 28, 1996
RETAIL SEGMENT
STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
Revenues:
Net sales $ 340,400 $ 357,017 $ 630,556 $ 683,376
Finance income and
other securitization
income, net 355 665 3,489 4,789
340,755 357,682 634,045 688,165
Costs and expenses:
Product cost 177,289 191,286 323,722 359,165
Administrative and
selling expenses 133,052 137,998 257,924 281,054
Provision for uncol-
lectible accounts 20,153 26,401 41,145 49,483
Interest expense, net 7,215 6,826 14,434 12,777
337,709 362,511 637,225 702,479
Earnings (loss) before
income taxes 3,046 (4,829) (3,180) (14,314)
Provision for income
taxes 1,212 (1,935) (1,264) (5,514)
Net earnings (loss) $ 1,834 $ (2,894) $ (1,916) $ (8,800)
Earnings (loss) per
share $ .04 $ (.06) $ (.04) $ (.18)
Retail Segment
(unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
Fingerhut Key Statistics:
Sales per mailing -
existing customer list $ 2.93 $ 3.46 $ 2.94 $ 3.16
Cost per new customer $ 13.72 $ 16.90 $ 14.97 $ 15.90
Mailings (in 000's)
New customers 35,098 49,417 68,061 94,800
Existing customers 85,282 69,804 153,295 143,823
Active customer list *
(in 000's) 4,562 5,068 4,562 5,068
Contribution margin per
existing customer $ 20 $ 17 $ 35 $ 30
Reserves for bad debt
as a percent of total
managed receivables 17.1% 17.9% 17.1% 17.9%
Reserves for bad debt
as a percent of
accounts 29 days plus
delinquent 70% 70% 70% 70%
Segment Key Statistics:
Capital expenditures
(in 000's) $ 5,143 $ 7,049 $ 8,385 $ 30,016
Depreciation (in 000's) $ 11,178 $ 11,224 $ 22,679 $ 22,526
* Includes existing customers who have made a purchase from Fingerhut
in the last twelve months.
RETAIL SEGMENT
STATEMENTS OF OPERATIONS (Managed Basis*)
(In thousands of dollars, except per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 27, June 28, June 27, June 28,
1997 1996 1997 1996
Revenues:
Net sales $ 340,400 $ 357,017 $ 630,556 $ 683,376
Finance income and
other revenues 55,673 54,747 101,661 103,720
396,073 411,764 732,217 787,096
Costs and expenses:
Product cost 177,289 191,286 323,722 359,165
Administrative and
selling expenses 136,447 141,575 262,929 286,098
Provision for uncol-
lectible accounts 56,323 60,778 103,761 112,434
Discount on sale of
accounts receivable 15,753 16,128 30,551 30,936
Interest expense, net 7,215 6,826 14,434 12,777
393,027 416,593 735,397 801,410
Earnings (loss) before
income taxes 3,046 (4,829) (3,180) (14,314)
Provision for income
taxes 1,212 (1,935) (1,264) (5,514)
Net earnings (loss) $ 1,834 $ (2,894) $ (1,916) $ (8,800)
Earnings (loss) per
share $ .04 $ (.06) $ (.04) $ (.18)
* Presented in format consistent with prior periods.
Results of Operations - Retail Segment
Second Quarter
Net sales for the current 13-week period were $340.4 million compared
to net sales of $357.0 million for the related period in 1996, a
decrease of 5 percent. Fingerhut Corporation ("Fingerhut"), the
Company's core business in this segment, had second quarter net sales of
$333.4 million compared to $350.2 million in the same period in 1996, a
decrease of 5 percent. Net sales from Fingerhut's new customer
acquisition programs decreased 20 percent to $60.6 million. This
decrease was the result of Fingerhut moving mailings to new customers
out of the first and second quarters and into the more productive
third and fourth quarters. As a result, mailings to new customers
decreased 29 percent from last year's second quarter. Net sales from
Fingerhut's existing customer list totaled $272.8 million, which was
flat with the second quarter of 1996. The impact of higher mailings to
Fingerhut's existing customer list was offset by lower sales per
mailing during the quarter.
Finance income and other securitization income, net, for the quarter
was $0.4 million, compared to $0.7 million in the second quarter of
1996. This decline was primarily the result of lower net sales.
Product cost for the current 13-week period was 52.1 percent of net
sales, or $177.3 million, compared to 53.6 percent of net sales, or
$191.3 million, during the comparable prior-year period. The decrease as a
percent of net sales was primarily the result of Fingerhut's continued
actions to reduce costs and consolidate vendors. Margin improvements
were achieved in the following categories: Domestics, Jewelry, Home
Accessories, Leisure, Sports Apparel and Athletic Footwear.
Administrative and selling expenses for the current 13-week period
were $133.1 million, or 39.1 percent of net sales, compared to $138.0
million, or 38.7 percent of net sales, in the comparable prior-year
period. Tighter cost controls and the impact of lower paper costs
resulted in favorable expense levels, while lower sales per mailing on
sales to Fingerhut's existing customer list contributed to the
increase as a percent of net sales.
The provision for uncollectible accounts relating to receivables sold
are included in "Finance income and other securitization income, net."
The provision for uncollectible accounts on a "managed" basis for the
current 13-week period was 16.5 percent of net sales, compared to 17.0
percent of net sales for the second quarter of 1996. Delinquencies
were reduced year-over-year as a result of Fingerhut tightening its
credit criteria as well as accelerating its collection activities.
At the end of the second quarter, balances 29 days or more delinquent
as a percent of managed receivables stood at 24.2 percent, down from
25.6 percent at the end of the prior-year second quarter.
Net interest expense for the current 13-week period was $7.2 million
compared to $6.8 million in the second quarter of 1996. The increase
was primarily due to higher borrowings of the Revolving Credit
Facilities as well as lower interest capitalization relating to fixed
asset projects.
The effective consolidated tax rate, which includes both the Retail
and Financial Services Segments, for the second quarter of 1997 was
38.7 percent compared to 36.2 percent in the comparable prior-year
period.
The improvement in earnings compared to second quarter 1996 reflects a
19 percent lower cost per new customer. In addition, the reduced
sales per mailing on the existing customer list was influenced by
tighter mailing criteria which eliminated higher response customers
with a propensity for bad debt. Consequently, profit per order has
improved quarter over quarter. As a result of the items discussed
above, the Retail Segment generated net earnings of $1.8 million, or
$.04 per share, compared to a second quarter 1996 net loss of $2.9
million, or $(.06) per share.
First Half
Net sales for the 26-week period ended June 27, 1997 were $630.6
million compared to $683.4 million for the corresponding period in
1996, a decrease of 8 percent. Fingerhut had first half net sales of
$610.0 million compared to $663.0 million in the same period in 1996,
a decrease of 8 percent. Net sales from Fingerhut's new customer
acquisition programs decreased 23 percent to $111.8 million, which was
primarily due to shifting mailings into the third and fourth quarters.
Net sales from Fingerhut's existing customer list declined 4 percent
to $498.2 million, primarily the result of lower sales per mailing
during the period.
Finance income and other securitization income, net, for the first
half of 1997 was $3.5 million, compared to $4.8 million for the same
period in 1996. This decline was primarily the result of lower
net sales.
Product cost for the current 26-week period was 51.3 percent of net
sales, or $323.7 million, compared to 52.6 percent of net sales, or
$359.2 million, during the comparable prior-year period. The decrease as a
percent of net sales was primarily the result of Fingerhut's
continued actions to reduce costs and consolidate vendors.
Administrative and selling expenses for the first half of 1997 were
$257.9 million, or 40.9 percent of net sales, compared to $281.1
million, or 41.1 percent of net sales, in the comparable prior-year
period. Tighter cost controls and the impact of lower paper costs
more than offset the lower sales per mailing on sales to Fingerhut's
existing customer list, resulting in the decrease as a percent of net
sales.
The provision for uncollectible accounts on a "managed" basis for both
the first half of 1997 and 1996 was 16.5 percent of net sales. The
Company continues to focus on reducing bad debt through the tightening
of its credit criteria as well as the acceleration of collection
programs.
Net interest expense for the first half of 1997 was $14.4 million
compared to $12.8 million in the comparable prior-year period. The
increase was primarily due to higher borrowings of the Revolving
Credit Facilities as well as lower interest capitalization relating to
fixed asset projects.
The effective consolidated tax rate, which includes both the Retail
and Financial Services Segments, for the first 26 weeks of 1997 was
38.3 percent compared with 36.5 percent in the first half of the prior-
year.
The decrease in net loss incurred compared to the first half of 1996
reflects a 6 percent lower cost per new customer. In addition, the
reduced sales per mailing on Fingerhut's existing customer list was
influenced by tighter mailing criteria which eliminated higher
response customers with a propensity for bad debt. Consequently,
profit per order has improved year over year. As a result of the
items discussed above, the Retail Segment incurred a net loss for the
26-week period ended June 27, 1997 of $1.9 million, or $(.04) per
share, compared to a first half 1996 net loss of $8.8 million, or
$(.18) per share.
METRIS COMPANIES INC.
STATEMENTS OF EARNINGS
(In thousands of dollars, except per share data)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
Revenues:
Net sales $ 1,528 $ 4,042 $ 2,425 $ 9,596
Finance income and
other securitization
income, net 55,134 26,462 112,477 50,876
56,662 30,504 114,902 60,472
Costs and expenses:
Product cost 10 209 10 2,624
Administrative and
selling expenses 32,832 21,197 66,374 36,405
Provision for uncol-
lectible accounts 6,429 483 17,483 5,173
Interest expense, net 1,588 422 2,650 1,808
40,859 22,311 86,517 46,010
Earnings before income
taxes and minority
interest 15,803 8,193 28,385 14,462
Provision for income
taxes 6,084 3,154 10,928 5,568
Net earnings before
minority interest 9,719 5,039 17,457 8,894
Minority interest (1,644) - (3,071) -
Net earnings $ 8,075 $ 5,039 $ 14,386 $ 8,894
Earnings per share $ .16 $ .10 $ .30 $ .18
Key Statistics:
Managed net charge-off
ratio 9.0% 5.4% 8.8% 5.5%
Period-end managed
loans (in 000's) $2,124,821 $1,068,018 $2,124,821 $1,068,018
Total accounts (in 000's) 1,591 1,123 1,591 1,123
Managed loan loss
reserves (in 000' $ 139,825 $ 44,305 $ 139,825 $ 44,305
Managed delinquency ratio 5.9% 3.4% 5.9% 3.4%
Reserves as a percent of
30-day plus receivables 112% 123% 112% 123%
Results of Operations - Financial Services Segment (Metris Companies
Inc.)
Second Quarter
Metris contributed net income for the quarter ended June 30, 1997 of
$8.1 million, or $.16 per share, up from $5.0 million, or $.10 per
share, for the second quarter of 1996. The 60 percent increase in net
income is the result of an increase in net interest income and other
operating income partially offset by increases in the provision for
loan losses and other operating expenses. Metris' managed credit card
loan portfolio increased 17 percent, or $308 million, during the second
quarter bringing the portfolio to $2.1 billion at June 30, 1997. Also
during the quarter, Metris generated approximately 188,000 new credit
card accounts to end the quarter with nearly 1.6 million credit card accounts.
First Half
Metris contributed net income for the six months ended June 30, 1997
of $14.4 million, or $.30 per share, compared to $8.9 million, or $.18
per share, for the comparable prior-year period. For the first half,
Metris' charge volume was approximately $1.1 billion, a 37 percent
increase over the same period in 1996. Managed credit card fees,
interchange and other related credit card income was $68.8 million
compared to $34.0 million for the comparable period last year.
Liquidity and Capital Resources (Consolidated)
The Company funds its operations through internally generated funds,
the sale of accounts receivable pursuant to the Fingerhut Master Trust
and the Metris Master Trust, borrowings under the Company's Amended
and Restated Revolving Credit Facility and Metris' Revolving Credit
Facility (the "Revolving Credit Facilities") and the issuance of long-
term debt and common stock.
The proceeds from the sale of Fingerhut accounts receivable were
$1.092 billion and $1.280 billion at June 27, 1997 and December 27,
1996, respectively. Net proceeds received from the sale of MasterCard
receivables were $1.844 billion at June 30, 1997 and $1.397 billion at
December 31, 1996, of which $9.2 million and $17.0 million,
respectively, was deposited in an investor reserve account held by the
trustee of the Metris Master Trust for the benefit of the Metris
Master Trust's certificateholders. In May 1997, the Metris Master
Trust issued Series 1997-1 certificates to third parties with a
principal amount of $794.8 million, generating proceeds of $792.2
million of which $667.7 million was used to reduce the Class A Variable
Funding Certificate issued under Series 1995-1. The Series 1997-1
certificates are scheduled to begin accumulating principal collections in
March 2001, but the accumulation period could potentially begin at a
later date. The expected final payment date for these certificates is
in April 2002.
In December 1996, the Fingerhut Master Trust Series 1994-1
certificates commenced controlled amortization, whereby collections on
the securitized receivables are now being used to pay down the
principal portion of the underlying certificates. In January 1997,
the Company issued Series 19971 variable funding certificates to
refinance approximately half of the amortizing certificates. In the
second quarter of 1997, the Company issued additional Series 1997-1
certificates, which increased the maximum proceeds to $790.0 million.
The monthly proceeds generated from Series 1997-1 will be sufficient
to cover the monthly pay-down of the amortizing 1994-1 certificates.
The Series 1997-1 Certificates are scheduled to begin amortization in
May 1998. The Company believes the Fingerhut Master Trust will be able
to issue a new series of certificates to refinance Series 1997-1 on or
before it commences its scheduled amortization. The Company plans to
support future receivables growth through the sale and issuance of
additional certificates by the Master Trusts and through borrowings
under the Revolving Credit Facilities.
The Revolving Credit Facilities provide for aggregate commitments of
up to $500.0 million, of which $200.0 million represents the Company's
credit facility and $300.0 million represents Metris' credit facility.
The expiration date for both facilities is September 2001. As of June
27, 1997, outstanding revolving credit balances totaled $97.0 million
and outstanding letters of credit totaled $6.4 million. As of June
28, 1996, outstanding revolving credit balances totaled $201.0 million
and outstanding letters of credit totaled $5.2 million. Additional
outstanding open letters of credit under a separate agreement
aggregated $36.2 million and $37.3 million at June 27, 1997 and June
28, 1996, respectively.
The Company had an aggregate amount of fixed rate notes outstanding of
$270.0 million as of June 27, 1997 and $180.0 million as of June 28,
1996. A total of $25.0 million of the notes mature in December 1997.
The Company generated $14.9 million in cash from operations during the
26week period ended June 27, 1997 compared with $5.1 million used for
operations during the related period in 1996. This $20.0 million net
reduction in cash used by operations resulted primarily from an
increase in net earnings and a significant decrease in customer
accounts receivable, net, partially offset by increases in inventories
and promotional material and other current assets.
Net cash used by investing activities for the 26-week period ended
June 27, 1997 was $10.6 million, compared to $32.0 million for the
comparable period in 1996. In January 1996, the owner of certain
office and warehouse facilities leased to the Company exercised its
right to require the Company to repurchase those facilities for
approximately $14.1 million. Thus, the decrease in capital spending
year over year was due primarily to this prior-year expenditure as
well as the Company's overall reduction in capital outlays.
During 1994, the Company's 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 common stock. During the current 26-week period, the
Company repurchased at prevailing market prices 228,900 shares of its
common stock for an aggregate of $3.3 million. Total purchases to
date under this plan were 1,609,200 shares for an aggregate of $24.8
million.
On July 17, 1997, the Company declared a cash dividend in the amount
of $.04 per share, aggregating approximately $1.8 million, payable on
August 14, 1997, to the shareholders of record as of the close of
business on July 31, 1997.
In the fiscal month ended July 25, 1997, the Company issued 16,805
shares of common stock under the Fingerhut Companies, Inc. Employee
Stock Purchase Plan and 42,023 shares related to the exercise of
employee stock options.
The Company believes it will have sufficient funds available to meet
current and future commitments.
FINGERHUT COMPANIES, INC. AND SUBSIDIARIES
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements include statements regarding intent, belief or
current expectations of the Company and its management. Shareholders
and prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve a
number of risks and uncertainties that may cause the Company's actual
results to differ materially from the results discussed in the forward-
looking statements, including: general economic conditions affecting
disposable consumer income such as employment, business conditions,
interest rates and taxation; risks associated with unsecured credit
transactions; interest rate risks; seasonal variations in consumer
purchasing activities; increases in postal and paper costs;
competition in the retail and direct marketing industry; dependence on
the securitization of accounts receivable and credit card loans to
fund operations; state and federal laws and regulations related to
advertising, offering and extending credit, charging and collecting
state sales/use taxes; product safety; and risks of doing business
with foreign suppliers. Each of these factors is more fully discussed
in Exhibit 99 to the Company's Annual Report on Form 10-K for the
iscal year ended December 27, 1996.
Part II. Other Information
Item 1. Legal Proceedings
In October 1995, the Company was served with a legal action
commenced in federal district court in Arizona by two
shareholders against the Company, a current officer and a
former officer alleging violations of Sections 10(b) and 20 of
the Securities Exchange Act of 1934, as amended and Rule 10b-5
thereunder. The complaint (i) alleges that the Company made
false and misleading statements or omissions with respect to
its plans regarding a proposed television shopping network,
(ii) requests certification as a class action on behalf of
shareholders of the Company who purchased Common Stock during
a specified period and (iii) alleges unspecified damages. The
Company considers the plaintiffs' claims to be without merit
and intends to vigorously defend the matter. Venue has been
transferred to federal district court in Minnesota. On May 29,
1997 the court granted the Company's motion to dismiss with
leave for plaintiffs to file an amended complaint. On July
17, 1997, plaintiffs' amended complaint was served and the
Company is in the process of preparing a reply.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the shareholders of the Company was
held on May 13, 1997. At the meeting, the shareholders
elected Dudley C. Mecum (41,584,543 votes for and 493,386 votes
withheld) and John M. Morrison (41,585,053 votes for and
492,876 votes withheld) to three-year terms as directors;
approved the amendment to the Fingerhut Companies, Inc. 1994
Employee Stock Purchase Plan (41,334,510 votes for, 525,803
votes against and 217,616 votes abstaining) and approved the
amendment to the Fingerhut Companies, Inc. 1995 Long-Term
Incentive and Stock Option Plan (35,074,863 votes for,
6,757,253 votes against and 245,813 votes abstaining). The
terms of office of the following directors continued after the
meeting: Theodore Deikel, Wendell R. Anderson, Edwin C. Gage,
Stanley S. Hubbard, Kenneth A. Macke and Christina L. Shea.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.a(iii)Amended and Restricted Series 1997-1
Supplement dated as of April 21, 1997
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: By: /s/ Gerald T. Knight
Gerald T. Knight Chief
Financial Officer (Principal
Financial
Officer)
Date: By: /s/ John C. Manning
John C. Manning
Vice President, Finance
Date: By: /s/ Thomas C. Vogt
Thomas C. Vogt
Corporate Controller
(Principal Accounting Officer)
<TABLE>
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 27, June 28, June 27, June 28,
1997 1996 1997 1996
Primary
<S> <C> <C> <C> <C>
Net earnings (a) $ 9,909 $ 2,145 $ 12,470 $ 94
Weighted average shares
of common stock
outstanding 46,036,759 46,334,885 46,101,842 46,246,928
Common stock equivalents 2,852,658 2,485,660 2,653,923 2,456,854
Weighted average shares of
common stock and common
stock equivalents (b) 48,889,417 48,820,545 48,755,765 48,703,782
Primary earnings per share
of common stock and common
stock equivalents (a/b) $ .20 $ .04 $ .26 $ .00
Fully diluted
Net earnings (c) $ 9,909 $ 2,145 $ 12,470 $ 94
Weighted average shares
of common stock
outstanding 46,036,759 46,334,885 46,101,842 46,246,928
Common stock
equivalents 3,288,692 2,810,177 3,240,415 2,705,618
Weighted average shares of
common stock and common
stock equivalents (d) 49,325,451 49,145,062 49,342,257 48,952,546
Fully diluted earnings per
share of common stock and
common stock equivalents
(c/d) $ .20 $ .04 $ .25 $ .00
</TABLE>
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>
This schedule contains summary financial information extracted from the
consolidated financial statements of Fingerhut Companies, Inc. for the fiscal
quarter ended June 27, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1997
<PERIOD-END> JUN-27-1997
<CASH> 83,392
<SECURITIES> 0
<RECEIVABLES> 727,592
<ALLOWANCES> 162,493
<INVENTORY> 129,458
<CURRENT-ASSETS> 1,018,621
<PP&E> 469,438
<DEPRECIATION> 197,304
<TOTAL-ASSETS> 1,361,708
<CURRENT-LIABILITIES> 446,536
<BONDS> 246,435
0
0
<COMMON> 460
<OTHER-SE> 612,446
<TOTAL-LIABILITY-AND-EQUITY> 1,361,708
<SALES> 630,263
<TOTAL-REVENUES> 746,229
<CGS> 323,732
<TOTAL-COSTS> 703,940
<OTHER-EXPENSES> 3,071
<LOSS-PROVISION> 58,628
<INTEREST-EXPENSE> 17,084
<INCOME-PRETAX> 22,134
<INCOME-TAX> 9,664
<INCOME-CONTINUING> 12,740
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,470
<EPS-PRIMARY> .26
<EPS-DILUTED> .25
</TABLE>
Exhibit 10a(iii)
_________________________________________________________
FINGERHUT RECEIVABLES, INC.
Transferor
FINGERHUT NATIONAL BANK
Servicer
and
THE BANK OF NEW YORK (DELAWARE)
Trustee
on behalf of the Series 1997-1 Certificateholders
AMENDED AND RESTATED SERIES 1997-1 SUPPLEMENT
Dated as of April 21, 1997
to
AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT
Dated as of January 12, 1997
____________________________________
FINGERHUT MASTER TRUST
Variable Funding Trust
Certificates, Series 1997-1, Class A
$51,100,000 Floating Rate Accounts Receivable Trust
Certificates, Series 1997-1, Class B
Variable Funding Trust
Certificates, Series 1997-1, Class C
_________________________________________________________
TABLE OF CONTENTS
Page
SECTION 1. Designation . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Definitions . . . . . . . . . . . . . . . . . . . 1
SECTION 3. Reassignment Terms . . . . . . . . . . . . . . . 23
SECTION 4. Delivery and Payment for the Series 1997-1
Certificates . . . . . . . . . . . . . . . . . . 23
SECTION 5. Form of Delivery of Series 1997-1 Certificates . 24
SECTION 6. Article IV of Agreement . . . . . . . . . . . . . 24
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.4 Rights of Certificateholders . . . . . . . 24
Section 4.5 Collections and Allocation; Payment on
Exchangeable Transferor Certificate . . . 25
Section 4.6 Determination of Interest for the Series
1997-1 Certificates . . . . . . . . . . . 26
Section 4.7 Determination of Principal Amounts . . . . 27
Section 4.8 Shared Principal Collections . . . . . . . 30
Section 4.9 Application of Funds on Deposit in the
Collection Account for the Certificates . 31
Section 4.10 Coverage of Required Amount for the
Series 1997-1 Certificates . . . . . . . . 41
Section 4.11 Payment of Certificate Interest . . . . . 42
Section 4.12 Payment of Certificate Principal . . . . . 42
Section 4.13 Investor Charge-Offs . . . . . . . . . . . 43
Section 4.14 Reallocated Principal Collections for the
Series 1997-1 Certificates . . . . . . . . 45
Section 4.15 Payment Reserve Account . . . . . . . . . 46
SECTION 7. Article V of the Agreement . . . . . . . . . . . 47
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS
Section 5.1 Distributions . . . . . . . . . . . . . . 47
Section 5.2 Certificateholders' Statement . . . . . . 49
SECTION 8. Article VI of the Agreement . . . . . . . . . . . 51
ARTICLE VI
THE CERTIFICATES
Section 6.15 Additional Class A Invested Amounts . . . 51
Section 6.16 Additional Class C Invested Amounts . . . 53
Section 6.17 Extension . . . . . . . . . . . . . . . . 54
SECTION 9. Series 1997-1 Pay Out Events . . . . . . . . . . 56
SECTION 10. Series 1997-1 Termination . . . . . . . . . . . 58
SECTION 11. Pre-Payment of Certificates . . . . . . . . . . 59
SECTION 12. Legends; Transfer and Exchange; Restrictions on
Transfer of Series 1997-1 Certificates; Tax
Treatment . . . . . . . . . . . . . . . . . . . 60
SECTION 13. Sale of Class C Certificates . . . . . . . . . . 68
SECTION 14. Purchases of Certificates by the Transferor . . 70
SECTION 15. Increased Costs . . . . . . . . . . . . . . . . 70
SECTION 16. Replacement of Certain Investor
Certificateholders . . . . . . . . . . . . . . . 74
SECTION 17. FCI Note . . . . . . . . . . . . . . . . . . . . 74
SECTION 18. GOVERNING LAW . . . . . . . . . . . . . . . . . 75
SECTION 19. Instructions in Writing . . . . . . . . . . . . 75
SECTION 20. Amendments . . . . . . . . . . . . . . . . . . . 75
SECTION 21. Ratification of Agreement . . . . . . . . . . . 77
SECTION 22. Counterparts . . . . . . . . . . . . . . . . . . 77
EXHIBITS
EXHIBIT A Form of Class A Investor Certificate
EXHIBIT B Form of Class B Investor Certificate
EXHIBIT C Form of Class C Certificate
EXHIBIT D Form of Monthly Certificateholders' Statement
EXHIBIT E Form of 144A Exchange Notice and Certification
EXHIBIT F Form of Extension Notice
EXHIBIT G Form of Investor Certificateholder Election Notice
AMENDED AND RESTATED SERIES 1997-1 SUPPLEMENT,
dated as of April 21, 1997 (this "Series Supplement") by
and among FINGERHUT RECEIVABLES, INC., a corporation
organized and existing under the laws of the State of
Delaware, as Transferor (the "Transferor"), FINGERHUT
NATIONAL BANK, a national banking association organized
and existing 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 successors in trust thereunder
as provided in the Agreement referred to below, the
"Trustee") under the Amended and Restated Pooling and
Servicing Agreement, dated as of January 12, 1997, 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
Transferor and the Trustee shall create a new Series of
Investor Certificates and shall specify the Principal
Terms thereof.
SECTION 1. Designation. There is hereby
created a Series of Investor Certificates to be issued
pursuant to the Agreement and this Series Supplement to
be known generally as the "Series 1997-1 Certificates."
The Series 1997-1 Certificates shall be issued in three
Classes, which shall be designated generally as the
Variable Funding Trust Certificates, Series 1997-1, Class
A (the "Class A Certificates"), the Floating Rate
Accounts Receivable Trust Certificates, Series 1997-1,
Class B (the "Class B Certificates") and the Variable
Funding Trust Certificates, Series 1997-1, Class C (the
"Class C Certificates"). Series 1997-1 shall be a Series
of Variable Funding Certificates.
SECTION 2. Definitions. In the event that any
term or provision contained herein shall conflict with or
be inconsistent with any provision contained in the
Agreement, the terms and provisions of this Series
Supplement shall govern with respect to the Series 1997-1
Certificates. All Article, Section or subsection
references herein shall mean Article, Section or
subsections of the Agreement, as amended or supplemented
by this Series Supplement, except as otherwise provided
herein. All capitalized terms not otherwise defined
herein are defined in the Agreement. Each capitalized
term defined herein shall relate only to the Series 1997-
1 Certificates and no other Series of Certificates issued
by the Trust.
"Additional Class A Invested Amounts" shall
have the meaning specified in Section 6.15 of the
Agreement. "Additional Class C Invested Amounts" shall
have the meaning specified in Section 6.16 of the
Agreement.
"Amortization Period" shall mean the period
beginning on the day following the last day of the
Revolving Period and ending on the Series 1997-1
Termination Date.
"Amortization Period Commencement Date" shall
mean (i) the earlier of the first day of the May 1998
Monthly Period and the Pay Out Commencement 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 1997-1 Imputed Yield
Collections" 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 the Class A Certificate
Rate and the Class B Certificate Rate, each weighted by
the unpaid principal amount of such Class of Certificates
as of such Business Day, plus (ii) the Series Servicing
Fee Percentage.
"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 Internal
Revenue Code or (iii) any entity whose underlying assets
include plan assets by reason of a plan's investment in
the entity.
"Carryover Class A Interest" shall mean with
respect to any Business Day (a) any Class A Interest due
but not paid on any previous Distribution Date plus (b)
any Class A Additional Interest due on the next
succeeding Distribution Date.
"Carryover Class B Interest" shall mean with
respect to any Business Day (a) any Class B Interest due
but not paid on any previous Distribution Date plus (b)
any Class B Additional Interest due on the next
succeeding Distribution Date.
"Class A Additional Interest" shall have the
meaning specified in subsection 4.6(a) of the Agreement.
"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 to be applied to the repayment of
principal of the Series 1997-1 Certificates on such date
of determination.
"Class A Available Commitment" shall mean
initially $538,900,000 but (i) may be increased from time
to time to an amount not to exceed the Class A Maximum
Invested Amount by written notice from the Transferor to
the Trustee and the Servicer and (ii) shall be
permanently reduced from time to time by (x) an amount
equal to the Defeasance Account Balance to be applied to
the repayment of principal of the Series 1997-1
Certificates and (y) the amount of principal payments
made to the Class A Certificateholders pursuant to
subsection 11(a) of this Series Supplement; provided,
however, that the Class A Available Commitment shall at
no time be reduced to an amount less than the outstanding
principal amount of the Class A Certificates, Class B
Certificates and Class C Certificates of Series 1994-1;
provided, further, that if the Class A Certificateholders
shall permanently no longer be obligated to make future
purchases hereunder, the Class A Available Commitment
shall be zero.
"Class A Breakage Costs" shall have the meaning
specified in subsection 11(b) of this Agreement.
"Class A Certificateholders" shall mean the
Persons in whose names the Class A Certificates are
registered in the Certificate Register.
"Class A Certificateholders' Interest" shall
mean the portion of the Series 1997-1 Certificateholders'
Interest evidenced by the Class A Certificates.
"Class A Certificates" shall mean the variable
funding certificates executed by the Transferor and
authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A hereto.
"Class A Certificate Rate" shall mean with
respect to each Interest Accrual Period, a per annum rate
.25% in excess of the LIBOR Rate, as determined on the
related LIBOR Determination Date.
"Class A Costs" shall mean with respect to any
Business Day, the sum of (a) the increased costs, if any,
specified in Section 15 of this Series Supplement, (b)
Class A Breakage Costs and (c) 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 including the current Business Day and the
denominator of which is the actual number of days in the
then current calendar year, (ii) the excess of the Class
A Available Commitment over the Class A Invested Amount
on such Business Day after giving effect to all
transactions on such Business Day and (iii) .125%.
"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; provided, however,
that with respect to the allocation of Principal
Collections on and prior to the Series 1994-1 Funding
Date, the numerator specified above shall be zero.
"Class A Interest" shall mean the interest
distributable in respect of the Class A Certificates as
calculated in accordance with subsection 4.6(a) of the
Agreement.
"Class A Interest Shortfall" shall have the
meaning specified in subsection 4.6(a) of the Agreement.
"Class A Invested Amount" shall mean, when used
with respect to any Business Day, an amount equal to (a)
$59,600,000, plus (b) the aggregate principal amount of
any Additional Class A Invested Amounts purchased
pursuant to Section 6.15 of the Agreement, minus (c) the
aggregate amount of principal payments made to Class A
Certificateholders through and including such Business
Day, minus (d) the aggregate amount of Class A Investor
Charge-Offs for all prior Distribution Dates, minus (e)
the Class A Invested Amount represented by any Class A
Certificates purchased by the Transferor on the secondary
market which have been cancelled by the Trustee at the
Transferor's request in accordance with Section 14 of
this Series Supplement, plus (f) the sum of (x) the
aggregate amount allocated with respect to Class A
Investor Charge-Offs and available on all prior
Distribution Dates pursuant to subsection 4.9(a)(vi) of
the Agreement and, with respect to such subsection,
pursuant to subsections 4.10(a) and (b) and Section 4.14
of the Agreement and (y) the amount designated pursuant
to subsection 4.13(d) of the Agreement for the purpose of
reinstating amounts reduced pursuant to the foregoing
clause (d).
"Class A Investor Charge-Offs" shall have the
meaning specified in subsection 4.13(c) of the Agreement.
"Class A Investor Percentage" shall mean, for
any Business Day, (a) with respect to Imputed Yield
Receivables and Defaulted Receivables at any time or
Principal Receivables during the Revolving Period, the
Class A Floating Allocation Percentage and (b) with
respect to Principal Receivables during the Amortization
Period, the Fixed/Floating Allocation Percentage.
"Class A Maximum Invested Amount" shall mean
$848,900,000.
"Class A Outstanding Principal Amount" shall
mean with respect to the Class A Certificates, when used
with respect to any Business Day, an amount equal to (a)
$59,600,000, plus (b) the aggregate principal amount of
any Additional Class A Invested Amounts purchased by the
Class A Certificateholders 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 Certificateholders on or prior to such Business
Day minus (d) the Class A Invested Amount represented by
any Class A Certificate purchased by the Transferor on
the secondary market which have been cancelled by the
Trustee at the Transferor's request in accordance with
Section 14 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 Certificates as
calculated in accordance with subsection 4.7(a) of the
Agreement.
"Class A Required Amount" shall mean the amount
determined by the Servicer on each Business Day equal to
the excess, if any, of (x) the sum of (i) the amount
described in subsection 4.9(a)(i)(y) of the Agreement for
such Business Day, (ii) the Class A Floating Allocation
Percentage of the Servicing Fee for such Business Day,
(iii) the Class A 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, (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 Transfer Date and (v) the
amount of unreimbursed Class A Investor Charge-Offs over
(y) the Available Series 1997-1 Imputed Yield Collections
plus any Excess Imputed Yield Collections from other
Series and any Transferor Imputed Yield Collections
allocated with respect to the amounts described in
clauses (x)(i) through (v).
Class B Additional Interest" shall have the
meaning specified in subsection 4.6(b) of the Agreement.
"Class B Adjusted Invested Amount" shall mean,
with respect to any date of determination, an amount
equal to the Class B Invested Amount minus the excess of
the Defeasance Account Balance to be applied to the
repayment of principal of the Series 1997-1 Certificates
over the Class A Invested Amount on such date of
determination.
"Class B Breakage Costs" shall have the meaning
specified in subsection 11(b) of this Series Supplement.
"Class B Certificateholders" shall mean the
Persons in whose names the Class B Certificates are
registered in the Certificate Register.
"Class B Certificateholders' Interest" shall
mean the portion of the Series 1997-1 Certificateholders'
Interest evidenced by the Class B Certificates.
"Class B Certificate Rate" shall mean with
respect to each Interest Accrual Period, a per annum rate
equal to the sum of the LIBOR Rate and .35%, 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 B hereto.
"Class B Daily Principal Amount" shall have the
meaning specified in subsection 4.9(c)(ii) of the Agreement.
"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
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 Collections for all Series.
"Class B Floating Allocation Percentage" shall
mean, with respect to any Business Day, the percentage
equivalent of a fraction, the numerator of which is the
Class B Adjusted Invested Amount as of the end of the
preceding Business Day and the denominator of which is
the greater of (a) the total amount of Principal
Receivables in the Trust and the amount on deposit in the
Excess Funding Account as of the end of the preceding
Business Day and (b) when used with respect to Principal
Collections only, the sum of the numerators with respect
to all Classes of all Series then outstanding used to
calculate the applicable allocation percentage; provided,
however, that with respect to the allocation of Principal
Collections on and prior to the Series 1994-1 Funding
Date, the numerator specified above shall be zero.
"Class B Interest" shall mean the interest
distributable in respect of the Class B Certificates as
calculated in accordance with subsection 4.6(b) of the
Agreement.
"Class B Interest Shortfall" shall have the
meaning specified in subsection 4.6(b) of the Agreement.
"Class B Invested Amount" shall mean, when used
with respect to any Business Day, an amount equal to (a)
$51,100,000, minus (b) the aggregate amount of principal
payments made to Class B Certificateholders through and
including 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 the
Class C Invested Amount has not been reduced for all
prior Business Days, minus (e) the Class B Invested
Amount represented by any Class B Certificates purchased
by the Transferor on the secondary market which have been
cancelled by the Trustee at the Transferor's request in
accordance with Section 14 of this Series Supplement, and
plus (f) the sum of (x) the aggregate amount allocated
and available on all prior Business Days pursuant to
subsection 4.9(a)(vii) of the Agreement and, with respect
to such subsection, pursuant to subsections 4.10(a) and
(b) and Section 4.14 of the Agreement and (y) the amount
designated pursuant to subsection 4.13(d) 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(b) of the Agreement.
"Class B Investor Percentage" shall mean, for
any Distribution Date, (a) with respect to Imputed Yield
Receivables and Defaulted Receivables at any time or
Principal Receivables during the Revolving Period, the
Class B Floating Allocation Percentage and (b) with
respect to Principal Receivables during the Amortization
Period, the Fixed/Floating Allocation Percentage.
"Class B Outstanding Principal Amount" shall
mean, when used with respect to any Business Day, an
amount equal to (a) $51,100,000, minus (b) the aggregate
amount of principal payments made to Class B
Certificateholders on or prior to such Business Day,
minus (c) the Class B Invested Amount represented by any
Class B Certificates purchased by the Transferor on the
secondary market which have been cancelled by the Trustee
at the Transferor's request in accordance with Section 14
of this Series Supplement.
"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 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 1997-1
Certificates remaining after payments have been made to
the Class A Certificateholders 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 after the Class A Invested Amount has
been paid in full.
"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 amount
described in subsection 4.9(a)(ii)(y) of the Agreement
for such Business Day, (ii) the Class B Floating
Allocation Percentage of the Servicing Fee for such
Business Day, (iii) 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, (iv) on
each Transfer Date, the Class B Percentage of the Series
Allocation Percentage of the Adjustment Payment required
to be made by the Transferor but not made on such
Transfer Date and (v) 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 over (y) the
Available Series 1997-1 Imputed Yield Collections plus
any Excess Imputed Yield Collections from other Series
and any Transferor Imputed Yield Collections allocated
with respect to the amounts described in clauses (x)(i)
through (v).
"Class C Adjusted Invested Amount" shall mean,
with respect to any date of determination, an amount
equal to the Class C Invested Amount minus the excess of
the Defeasance Account Balance over the Class A Invested
Amount and Class B Invested Amount on such date of
determination.
"Class C Certificateholders" shall mean the
Persons in whose names the Class C Certificates are
registered in the Certificate Register.
"Class C Certificateholders' Interest" shall
mean the portion of the Series 1997-1 Certificateholders'
Interest evidenced by the Class C Certificates.
"Class C Certificate Rate" shall mean with
respect to each Interest Accrual Period, a rate set
initially at zero; provided, however, that such
certificate rate may be increased pursuant to the terms
of a supplemental agreement or amended and restated
series supplement entered into in accordance with Section
13 of this Series Supplement.
"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 C hereto.
"Class C Daily Principal" shall have the
meaning specified in subsection 4.7(c) of the Agreement.
"Class C Daily Principal Amount" shall have the
meaning specified in subsection 4.9(c)(iii) of the
Agreement.
"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
Revolving Period (or, if the Pay Out Commencement Date
occurs prior to the Series 1994-1 Funding Date, the Class
C Invested Amount at the end of the day on the Series
1994-1 Funding Date) 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 Collections for all Series; provided, however,
that with respect to the allocation of Principal
Collections on and prior to the Series 1994-1 Funding
Date, the numerator specified above shall be zero.
"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 Adjusted 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;
provided, however, that with respect to the allocation of
Principal Collections on and prior to the Series 1994-1
Funding Date, the numerator specified above shall be
zero.
"Class C Invested Amount" shall mean, when used
with respect to any Business Day, an amount equal to (a)
upon the initial issuance of the Class C Certificate,
zero, plus (b) the aggregate principal amount of any
Additional Class C Invested Amounts pursuant to Section
6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class C Certificateholders
through and including such Business Day, minus (d) the
aggregate amount of Class C Investor Charge-Offs for all
prior Distribution Dates pursuant to subsections 4.13(a)
and 4.13(d) of the Agreement, 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)(viii) 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 C Investor Charge-Offs" shall have the
meaning specified in subsection 4.13(a) of the Agreement
and shall include amounts specified in subsection
4.13(d).
"Class C Investor Percentage" shall mean, for
any Distribution Date, (a) with respect to Imputed Yield
Receivables and Defaulted Receivables at any time or
Principal Receivables during the Revolving Period, the
Class C Floating Allocation Percentage and (b) with
respect to Principal Receivables during the Amortization
Period, the Fixed/Floating Allocation Percentage.
"Class C Outstanding Principal Amount" shall
mean, when used with respect to any Business Day, an
amount equal to (a) the aggregate principal amount of any
Additional Class C Invested Amounts pursuant to Section
6.16 of the Agreement, minus (b) the aggregate amount of
principal payments made to Class C Certificateholders on
or 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 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 A Invested
Amount and the Class B Invested Amount equal or are
reduced to zero or, if there are no Principal Collections
allocable to the Series 1997-1 Certificates remaining
after payments have been made to the Class A Certificates
and the Class B Certificates on such Distribution Date,
the Distribution Date following the Distribution Date on
which the Class A Invested Amount and the Class B
Invested Amount are 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
after the Class A Invested Amount and Class B Invested
Amount have been paid in full.
"Closing Date" shall mean January 21, 1997.
"Defeasance Account" shall have the meaning
specified in subsection 11(a) 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.
"Distribution Date" shall mean February 20,
1997, and the twentieth day of each month thereafter, or
if such day is not a Business Day, the next succeeding
Business Day; provided, that the final Distribution Date
with respect to the payment of principal and interest
shall be the Scheduled Series 1997-1 Termination 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 and the Class C
Invested Amount have been paid in full and (ii) the
Series 1997-1 Termination Date.
"Election Date" shall have the meaning
specified in subsection 6.17(a) of the Agreement.
"Election Notice" shall have the meaning
specified in subsection 6.17(a) of the Agreement.
"Enhancement" shall mean, with respect to the
Class A Certificates, the subordination of the Class B
Invested Amount and the Class C Invested Amount and with
respect to the Class B Certificates, the subordination of
the Class C Invested Amount.
"Eurocurrency Reserve Requirements" shall mean,
for any day, the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect
thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board)
maintained by a member bank of the Federal Reserve
System.
"Excess Imputed Yield Collections" shall mean,
with respect to any Business Day, as the context
requires, either (x) the amount described in subsection
4.9(a)(xii) of the Agreement allocated to the Series
1997-1 Certificates but available to cover shortfalls in
amounts paid from Imputed Yield Collections for other
Series, if any, or (y) the aggregate amount of Imputed
Yield Collections allocable to other Series in excess of
the amounts necessary to make required payments with
respect to such Series, if any, and available to cover
shortfalls with respect to the Series 1997-1
Certificates.
"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 20, 1998 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.
"FCI Note" shall have the meaning specified in
Section 17 of this Series Supplement.
"FCI Note Required Amount" shall have the
meaning specified in Section 17 of this Series
Supplement.
"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 (or,
if the Pay Out Commencement Date occurs prior to the
Business Day on which the aggregate invested amount of
the Series 1994-1 Class A, Class B and Class C Investor
Certificates have been paid in full, on and after such
date the Invested Amount at the end of the day on such
date) 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 with
respect to the allocation of Principal Collections on and
prior to the end of the day on the Series 1994-1 Funding
Date the numerator specified above shall be zero.
"Floating Allocation Percentage" shall mean for
any Business Day the sum of the applicable Class A
Floating Allocation Percentage, Class B Floating
Allocation Percentage and Class C Floating Allocation
Percentage for such Business Day.
"Interest Accrual Period" shall mean a Monthly
Period and, with respect to a Distribution Date, the
preceding Monthly Period; provided, however, that the
initial 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.
"Invested Amount" shall mean, when used with
respect to any Business Day, an amount equal to the sum
of (a) the Class A Invested Amount as of such Business
Day, (b) the Class B Invested Amount as of such Business
Day and (c) the Class C Invested Amount as of such
Business Day; provided, however, that for purposes of
determining the Servicing Fee and the Aggregate Invested
Amount, the Invested Amount shall mean an amount equal to
the sum of the Class A Adjusted Invested Amount, the
Class B Adjusted Invested Amount and the Class C Adjusted
Invested Amount as of such Business Day; provided,
further, that for so long as the Series 1994-1
Certificates are outstanding, for purposes of determining
the Minimum Aggregate Principal Receivables under the
Agreement, the Invested Amount shall be deemed to be
zero.
"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 4.15(c)
of the Agreement and (ii) the Defeasance Account,
deposited in the Collection Account pursuant to
subsection 11(a) of this Series Supplement.
"Investor Certificateholder" shall mean the
Holder of record of an Investor Certificate of Series
1997-1.
"Investor Certificates" shall mean the Class A
Certificates, the Class B Certificates and the Class C
Certificates.
"Investor Charge-Offs" shall mean the sum of
Class A Investor Charge-Offs, Class B Investor Charge-
Offs and Class C 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
Business Day, (a) with respect to Imputed Yield
Collections and Defaulted Amounts at any time or
Principal Collections during the Revolving Period, the
Floating Allocation Percentage and (b) with respect to
Principal Collections during the Amortization Period, the
Fixed/Floating Allocation Percentage.
"LIBOR Base Rate" shall mean, for any Interest
Accrual Period, the rate for deposits in United States
dollars for a period equal to such Interest Accrual
Period (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;
provided that, the LIBOR Base Rate for the Initial
Interest Accrual Period shall be 5.44531%. 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 United States dollars
are offered by the Reference Banks (as defined below) 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 such Interest Accrual Period
(commencing on the first day of such Interest Accrual
Period). The Trustee will request the principal London
office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations
are provided, the rate for such Interest Accrual Period
will be the arithmetic mean of the quotations. If fewer
than two quotations are provided, the rate for such
Interest Accrual Period will be the arithmetic mean of
the rates quoted by major banks in New York City,
selected by the Trustee, at approximately 11:00 A.M., New
York City time, on the first day of such Interest Accrual
Period for loans in United States dollars to leading
European banks for a period equal to such Interest
Accrual Period (commencing on the first day of such
Interest Period). As used in this definition, "Reference
Banks" means four major banks in the London interbank
market selected by the Trustee.
"LIBOR Determination Date" shall mean the
second Business Day prior to the commencement of each
Interest Accrual Period. For purposes of this
definition, a Business Day is any day on which banks in
London and New York are open for the transaction of
international business.
"LIBOR Rate" shall mean, with respect to each
day during each Interest Accrual Period, a rate per annum
determined for such day in accordance with the following
formula (rounded upward to the nearest 1/100th of 1%):
LIBOR Base Rate
1.00 - Eurocurrency Reserve Requirements
"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
specified in the Agreement, except that the first Monthly
Period with respect to the Series 1997-1 Certificates
shall begin on and include the Closing Date and shall end
on and include the last day of the then current fiscal
month of the Transferor.
"Net Revolving Principal Collections" shall
have the meaning specified in subsection 4.9(b) of the
Agreement.
"Negative Carry Amount" shall have the meaning
specified in subsection 4.10(a) of the Agreement.
"Paying Agent" shall mean, for the Series
1997-1 Certificates, The Bank of New York.
"Payment Reserve Account" shall have the
meaning specified in subsection 4.15 of the Agreement.
"Pay Out Commencement Date" shall mean the date
on which a Trust Pay Out Event is deemed to occur
pursuant to Section 9.1 of the Agreement or a Series
1997-1 Pay Out Event is deemed to occur pursuant to
Section 9 of this Series Supplement.
"Percentage" shall mean, with respect to each
Class A Certificateholder, the percentage equivalent of a
fraction the numerator of which is the Class A Invested
Amount of the Class A Certificate then held by such Class
A Certificateholder and the denominator of which is the
Class A Invested Amount.
"Portfolio Yield" shall mean for the Series
1997-1 Certificates, with respect to any Monthly Period,
the annualized percentage equivalent of a fraction, the
numerator of which is an amount equal to the aggregate
amount of Available Series 1997-1 Imputed Yield
Collections for such Monthly Period (not including the
Floating Allocation Percentage of the portion of Imputed
Yield Collections for such period described in clause (D)
of the definition thereof or the amounts on deposit in
the Payment Reserve Account, if any), calculated on a
cash basis, minus the sum of 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 Agreement for such Monthly Period, and the
denominator of which is the average daily Invested Amount
for such Monthly Period.
"Principal Shortfalls" shall mean on any
Business Day (i) prior to the Amortization Period
Commencement Date, zero and (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
(less the amount then on deposit in the Principal Account
for the benefit of such Class); provided, however, that
on and prior to the Series 1994-1 Funding Date the
Principal Shortfall for Series 1997-1 shall be equal to
the lesser of the amount specified above and the maximum
amount that will allow Shared Principal Collections
allocable with respect to any principal shortfall for the
Series 1994-1 Certificates to be equal to the full amount
of the principal shortfall for such Series.
"Program Bank" shall mean with respect to any
SPCPC each liquidity provider and credit support provider
for such SPCPC.
"Rating Agency" shall mean with respect to any
Business Day each statistical rating agency selected by
the Transferor to rate any Class of Certificates which on
such Business Day has issued a rating which is
outstanding with respect to such Class of Certificates.
"Rating Agency Condition" shall mean, at any
time at which any Class of Certificates is rated by a
Rating Agency, the written confirmation of the Rating
Agency that a specified event or modification of the
terms of the Investor Certificates will not result in the
withdrawal or downgrade of the rating of such
Certificates then in effect.
"Reallocated Class B Principal Collections"
shall have the meaning specified in subsection 4.14(b) of
the Agreement.
"Reallocated Class C Principal Collections"
shall have the meaning specified in subsection 4.14(a) of
the Agreement.
"Reallocated Principal Collections" shall mean
the sum of Reallocated Class B Principal Collections and
Reallocated Class C Principal Collections.
"Required Amount" shall have the meaning
specified in subsection 4.10(b) of the Agreement.
"Revolving Period" shall mean the period from
and including the Closing Date to, but not including, the
Amortization Period Commencement Date.
"Revolving Principal Collections" shall have
the meaning specified in subsection 4.9(b) of the
Agreement.
"Scheduled Series 1997-1 Termination Date"
shall mean the October 2002 Distribution Date, unless a
different date shall be set forth in any Extension
Notice.
"Series 1994-1 Certificates" shall mean the
investor certificates issued pursuant to the Series
1994-1 Supplement.
"Series 1994-1 Funding Date" shall mean the
first Business Day on which an amount equal to the
invested amount of the Series 1994-1 Class A, Class B and
Class C Investor Certificates has been deposited in the
Principal Account for the benefit of such Series 1994-1
Certificates.
"Series 1994-1 Supplement" shall mean the
Series 1994-1 Supplement, dated as of June 29, 1994 by
and among Fingerhut Receivables, Inc., as Transferor,
Fingerhut Corporation (as predecessor servicer to
Fingerhut National Bank), as Servicer, and The Bank of
New York (Delaware), as Trustee under the Agreement, as
it may be amended from time to time.
"Series 1994-2 Certificates" shall mean the
investor certificates issued pursuant to the Series
1994-2 Supplement.
"Series 1994-2 Supplement" shall mean the
Series 1994-2 Supplement, dated as of November 15, 1994
by and among Fingerhut Receivables, Inc., as Transferor,
Fingerhut Corporation (as predecessor servicer to
Fingerhut National Bank), as Servicer, and The Bank of
New York (Delaware), as Trustee under the Agreement, as
it may be amended from time to time.
"Series 1997-1" shall mean the Series of the
Fingerhut Master Trust represented by the Series 1997-1
Certificates.
"Series 1997-1 Certificates" shall mean the
Class A Certificates, the Class B Certificates and the
Class C Certificates.
"Series 1997-1 Certificateholder" shall mean
the holder of record of any Series 1997-1 Certificate.
"Series 1997-1 Certificateholders' Interest"
shall have the meaning specified in Section 4.4 of the
Agreement.
"Series 1997-1 Pay Out Event" shall have the
meaning specified in Section 9 of this Series Supplement.
"Series 1997-1 Termination Date" shall mean the
earlier to occur of (i) the day after the Distribution
Date following the end of the Revolving Period on which
the Series 1997-1 Certificates are paid in full, or (ii)
the Scheduled Series 1997-1 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
including the current Business Day and the denominator of
which is the actual number of days in the then current
calendar year, (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 1997-1 Certificates which, in accordance with
subsections 4.9(b) and 4.9(c)(iv) of the Agreement, may
be applied in accordance with Section 4.3(e) of the
Agreement or (b) the amounts allocated to the investor
certificates (other than Transferor Retained
Certificates) of other Series which the applicable 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
1997-1 Certificates.
"SPCPC" shall mean a special purpose commercial
paper conduit.
"Stated Class C Amount" shall mean on any date
of determination prior to the Business Day upon which the
aggregate invested amount of the Series 1994-1 Class A,
Class B and Class C Investor Certificates have been paid
in full, zero, and on and after the Business Day upon
which the aggregate invested amount of the Series 1994-1
Class A, Class B and Class C Investor Certificates have
been paid in full the greater of (i) zero and (ii) a
number rounded to the nearest dollar obtained by
multiplying the sum of the Class A Invested Amount and
the Class B Invested Amount by a fraction the numerator
of which is 12 and the denominator of which is 88;
provided however that during the Early Amortization
Period the Stated Class C Amount shall be equal to the
Stated Class C Amount immediately preceding the
commencement of the Early Amortization Period plus the
amount specified in clause (B) of the second sentence of
Section 6.16 of the Agreement.
"Targeted Holder" shall mean (i) each holder of
a right to receive interest or principal with respect to
investor certificates (or other interests in the Trust),
including the Class A Certificates and the Class B
Certificates, other than certificates (or other such
interests) with respect to which an opinion is rendered
that such certificates (or other such interests) will be
treated as debt for Federal income tax purposes and (ii)
any holder of a right to receive any amount in respect of
the Transferor Interest; provided, that any person
holding more than one interest each of which would cause
such person to be a Targeted Holder shall be treated as a
single Targeted Holder.
"Transferor Imputed Yield Collections" shall
mean with respect to Series 1997-1, on any Business Day
the product of (a) the Imputed Yield Collections for such
Business Day, (b) the Transferor Percentage and (c) the
Series Allocation Percentage.
"Transferor Retained Certificates" shall mean
investor certificates of any Series, including the Class
C Certificates, which the Transferor retains, but only to
the extent that and for so long as the Transferor is the
Holder of such Certificates.
SECTION 3. Reassignment Terms. The Series
1997-1 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 invested amount of any
other Class of Series 1997-1 Certificates sold by the
Transferor in accordance with the provisions of Section
13 of this Series Supplement is reduced to an amount less
than or equal to 10% of the sum of the highest invested
amount during the Revolving Period of the Class A
Certificates and the Class B Certificates, and any such
other Class of Series 1997-1 Certificates sold by the
Transferor in accordance with the provisions of Section
13 of this Series Supplement. The deposit required in
connection with any such termination and final
distribution shall be equal to the sum of the Class A
Invested Amount, the Class B Invested Amount and the
invested amount of any other Class of Series 1997-1
Certificates then outstanding plus accrued and unpaid
interest on the Series 1997-1 Certificates through the
day prior to the Distribution Date on which the final
distribution occurs.
SECTION 4. Delivery and Payment for the Series
1997-1 Certificates. The Transferor shall execute and
deliver the Series 1997-1 Certificates to the Trustee for
authentication in accordance with Section 6.1 of the
Agreement. The Trustee shall deliver the Series 1997-1
Certificates to or upon the order of the Transferor when
authenticated in accordance with Section 6.2 of the
Agreement.
SECTION 5. Form of Delivery of Series 1997-1
Certificates. The Class A Certificates, the Class B
Certificates and the Class C Certificates shall be
delivered as Registered Certificates as provided in
Section 6.1 of the Agreement.
SECTION 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
Agreement (except for Sections 4.1, 4.2 and 4.3 thereof)
shall read in its entirety as follows and shall be
applicable only to the Series 1997-1 Certificates:
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.4 Rights of Certificateholders. The
Series 1997-1 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 1997-1 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 Imputed Yield Collections)
available in the Collection Account, (b) funds allocable
to the Series 1997-1 Certificates on deposit in the
Excess Funding Account and (c) funds on deposit in the
Interest Funding Account, the Principal Account, the
Distribution Account, the Payment Reserve Account and the
Defeasance Account (for such Series, the "Series 1997-1
Certificateholders' Interest"). The Class B Invested
Amount shall be subordinated to the Class A Certificates
and the Class C Invested Amount shall be subordinated to
the Class A Certificates and the Class B Certificates in
each case to the extent provided in this Article IV.
Except in connection with a payment of Class C Daily
Principal pursuant to subsection 4.9(e) of this
Agreement, 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 each
been paid in full.
Section 4.5 Collections and Allocation;
Payments on Exchangeable Transferor Certificate.
(a) Collections. The Servicer will apply
or will instruct the Trustee to apply all funds on
deposit in the Collection Account and the Excess Funding
Account allocable to the Series 1997-1 Certificates, and
all funds on deposit in the Interest Funding Account, the
Principal Account, the Distribution Account, the Payment
Reserve Account and the Defeasance Account maintained for
this Series, as described in this Article IV.
(b) Payments to the Holder of the
Exchangeable Transferor Certificate. On each Business
Day, the Servicer shall determine whether a Pay Out Event
is deemed to have occurred with respect to the Series
1997-1 Certificates, and the Servicer shall allocate and
pay Collections in accordance with the Daily Report with
respect to such Business Day to the Holder of the
Exchangeable Transferor Certificate as follows:
(i) For each Business Day with respect to the
Revolving Period after the Series 1994-1 Funding
Date, in addition to amounts allocated and paid to
the Holder of the Exchangeable Transferor
Certificate pursuant to subsection 4.3(b) of the
Agreement, an amount equal to (w) the product of the
Floating Allocation Percentage and the amount of
Principal Collections on such Business Day, minus
(x) the portion thereof constituting a part of Net
Revolving Principal Collections to be deposited in
the Defeasance Account pursuant to subsection 4.9(b)
of the Agreement, minus (y) the Reallocated
Principal Collections for such Business Day minus
(z) the Class C Principal for such Business Day; and
(ii) For each Business Day on and prior to the
Series 1994-1 Funding Date and for each Business Day
during the Amortization Period, 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) of the
Agreement 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.
Section 4.6 Determination of Interest for the
Series 1997-1 Certificates. (a) The amount of interest
(the "Class A Interest") allocable to the Class A
Certificates with respect to any Business Day shall be an
amount equal to the product of (i) the Class A
Certificate Rate and (ii) a fraction, the numerator of
which is the actual number of days from and including the
immediately preceding Business Day to but excluding such
Business Day, and the denominator of which is 360 and
(iii) the Class A Outstanding Principal Amount on such
Business Day after giving effect to all transactions on
such Business Day.
On the Determination Date preceding each
Distribution Date, the Servicer shall determine an amount
(the "Class A Interest Shortfall") equal to the excess,
if any, of (x) the aggregate Class A Interest for the
Interest Accrual Period applicable to the Distribution
Date over (y) the amount available to be paid to the
Class A Certificateholders in respect of interest on such
Distribution Date. If there is a Class A Interest
Shortfall with respect to any Distribution Date, an
additional amount ("Class A Additional Interest") shall
be payable as provided herein with respect to any
Business Day following such Distribution Date, to and
including the Distribution Date on which such Class A
Interest Shortfall is paid to Class A Certificateholders,
equal to the product of (i) the Class A Certificate Rate,
(ii) such Class A Interest Shortfall remaining unpaid and
(iii) a fraction, the numerator of which is the actual
number of days from and including the immediately
preceding Business Day to but excluding such Business
Day, and the denominator of which is 360.
Notwithstanding anything to the contrary herein, Class A
Additional Interest shall be payable or distributed to
Class A Certificateholders only to the extent permitted
by applicable law.
(b) The amount of interest (the "Class B
Interest") allocable to the Class B Certificates with
respect to any Business Day shall be an amount equal to
the product of (i) the Class B Certificate Rate and (ii)
a fraction, the numerator of which is the actual number
of days from and including the immediately preceding
Business Day to but excluding such Business Day, and the
denominator of which is 360 and (iii) the Class B
Outstanding Principal Amount on such Business Day after
giving effect to all transactions on such Business Day.
On the Determination Date preceding each
Distribution 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
Shortfall with respect to any Distribution Date, an
additional amount ("Class B Additional Interest") shall
be payable as provided herein with respect to any
Business Day following such Distribution 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
(ii) such Class B Interest Shortfall remaining unpaid and
(iii) a fraction, the numerator of which is the actual
number of days from and including the immediately
preceding Business Day to but excluding such Business
Day, and the denominator of which is 360.
Notwithstanding anything to the contrary herein, Class B
Additional Interest shall be payable or distributed to
Class B Certificateholders only to the extent permitted
by applicable law.
Section 4.7 Determination of Principal
Amounts. (a) The amount of principal (the "Class A
Principal") distributable from the Distribution Account
with respect to the Class A Certificates on each
Distribution Date with respect to (A) the Revolving
Period shall be an amount equal to the amounts deposited
into the Principal Account from the Defeasance Account
pursuant to Section 11 of this Series Supplement plus any
Shared Principal Collections allocated to the Class A
Certificateholders with respect to such Distribution Date
pursuant to Section 4.3(e) of the Agreement and (B) the
Amortization Period shall be equal to an amount
calculated as follows: the sum of (i) an amount equal to
the product of the Fixed/Floating Allocation Percentage
and the aggregate amount of Principal Collections (less
the amount of Reallocated Principal Collections) with
respect to the preceding Monthly Period (or, in the case
of the Distribution Date in the first Monthly Period in
the Amortization Period following the Series 1994-1
Funding Date, the Fixed/Floating Allocation Percentage of
Principal Collections from the day following the Series
1994-1 Funding Date), (ii) any amount on deposit in the
Excess Funding Account allocated to the Class A
Certificates pursuant to subsection 4.9(d) of the
Agreement with respect to the preceding Monthly Period,
(iii) the amount, if any, allocated to the Class A
Certificates pursuant to subsections 4.9(a)(iv), (v),
(vi), (vii) and (viii) of the Agreement and, with respect
to such subsections, pursuant to subsections 4.10(a) and
(b) and 4.14(a) and (b) of the Agreement with respect to
such Distribution Date and, (iv) the amount of Shared
Principal Collections allocated to the Class A
Certificates with respect to such Distribution Date and
pursuant to subsection 4.3(e) and Section 4.8 of the
Agreement; 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 1997-1 Termination Date, the
Class A Principal shall be an amount equal to the Class A
Invested Amount.
(b) The amount of principal (the "Class B
Principal") distributable from the Distribution Account
with respect to the Class B Certificates on each
Distribution Date, beginning with the Class B Principal
Payment Commencement Date, shall equal an amount
calculated as follows: the sum of (i) an amount equal to
the product of the 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
following the date on which an amount equal to the Class
A Invested Amount is paid to the Class A
Certificateholders in respect of Class A Principal, the
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)(iv), (v),
(vii) and (viii) of the Agreement and, with respect to
such subsections, pursuant to subsections 4.10(a) and (b)
and 4.14(a) and (b) of the Agreement with respect to such
Distribution Date and (iv) the amount of Shared Principal
Collections allocated to the Class B Certificates with
respect to the preceding Monthly Period pursuant to
subsection 4.3(e) and Section 4.8 of the Agreement on and
after the Class B Principal Payment Commencement Date;
provided, further, that with respect to any Distribution
Date, Class B Principal may not exceed the Class B
Invested Amount; provided, further, that with respect to
the Scheduled Series 1997-1 Termination Date, the Class B
Principal shall be an amount equal to the Class B
Invested Amount.
(c) 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, or in the case of
distributions of Class C Daily Principal pursuant to the
last proviso of this subsection 4.7(c) of the Agreement,
on each Business Day, shall equal an amount calculated as
follows: the sum of (i) an amount equal to the product
of the Fixed/Floating Allocation Percentage and the
aggregate amount of Principal Collections (less the
amount of Reallocated Principal Collections) with respect
to the preceding Monthly Period (or, in the case of the
first Distribution Date in the Amortization Period
following the date on which an amount equal to the Class
B Invested Amount is paid to the Class B
Certificateholders in respect of Class B Principal, the
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 C Certificates pursuant to
subsection 4.9(d) of the Agreement with respect to the
preceding Monthly Period, (iii) the amount, if any,
allocated to the Class C Certificates pursuant to
subsections 4.9(a)(iv), (v) and (viii) of the Agreement
and, with respect to such subsections, pursuant to
subsections 4.10(a) and (b) of the Agreement with respect
to such Distribution Date and (iv) the amount of Shared
Principal Collections allocated to the Class C
Certificates with respect to the preceding Monthly Period
pursuant to subsection 4.3(e) and Section 4.8 of the
Agreement on and after the Class C Principal Payment
Commencement Date; provided, however, that with respect
to any Distribution Date, Class C Principal may not
exceed the Class C Invested Amount; provided, further,
that with respect to the Scheduled Series 1997-1
Termination Date, the Class C Principal shall be an
amount equal to the Class C Invested Amount; provided
further, that on any Business Day during any period other
than an Early Amortization Period, the Transferor may
designate that either (x) an amount up to the lesser of
(i) the excess of the Class C Invested Amount over the
Stated Class C Amount on such day after taking into
account all adjustments of the Class A Invested Amount
and the Class B Invested Amount on such day and (ii) (A)
during the Revolving Period an amount equal to (I) the
product of the Class C Floating Allocation Percentage and
the amount of Principal Collections on such Business Day
minus (II) Reallocated Principal Collections on such
Business Day or (B) after the Amortization Period
Commencement Date an amount equal to (I) the product of
the Fixed/Floating Allocation Percentage and the amount
of Principal Collections on such Business Day minus (II)
the amount of Principal Collections to be applied with
respect to Class A Principal and Class B Principal on
such Business Day minus (III) Reallocated Principal
Collections on such Business Day (such designated amount,
the "Class C Daily Principal") shall be distributed in
accordance with subsection 4.9(e) or (y) an amount up to
the excess of the Class C Invested Amount over the Stated
Class C Amount on such day after taking into account all
adjustments of the Class C Invested Amount on such day,
shall be subtracted from the Class C Invested Amount and
added to the Transferor Interest.
Section 4.8 Shared Principal Collections.
Shared Principal Collections allocated to the Series
1997-1 Certificates and to be applied pursuant to
subsections 4.9(b), 4.9(c)(i)(z), 4.9(c)(ii)(z) and
4.9(c)(iii)(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 1997-1 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 Principal
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 1997-1 in
accordance with Section 4.3(e) of the Agreement.
Section 4.9 Application of Funds on Deposit in
the Collection Account for the Certificates. (a) On
each Business Day, the Servicer shall deliver to the
Trustee a Daily Report in which it shall instruct the
Trustee to withdraw, and the Trustee, acting in
accordance with such instructions, shall withdraw from
the Collection Account, to the extent of the sum of (w)
the Floating Allocation Percentage of Imputed Yield
Collections available in the Collection Account, (x)
Investment Earnings on deposit in the Collection Account
and (y) amounts on deposit in the Payment Reserve
Account, if any, if and to the extent so designated by
the Transferor (the "Available Series 1997-1 Imputed
Yield Collections") the amounts set forth in subsections
4.9(a)(i) through 4.9(a)(xi) of the Agreement.
(i) Class A Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer,
shall allocate to the Class A Certificates and
withdraw first from the Collection Account and then
from the Payment Reserve Account and deposit into
the Interest Funding Account, to the extent of the
Available Series 1997-1 Imputed Yield Collections,
an amount equal to the lesser of (x) the Available
Series 1997-1 Imputed Yield Collections and (y) the
sum of (A) the sum of the Class A Interest and the
Carryover Class A Interest for such Business Day
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 respect thereto on
such Business Day. Notwithstanding anything to the
contrary herein, the portion of Carryover Class A
Interest that constitutes Class A Additional
Interest shall be payable or distributable to Class
A Certificateholders only to the extent permitted by
applicable law.
(ii) Class B Interest. On each Business
Day during a Monthly Period, the Trustee, acting in
accordance with instructions from the Servicer,
shall allocate to the Class B Certificates and
withdraw first from the Collection Account and then
from the Payment Reserve Account and deposit into
the Interest Funding Account, to the extent of the
Available Series 1997-1 Imputed Yield Collections
remaining after giving effect to the withdrawal
pursuant to subsection 4.9(a)(i) of the Agreement,
an amount equal to the lesser of (x) any such
remaining Available Series 1997-1 Imputed Yield
Collections and (y) the sum of (A) the sum of the
Class B Interest and the Carryover Class B Interest
for such Business Day 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 respect thereto on such Business Day.
Notwithstanding anything to the contrary herein, the
portion of Carryover Class B Interest that
constitutes Class B Additional Interest shall be
payable or distributable to Class B
Certificateholders only to the extent permitted by
applicable law.
(iii) Investor Servicing Fee. On each
Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first
from the Collection Account and then from the
Payment Reserve Account and distribute to the
Servicer, to the extent of any Available Series
1997-1 Imputed Yield Collections remaining after
giving effect to the withdrawals pursuant to
subsections 4.9(a)(i) and (ii) of the Agreement, an
amount equal to the lesser of (x) any such remaining
Available Series 1997-1 Imputed Yield Collections
and (y) the Servicing Fee for such Business Day plus
any Servicing Fees due with respect to any prior
Business Day but not distributed to the Servicer.
(iv) Investor Default Amount. On each
Business Day, the Trustee, acting in accordance with
instructions from the Servicer, shall withdraw first
from the Collection Account and then from the
Payment Reserve Account, to the extent of any
Available Series 1997-1 Imputed Yield Collections
remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (iii) of
the Agreement, an amount equal to the lesser of (x)
any such remaining Available Series 1997-1 Imputed
Yield Collections and (y) the sum of (1) the
aggregate Investor Default Amount for such Business
Day plus (2) the unpaid Investor Default Amount for
each previous Business Day during such Monthly
Period, such amount to be (A) during the Revolving
Period treated as Shared Principal Collections, (B)
during the Amortization Period on and prior to the
day on which an amount equal to the Class A Invested
Amount is deposited in the Principal Account, to be
deposited in the Principal Account for distribution
to the Class A Certificateholders on the related
Distribution Date, (C) during the Amortization
Period, on and after the day on which such deposit
to the Principal Account with respect to the Class A
Invested Amount has been made and on and prior to
the day on which an amount equal to the Class B
Invested Amount is deposited in the Principal
Account, to be deposited in the Principal Account
for payment to the Class B Certificateholders on the
related Distribution Date and (D) during the
Amortization Period, on and after the day on which
such deposit to the Principal Account with respect
to the Class A Invested Amount and Class B Invested
Amount has been made and on and prior to the day on
which an amount equal to the Class 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 related
Distribution Date.
(v) Adjustment Payment Shortfalls. On
each Business Day, the Trustee, acting in accordance
with instructions from the Servicer, shall withdraw
first from the Collection Account and then from the
Payment Reserve Account, to the extent of any
Available Series 1997-1 Imputed Yield Collections
remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (iv) of
the Agreement, an amount equal to the lesser of (x)
any such remaining Available Series 1997-1 Imputed
Yield Collections and (y) an amount equal to the
Series Allocation Percentage of any Adjustment
Payment which the Transferor is required but fails
to make pursuant to subsection 3.8(a) of the
Agreement, such amount, (i) during the Revolving
Period, to be treated as Shared Principal
Collections, (ii) during the Amortization Period on
and prior to the day on which an amount equal to the
Class A Invested Amount is deposited in the
Principal Account, to be deposited in the Principal
Account for distribution to the Class A
Certificateholders 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 related
Distribution Date and (iv) during the Amortization
Period, on and after the day on which such deposit
to the Principal Account with respect to the Class A
Invested Amount and Class B Investment Amount 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 for payment to
the Class C Certificateholders on the related
Distribution Date.
(vi) 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 Collection
Account and then from the Payment Reserve Account,
to the extent of any Available Series 1997-1 Imputed
Yield Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.9(a)(i)
through (v) of the Agreement, an amount equal to the
lesser of (x) any such remaining Available Series
1997-1 Imputed Yield Collections and (y) the
unreimbursed Class A Investor Charge-Offs, if any,
such amount to be applied to reimburse Class A
Investor Charge-Offs, and, during the Revolving
Period, to be treated as Shared Principal
Collections, and during the Amortization Period on
and prior to the day on which an amount equal to the
Class A Invested Amount is deposited in the
Principal Account to be deposited in the Principal
Account for distribution to the Class A
Certificateholders on the related Distribution Date.
(vii) Reimbursement of Class B Investor
Charge-Offs. On each Business Day, the Trustee,
acting in accordance with instructions from the
Servicer, shall withdraw first from the Collection
Account and then from the Payment Reserve Account,
to the extent of any Available Series 1997-1 Imputed
Yield Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.9(a)(i)
through (vi) of the Agreement, an amount equal to
the lesser of (x) any such remaining Available
Series 1997-1 Imputed Yield Collections and (y) the
unreimbursed amount by which the Class B Invested
Amount has been reduced on prior Business Days
pursuant to clauses (c) and (d) of the definition of
Class B Invested Amount, if any, such amount,
(i) during the Revolving Period to be treated as
Shared Principal Collections, (ii) during the
Amortization Period, on and prior to the day on
which an amount equal to the Class A Invested Amount
is deposited in the Principal Account, to be
deposited in the Principal Account for distribution
to the Class A Certificateholders on the related
Distribution Date, and (iii) during the Amortization
Period, on and after the day on which such deposit
has been made and on and prior to the day on which
the Class B Invested Amount has been deposited in
the Principal Account, to be deposited in the
Principal Account for payment to the Class B
Certificateholders on the related Distribution Date.
(viii) Reimbursement of Class C Investor
Charge-Offs. On each Business Day, the Trustee
acting in accordance with instructions from the
Servicer, shall withdraw first from the Collection
Account and then from the Payment Reserve Account,
to the extent of any Available Series 1997-1 Imputed
Yield Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.9(a)(i)
through (vii), an amount equal to the lesser of (x)
any such remaining Available Series 1997-1 Imputed
Yield Collections and (y) the unreimbursed amount by
which the Class C Invested Amount has been reduced
on prior Business Days pursuant to clauses (d) and
(e) of the definition of Class C Invested Amount, if
any, such amount, (i) during the Revolving Period to
be treated as Shared Principal Collections, (ii)
during the Amortization Period, on and prior to the
day on which an amount equal to the Class A Invested
Amount is deposited in the Principal Account to be
deposited in the Principal Account for distribution
to the Class A Certificateholders on the next
Distribution Date, (iii) during the Amortization
Period, on and prior to the day on which an amount
equal to the Class B Invested Amount is deposited in
the Principal Account, to be deposited in the
Principal Account for distribution to the Class B
Certificateholders on the new Distribution Date and
(iv) during the Amortization Period, on and after
the day on which such deposit has been made and on
and prior to the day on which an amount equal to the
Class 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.
(ix) Class A Costs. On each Business Day,
the Trustee acting in accordance with instructions
from the Servicer, shall withdraw first from the
Collection Account and then from the Payment Reserve
Account and deposit into the Interest Funding
Account, to the extent of any Available Series 1997-
1 Imputed Yield Collections remaining after giving
effect to the withdrawals pursuant to subsections
4.9(a)(i) through (viii) of the Agreement, an amount
equal to the lesser of (x) any such remaining
Available Series 1997-1 Imputed Yield Collections
and (y) the Class A Costs for such Business Day and
any such amounts that remain unpaid from any source
from previous days to the extent not included in
Class A Costs for such Business Day.
(x) Class B Costs. On each Business Day,
the Trustee acting in accordance with instructions
from the Servicer, shall withdraw first from the
Collection Account and then from the Payment Reserve
Account, to the extent of any Available Series 1997-
1 Imputed Yield Collections remaining after giving
effect to the withdrawals pursuant to subsections
4.9(a)(i) through (ix) of the Agreement, an amount
equal to the lesser of (x) any such remaining
Available Series 1997-1 Imputed Yield Collections
and (y) Class B Breakage Costs and any amounts
payable to Class B Certificateholders pursuant to
Section 15 of the Series Supplement for payment to
such Class B Certificateholders.
(xi) Payment Reserve Account. On each
Business Day, the Trustee acting in accordance with
instructions from the Servicer, shall withdraw from
the Collection Account, to the extent of any
Available Series 1997-1 Imputed Yield Collections
remaining after giving effect to the withdrawals
pursuant to subsections 4.9(a)(i) through (x) of the
Agreement an amount equal to the lesser of (x) any
such remaining Available Series 1997-1 Imputed Yield
Collections and (y) the amount designated by the
Transferor in writing (which includes facsimile
transmission) in its instructions to the Trustee on
such Business Day and deposit such amount, if any,
into the Payment Reserve Account.
(xii) Excess Imputed Yield Collections.
Any amounts remaining in the Collection Account to
the extent of any Available Series 1997-1 Imputed
Yield Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.9(a)(i)
through (xi) of the Agreement, shall be treated as
Excess Imputed Yield Collections, and the Servicer
shall direct the Trustee in writing on each Business
Day to withdraw such amounts from the Collection
Account and to first make such amounts available to
pay to Certificateholders of other Series to the
extent of shortfalls, if any, in amounts payable to
such certificateholders from Imputed Yield
Collections allocated to such other Series, then to
pay any unpaid commercially reasonable costs and
expenses of a Successor Servicer, if any, and then
pay any remaining Excess Imputed Yield Collections
to the Transferor.
(b) For each Business Day with respect to the
Revolving Period, the funds on deposit in the Collection
Account to the extent of the lesser of (A) the Class A
Invested Amount and (B) the sum of (x) product of (i) the
Floating Allocation Percentage and (ii) the amount of
Principal Collections on such Business Day (such product
the "Revolving Principal Collections") less the amount of
Reallocated Principal Collections on such Business Day
(the Revolving Principal Collections less the Reallocated
Principal Collections on the related Business Day, the
"Net Revolving Principal Collections"), and (y) Shared
Principal Collections allocated to the Series 1997-1
Certificates in accordance with Section 4.8 on such
Business Day may, at the option of the Transferor,
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
11(b) of this Series Supplement. During the Revolving
Period, an amount equal to the Net Revolving Principal
Collections less any amount deposited to the Defeasance
Account pursuant to the immediately 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(e) of the Agreement.
(c) For each Business Day on and after the
Amortization Period Commencement Date, the amount of
funds on deposit in the Collection Account and the other
amounts described below will be distributed, pursuant to
the written direction of the Servicer in the Daily Report
for such Business Day in the following priority:
(i) on and prior to the day on which an
amount equal to the Class A Invested Amount has been
deposited in the Principal Account to be applied to
the payment of Class A Principal, an amount (not in
excess of the Class A Invested Amount) equal to the
sum of (w) the product of the 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 Principal Collections on such
Business Day), (x) any amount on deposit in the
Excess Funding Account allocated to the Class A
Certificates on such Business Day pursuant to
subsection 4.9(d) of the Agreement, (y) amounts to
be paid pursuant to subsections 4.9(a)(iv), (v),
(vi), (vii) and (viii) of the Agreement from
Available Series 1997-1 Imputed Yield Collections
and from amounts available pursuant to subsections
4.10(a) and (b) and 4.14 of the Agreement on such
Business Day, and (z) the amount of Shared Principal
Collections allocated to the Series 1997-1
Certificates in accordance with subsection 4.3(e)
and Section 4.8 of the Agreement on such Business
Day, will be deposited into the Principal Account;
(ii) on and after the day on which an
amount equal to the Class A Invested Amount has been
deposited in the Principal Account to be applied to
the payment of Class A Principal, an amount (not in
excess of the Class B Invested Amount) equal to the
sum of (w) an amount equal to the product of the
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), (x) any amount on
deposit in the Excess Funding Account allocated to
the Class B Certificates on such Business Day
pursuant to subsection 4.9(d) of the Agreement, (y)
the amount, if any, allocated to be paid to the
Class B Certificates pursuant to subsections
4.9(a)(iv), (v), (vii) and (viii) of the Agreement
from Available Series 1997-1 Imputed Yield
Collections and from amounts available pursuant to
subsections 4.10(a) and (b) and 4.14(a) of the
Agreement with respect to such Business Day, and (z)
the amount of Shared Principal Collections allocated
to the Series 1997-1 Certificates in accordance with
subsection 4.3(e) and Section 4.8 of the Agreement
on such Business Day (such sum, the "Class B Daily
Principal Amount") will be deposited into the
Principal Account;
(iii) on and after the day on which an
amount equal to the Class B Invested Amount has been
deposited in the Principal Account to be applied to
the payment of Class B Principal, an amount (not in
excess of the Class C Invested Amount) equal to the
sum of (w) an amount equal to the product of the
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), (x) 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) of the Agreement, (y)
the amount, if any, allocated to be paid to the
Class C Certificates pursuant to subsections
4.9(a)(iv), (v) and (viii) of the Agreement from
Available Series 1997-1 Imputed Yield Collections
and from amounts available pursuant to subsections
4.10(a) and (b) of the Agreement with respect to
such Business Day, and (z) the amount of Shared
Principal Collections allocated to the Series 1997-1
Certificates in accordance with subsection 4.3(e)
and Section 4.8 of the Agreement on such Business
Day (such sum, the "Class C Daily Principal Amount")
will be deposited into the Principal Account;
(iv) an amount equal to the excess, if
any, of (A) the sum of the amounts described in
clauses (i)(w) and (y), (ii)(w) and (y) and (iii)(w)
and (y) above over (B) the sum of Class A Principal,
Class B Principal and Class C Principal will be
treated as Shared Principal Collections and applied
as provided in subsection 4.3(e) of the Agreement.
(d) On the first Business Day of the
Amortization Period, funds on deposit in the Excess
Funding Account will be deposited in the Principal
Account; provided, however, that if any other Series
enters its Amortization Period, as defined in its related
Series Supplement at the same time as Series 1997-1, 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; provided, further, that on any Business Day
prior to the Series 1994-1 Funding Date any amounts
allocated to the Series 1997-1 Certificates from the
Excess Funding Account as described above shall instead
initially be reallocated to the Series 1994-1
Certificates until the Class A, Class B and Class C
Series 1994-1 Certificates have been paid in full and
then shall be reallocated back to the Series 1997-1
Certificates. 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
Certificates in an amount not to exceed the Class A
Principal after subtracting therefrom any amounts to be
paid to the Class A Certificateholders with respect
thereto pursuant to subsections 4.9(c)(i)(w) and (y) of
the Agreement, and (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)(w) and (y). On and after the Class
C Principal Payment Commencement Date any amounts
remaining on deposit in the Excess Funding Account and
allocated to the Series 1997-1 Certificates will be
deposited in the Principal Account in an amount not to
exceed the Class C Invested Amount after subtracting
therefrom any amounts to be deposited in the Principal
Account with respect thereto pursuant to subsections
4.9(c)(iii)(w), (y) and (z).
(e) On each Business Day on which Class C
Principal has been allocated pursuant to subsection
4.7(c) of the Agreement, funds on deposit in the
Collection Account in an amount equal to the Class C
Daily Principal Amount designated by the Transferor with
respect to such Business Day will be distributed to the
Class C Certificateholders.
Section 4.10 Coverage of Required Amount for
the Series 1997-1 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
1997-1 Imputed Yield Collections in subsections 4.9(a)(i)
through (x), Transferor Imputed Yield Collections in an
amount equal to the excess of (x) the product of (a) the
Base Rate, (b) the amounts on deposit in the 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").
(b) To the extent that on any Business Day
payments are being made pursuant to any of subsections
4.9(a)(i) through (x), 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 1997-1
Imputed Yield Collections in subsections 4.9(a)(i)
through (x), all or a portion of the Excess Imputed Yield
Collections from other Series with respect to such
Business Day allocable to the Series 1997-1 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 1997-1 Imputed Yield Collections and
Transferor Imputed Yield Collections on such Business Day
(the "Required Amount"). Excess Imputed Yield
Collections allocated to the Series 1997-1 Certificates
for any Business Day shall mean an amount equal to the
product of (x) Excess Imputed Yield Collections available
from all other Series for such Business Day and (y) a
fraction, the numerator of which is the Required Amount
for such Business Day and the denominator of which is the
aggregate amount of shortfalls in required amounts or
other amounts to be paid from Imputed Yield Collections
for all Series for such Business Day.
Section 4.11 Payment of Certificate Interest.
On each Transfer Date, the Trustee, acting in accordance
with instructions from the Servicer set forth in the
Daily Report for such day, shall withdraw the amount on
deposit in the Interest Funding Account with respect to
the preceding Monthly Period allocable to the Series
1997-1 Certificates and deposit such amount in the
Distribution Account. On each Distribution Date, the
Paying Agent shall pay in accordance with Section 5.1 of
the Agreement (x) to the Class A Certificateholders from
the Distribution Account the amount deposited into the
Interest Funding Account during the preceding Monthly
Period pursuant to subsections 4.9(a)(i) and 4.9(a)(ix)
and Sections 4.10 and 4.14 with respect to the related
Interest Accrual Period and (y) the Class B
Certificateholders 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 4.9(a)(x) and Sections 4.10 and 4.14 with
respect to the related Interest Accrual Period.
Section 4.12 Payment of Certificate Principal.
(a) On the Transfer Date preceding the first
Distribution Date in the Amortization Period and on 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 A Principal for such Distribution
Date. On the first Distribution Date in the Amortization
Period and on each Distribution Date thereafter until the
Class A Invested Amount is paid in full, the Paying Agent
shall pay in accordance with subsection 5.1(a) to the
Class A 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 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 Certificateholders
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(b)
to the Class B Certificateholders from the Distribution
Account such amount deposited into the Distribution
Account on the related Transfer Date.
(c) 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
payments of principal to the Class C Certificateholders
of Class C Daily Principal, if any, designated by the
Transferor pursuant to Section 4.7(c) of the Agreement.
Any amounts remaining in the Principal Account
and allocable to the Series 1997-1 Certificates, after
the Class C Invested Amount has been paid in full, will
be treated as Shared Principal Collections and applied in
accordance with Section 4.3(e) of the Agreement.
Section 4.13 Investor Charge-Offs. (a) If,
on any Determination Date, the aggregate Investor Default
Amount and the Series Allocation Percentage of unpaid
Adjustment Payments, if any, for each Business Day in the
preceding Monthly Period exceeded the Available Series
1997-1 Imputed Yield Collections applied to the payment
thereof pursuant to subsections 4.9(a)(iv) and (v) of the
Agreement and the amount of Transferor Imputed Yield
Collections and Excess Imputed Yield Collections
allocated thereto pursuant to Section 4.10 of the
Agreement, and the amount of Reallocated Principal
Collections applied with respect thereto pursuant to
Section 4.14 of the Agreement, the Class C 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 respect thereto during
such preceding 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").
(d) Following the occurrence of a Class A
Investor Charge-Off, if the Class C Invested Amount is
increased, including any increase thereof pursuant to
Section 6.16 of the Agreement, to the extent of the Class
C Invested Amount the amount of any unreimbursed Class A
Investor Charge-Off shall be reduced and, the Class A
Invested Amount shall be correspondingly increased in an
amount not to exceed the amount of such increased Class C
Invested Amount, the Class C Invested Amount shall be
correspondingly decreased and the amount of such decrease
shall be deemed to be a Class C Investor Charge-Off.
Following the occurrence of either a Class B Investor
Charge-Off or any reduction of the Class B Invested
Amount described in clause (d) of the definition thereof,
if the Class C Invested Amount is increased, including
any increase thereof pursuant to Section 6.16 of the
Agreement, to the extent of the Class C Invested Amount
remaining after any adjustment thereto pursuant to the
preceding sentence the amount of any unreimbursed Class B
Investor Charge-Off and amounts described in clause (d)
of the definition of Class B Invested Amount shall be
reduced and, the Class B Invested Amount shall be
increased in an amount not to exceed the lesser of (x)
the amount of such remaining Class C Invested Amount, and
(y) the amount of reductions to the Class B Invested
Amount described in clauses (c) and (d) of the definition
thereof, the Class C Invested Amount shall be
correspondingly decreased and the amount of such decrease
shall be deemed to be a Class C Investor Charge-Off.
Section 4.14 Reallocated Principal Collections
for the Series 1997-1 Certificates.
(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 with respect to such
Business Day and (iii) an amount equal to the sum of the
Class A Required Amount and the Class B Required Amount
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 components of the Class A Required Amount, then to
the components of the Class B Required Amount in the same
priority as amounts are applied to such components from
Available Series 1997-1 Imputed Yield Collections
pursuant to subsection 4.9(a) of the Agreement.
(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 Required Amount for such Business Day over the
amount of 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 1997-1
Imputed Yield Collections pursuant to subsection 4.9(a).
Section 4.15 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 Reserve
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 established, 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 Earnings for
application as Available Series 1997-1 Imputed Yield
Collections.
SECTION 7. Article V of the Agreement.
Article V of the Agreement shall read in its entirety as
follows and shall be applicable only to the Series 1997-1
Certificates:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO INVESTOR
CERTIFICATEHOLDERS
Section 5.1 Distributions.
(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 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 Class A
Certificates held by such Certificateholder) of amounts
on deposit in the Distribution Account as are payable to
the Class A Certificateholders pursuant to Section 4.11
and 4.12 of the Agreement by wire transfer to an account
or accounts designated by such Class A Certificateholders
by written notice given to the Paying Agent not less than
five days prior to the related Distribution Date;
provided, however, that with respect to amounts payable
pursuant to Section 4.11, the portion of such amounts
constituting increased costs and Class A Breakage Costs
shall be paid to Class A Certificateholders on the basis
of certifications provided to the Trustee and the
Servicer pursuant to Section 15 and subsection 11(b) of
this Series Supplement; provided, further, that the final
payment in retirement of the Class A Certificates will be
made only upon presentation and surrender of the Class A
Certificates at the office or offices specified in the
notice of such final distribution delivered by the
Trustee pursuant to Section 12.3.
(b) On each Distribution Date, the Paying
Agent shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to each
Class B Certificateholder of record on the preceding
Record Date (other than as provided in subsection 2.4(e)
or in Section 12.3 respecting a final distribution) such
Certificateholder's pro rata share (based on the
aggregate Undivided Interests represented by Class B
Certificates held by such Certificateholders) of amounts
on deposit in the Distribution Account as are payable to
the Class B Certificateholders pursuant to Section 4.11
and 4.12 of the Agreement by 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 with respect to amounts payable
pursuant to Section 4.11, the portion of such amounts
constituting increased costs and Class B Breakage Costs
shall be paid to Class B Certificateholders on the basis
of certifications provided to the Trustee and the
Servicer pursuant to Section 15 and subsection 11(b) of
this Series Supplement; provided, further, 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 distribution delivered by the
Trustee pursuant to Section 12.3.
(c) On each Distribution Date, the Paying
Agent shall distribute (in accordance with the Settlement
Statement delivered by the Servicer to the Trustee and
the Paying Agent pursuant to subsection 3.4(c)) to each
Class C Certificateholder of record on the preceding
Record Date (other than as provided in subsection 2.4(e)
or in Section 12.3 respecting a final distribution) such
Certificateholder's pro rata share (based on the
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 Section 4.11
and 4.12 of the Agreement by wire transfer to each Class
C Certificateholder to an account or accounts designated
by such Class C Certificateholder by written notice given
to the Paying Agent not less than five days prior to the
related Distribution Date; provided, however, that the
final payment in retirement of the Class C Certificates
will be made only upon presentation and surrender of the
Class C Certificates at the office or offices specified
in the notice of such final distribution delivered by the
Trustee pursuant to Section 12.3.
Section 5.2 Certificateholders' Statement.
(a) On the 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 a statement substantially in the form
of Exhibit D prepared by the Servicer and delivered to
the Trustee and the Paying Agent on the preceding
Determination Date setting forth the following information:
(i) the total amount distributed;
(ii) the amount of such distribution
allocable to Certificate Principal;
(iii) the amount of such distribution
allocable to Certificate Interest;
(iv) the amount of Principal Collections
received in the Collection Account during the
preceding Monthly Period and allocated in respect of
the Class A Certificates, the Class B Certificates
and the Class C Certificates, respectively;
(v) the amount of Imputed Yield
Collections processed during the preceding Monthly
Period and allocated in respect of the Class A
Certificates, the Class B Certificates and the Class
C Certificates, respectively;
(vi) 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 Floating Allocation
Percentage and, during the Amortization Period, the
Fixed/Floating Allocation Percentage, Class B
Fixed/Floating Allocation Percentage and the Class C
Fixed/Floating Allocation Percentage, as of the end
of the day on the last day of the related Monthly
Period;
(vii) 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;
(viii) the aggregate Investor Default
Amount for the preceding Monthly Period;
(ix) the aggregate amount of Class A
Investor Charge-Offs, Class B Investor Charge-Offs
and Class C Investor Charge-Offs for the preceding
Monthly Period;
(x) the amount of the Servicing Fee for
the preceding Monthly Period;
(xi) the amount of unreimbursed
Reallocated Principal Collections for the related
Monthly Period;
(xii) the aggregate amount of funds in
the Excess Funding Account and the Defeasance
Account as of the last day of the Monthly Period
immediately preceding the Distribution Date;
(xiii) the Portfolio Yield and Base Rate
with respect to such Monthly Period; and
(xiv) 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 with respect to such Monthly
Period, such amount to be specified only to the
extent it is greater than zero.
(b) Annual Certificateholders' Tax
Statement. On or before January 31 of each calendar
year, beginning with calendar year 1998, the Paying Agent
shall distribute to each Person who at any time during
the preceding calendar year was a Series 1997-1
Certificateholder, a statement prepared by the Servicer
containing the information required to be contained in
the regular report to Series 1997-1 Certificateholders,
as set forth in subclauses (i), (ii) and (iii) above,
aggregated for such calendar year or the applicable
portion thereof during which such Person was a Series
1997-1 Certificateholder, together with, on or before
January 31 of each year, beginning in 1998, such other
customary information (consistent with the treatment of
the Certificates as debt) as the Trustee or the Servicer
deems necessary or desirable to enable the Series 1997-1
Certificateholders to prepare their tax returns. Such
obligations of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to
any requirements of the Internal Revenue Code as from
time to time in effect.
SECTION 8. Article VI of the Agreement.
Article VI (except for Sections 6.1 through 6.14 thereof)
shall read in its entirety as follows and shall be
applicable only to the Series 1997-1:
ARTICLE VI
THE CERTIFICATES
Section 6.15 Additional Class A Invested
Amounts. Each Class A Certificateholder agrees, by
acceptance of its Class A Certificate, that the
Transferor may from time to time, other than after a Pay
Out Commencement Date and other than after the occurrence
of a pay out event with respect to the Series 1994-1
Certificates, request that such Class A Certificateholder
acquire on any Distribution Date additional undivided
interests in the Trust in specified amounts (such
amounts, the "Additional Class A Invested Amounts") in an
aggregate amount for all Class A Certificateholders equal
to the excess of the amount of the reduction in the
invested amount of the Class A, Class B and Class C
Series 1994-1 Certificates on such Distribution Date over
the amount of the increase of the Class B Invested Amount
on such Distribution Date; provided, however, that if
such an increase in the Class A Invested Amount would
cause a Trust Pay Out Event or a Series 1997-1 Pay Out
Event to occur, then the amount of the increase in the
Class A Invested Amount shall be limited on such
Distribution Date 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 1997-1 Pay Out
Event to occur; provided further, that in no case shall
the Class A Invested Amount be increased above the lesser
of (x) the Class A Maximum Invested Amount and (y) the
Class A Available Commitment. The Additional Class A
Invested Amount on any Distribution Date shall not exceed
an amount equal to the excess of the sum of the aggregate
amount of Principal Receivables and amounts on deposit in
the Excess Funding Account over the greater of (a) the
sum of (i) the aggregate invested amount of each Series
then outstanding as of such day, including the Series
1997-1 Certificates (prior to giving effect to such
Additional 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 less
any principal repaid to the Series 1994-1 Certificates.
The Class A Certificateholders shall acquire such
Additional Class A Invested Amount, only if (a) the Class
C Invested Amount following the acquisition of such
Additional Class A Invested Amount shall be at least
equal to the Stated Class C Amount (including increases
to the Class C Invested Amount pursuant to Section 6.16
of the Agreement) and (b) after giving effect to the
proposed increase in the Class A Invested Amount no
Series 1997-1 Pay Out Event shall exist or occur as a
result of such increase. Each Class A Certificateholder
agrees, by acceptance of its Class A Certificate, that it
will acquire an amount equal to its Percentage of any
Additional Class A Invested Amounts; provided, that no
Class A Certificateholder shall be required to purchase
an Additional Class A Invested Amount if such purchase
would cause the total Class A Invested Amount held by
such Class A Certificateholder to exceed such Class A
Certificateholder's Percentage of the Class A Available
Commitment. If the Class A Certificateholders acquire
such Additional Class A Invested Amount, each such Class
A Certificateholder shall pay an amount equal to its
Percentage of the Additional Class A Invested Amount to
the Trustee and, in consideration of such payment the
Servicer shall appropriately note the aggregate
Additional Class A Invested Amount (and the increased
Class A Invested Amount) on the next succeeding
Servicer's report and direct the Trustee in writing to
pay to the Transferor such Additional Class A Invested
Amount, and the aggregate Invested Amount of the Class A
Certificates will be equal to the Invested Amount of the
Class A Certificates stated in such Servicer's report.
The purchase of any Additional Class A Invested
Amount shall be in an aggregate principal amount that is
not less than $1,000,000 or integral multiples of
$100,000 in excess thereof.
Each Class A Certificateholder shall be and is
hereby authorized to record on the grid attached to its
Class A Certificate (or at such Class A Certificate-
holder's option, in its internal books and records) the
date and amount of its percentage interest in any
Additional Class A Invested Amount purchased by it, and
each repayment thereof; provided that failure to make any
such recordation on such grid or any error in such grid
shall not adversely affect such Class A
Certificateholder's rights with respect to its Class A
Invested Amount and its right to receive interest
payments in respect of the Class A Invested Amount held
by such Class A Certificateholder.
Section 6.16 Additional Class C Invested
Amounts.
On each Distribution Date while any Series
1997-1 Certificates are outstanding, the Transferor may
elect to increase the Class C Invested Amount and after
the Pay Out Commencement Date the Transferor agrees to
increase the Class C Invested Amount (such additional
amounts, "Additional Class C Invested Amounts") by
written notice to the Trustee on such date which notice
shall specify the effective date and the amount of such
increase in the Class C Invested Amount. The Transferor
agrees that, subject to satisfaction of the conditions
specified above, (A) on the Business Day upon which the
aggregate invested amount of the Series 1994-1 Class A,
Class B and Class C Investor Certificates have been paid
in full but prior to the Pay Out Commencement Date, the
Transferor shall increase the Class C Invested Amount by
an amount equal to the lesser of (i) the invested amount
(to be calculated without including for such calculation
any allocations to such Series 1994-1 Class D Investor
Certificates on such Business Day) of the Series 1994-1
Class D Investor Certificates on such Business Day and
(ii) the Stated Class C Amount on such Business Day and
shall cancel such Series 1994-1 Class D Investor
Certificates concurrently with such increase of the Class
C Invested Amount or (B) on and after the Pay Out
Commencement Date (i) the Transferor shall increase the
Class C Invested Amount on the first Distribution Date
after the Pay Out Commencement Date by an amount equal to
the amount of Principal Collections on deposit in the
applicable principal account for the benefit of the
Series 1994-1 Certificateholders on such Distribution
Date and paid to the Series 1994-1 Certificateholders on
such Distribution Date and (ii) on the Business Day on
which the aggregate invested amounts of the Class A,
Class B and Class C Investor Certificates of Series 1994-
1 are paid in full, if such day occurs on or after the
Pay Out Commencement Date, the Transferor shall increase
the Class C Invested Amount by an amount equal to the
invested amount of the Series 1994-1 Class D Investor
Certificates on such Business Day and shall cancel such
Series 1994-1 Class D Investor Certificates concurrently
with such increase of the Class C Invested Amount.
Section 6.17 Extension. (a) If a Pay Out
Event has not occurred on or before the 30th Business Day
preceding the Extension Date, the Transferor, in its sole
discretion, may deliver to the Trustee on or before such
date a notice substantially in the form of Exhibit F (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; and (iii) a form of Investor
Certificateholder Election Notice substantially in the
form of Exhibit G (the "Election Notice") to this Series
Supplement. In addition, the Extension Notice shall
state that any Investor Certificateholder electing to
approve the Extension must do so on or before the
Election Date (as defined below) by returning the annexed
Election Notice properly executed to the Trustee in the
manner described below. The Extension Notice shall also
state that an Investor Certificateholder may withdraw any
such election in whole or in part on or before the
Election Date, and the Transferor, in its sole
discretion, may, prior to the Election Date, withdraw its
election to extend the Revolving Period. Any Holder that
elects to approve an Extension hereunder shall deliver a
duly executed Election Notice to the Trustee at the
address designated in the Extension Notice on or before
3:00 p.m., New York City time, on or before the fifth
Business Day preceding the Extension Date (such Business
Day constituting the "Election Date").
(b) No extension shall occur 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
Extension Tax Opinion and the Extension Opinion, each
addressed to the Trustee and (B) written confirmation
from each Rating Agency rating any class of the
Certificates at the request of the Transferor at the time
of such Extension that the Extension will not cause such
Rating Agency to lower or withdraw its then current
rating of such Investor Certificates, (iii) each of the
holders of the Class A Certificates, the Class B
Certificates and the Class C Certificates shall have
elected to approve the Extension by returning to the
Trustee on or before the Election Date the executed
Election Notice annexed to the Extension Notice delivered
to 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 Election Date, that
the Transferor has exercised its right to withdraw its
election of an Extension, no Extension shall occur.
(c) The execution by the required number of
Investor 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 Section
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.
(d) To the extent required by applicable laws
and regulations, as evidenced by an Opinion of Counsel
delivered 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 9. Series 1997-1 Pay Out Events. If
any one of the following events shall occur with respect
to the Series 1997-1 Certificates:
(a) failure on the part of the Transferor
(i) to make any payment or deposit required to be made by
the Transferor by the terms of (A) the Agreement or (B)
this Series Supplement, on or before the date occurring
five Business Days after the date such payment or deposit
is required to be made herein, (ii) to perform in all
material respects the Transferor's covenant not to sell,
pledge, assign, or transfer to any person, or grant any
unpermitted lien on, any Receivable, except as expressly
provided in the Agreement; or (iii) duly to observe or
perform in any material respect any covenants or
agreements of the Transferor set forth in the Agreement
or this Series Supplement, which failure has a material
adverse effect on the Series 1997-1 Certificateholders
and which continues unremedied for a period of 60 days
after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given
to the Transferor by the Trustee, or to the Transferor
and the Trustee by the Holders of Series 1997-1
Certificates evidencing Undivided Interests aggregating
greater than 50% of any of the Class A Invested Amount,
Class B Invested Amount or the Class C Invested Amount,
and continues to affect materially and adversely the
interests of the Series 1997-1 Certificateholders for
such period;
(b) any representation or warranty made
by the Transferor in the Agreement or 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 1997-1
Certificates evidencing Undivided Interests aggregating
more than 50% of any of the Class A Invested Amount,
Class B Invested Amount or the Class C Invested Amount,
and (ii) as a result of which the interests of the Series
1997-1 Certificateholders are materially and adversely
affected and continue to be materially and adversely
affected for such period; provided, however, that a
Series 1997-1 Pay Out Event pursuant to this subsection
9(b) shall not be deemed to have occurred hereunder if
the Transferor has accepted reassignment of the related
Receivable, or all of such Receivables, if applicable,
during such period in accordance with the provisions of
the Agreement;
(c) the average of the Portfolio Yields
for any three consecutive Monthly Periods is reduced to a
rate which is less than the weighted average of the
weighted average Base Rates for such three consecutive
Monthly Periods;
(d) (i) the Transferor Interest shall be
less than the Minimum Transferor Interest, (ii) (A) the
Series Allocation Percentage of the sum of the total
amount of Principal Receivables plus amounts on deposit
in the Excess Funding Account shall be less than (B) the
sum of the Class A Outstanding Principal Amount, the
Class B Outstanding Principal Amount and the Class C
Outstanding Principal Amount or (iii) the total amount of
Principal Receivables and the amount on deposit in the
Excess Funding Account shall be less than the Minimum
Aggregate Principal Receivables (provided that for
purposes of determining Minimum Aggregate Principal
Receivables, for so long as the Series 1994-1
Certificates are outstanding, the Initial Invested Amount
of Series 1994-1 shall mean $1,022,728,000), in each case
as of any Determination Date;
(e) any Servicer Default shall occur
which would have a material adverse effect on the Series
1997-1 Certificateholders;
(f) 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; or
(g) FCI or FNB shall consent to the
appointment of a bankruptcy trustee or receiver or
liquidator in any bankruptcy proceeding or any other
insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to
all or substantially all of its property; or a decree or
order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment
of a bankruptcy trustee or receiver or liquidator in any
bankruptcy proceeding or any other insolvency,
readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up
or liquidation of its affairs, shall have been entered
against FCI or FNB; or FCI or FNB shall admit in writing
its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable
insolvency or reorganization statute including the U.S.
bankruptcy code, make an assignment for the benefit of
its creditors or voluntarily suspend payment of its
obligations;
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 1997-1 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 by notice then given in writing to the
Trustee, the Transferor and the Servicer may declare that
a pay out event (a "Series 1997-1 Pay Out Event") has
occurred as of the date of such notice, and in the case
of any event described in subparagraphs (c), (d), (f) or
(g), a Series 1997-1 Pay Out Event shall occur without
any notice or other action on the part of the Trustee or
the Series 1997-1 Certificateholders immediately upon the
occurrence of such event.
SECTION 10. Series 1997-1 Termination. The
right of the Series 1997-1 Certificateholders to receive
payments from the Trust will terminate on the first
Business Day following the Series 1997-1 Termination Date
unless such Series is an Affected Series as specified in
Section 12.1(c) of the Agreement and the sale
contemplated therein has not occurred by such date, in
which event the Series 1997-1 Certificateholders shall
remain entitled to receive proceeds of such sale when
such sale occurs.
SECTION 11. Pre-Payment of Certificates. (a)
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
Invested Amount on such date. On the Closing Date the
Trustee shall, for the benefit of the Certificateholders,
establish and maintain with a Qualified Institution in
the name of the Trust, a certain segregated trust account
(the "Defeasance Account"). Any amounts on deposit in
the Defeasance Account 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 Earnings for
application as Available Series 1997-1 Imputed Yield
Collections.
(b) Upon the direction of the Servicer
any amounts, up to the 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 a date to be specified by the Transferor
(which shall not be later than the Distribution Date in
the next succeeding Monthly Period) to be applied
first to the payment of Class A Principal, second to the
payment of Class B Principal and third to the payment of
Class C Principal. Such amounts shall be applied and
paid in accordance with Sections 4.7, 4.12 and 5.1 of the
Agreement. In the event the date of payment of such
amounts is not a Distribution Date, a Certificateholder
may provide to the Trustee and the Servicer within 30
days of such payment a written certificate setting forth
any reasonable loss or expense that such
Certificateholder sustained or incurred as a consequence
of such payment being made on a date other than a
Distribution Date (with respect to the Class A
Certificates, "Class A Breakage Costs" and with respect
to the Class B Certificates, "Class B Breakage Costs")
and, pursuant to subsections 4.9(a)(ix) and 4.9(a)(x) of
the Agreement and as further specified in Section 4.11
and subsection 5.1(a) of the Agreement, an amount equal
to the Class A Breakage Costs shall be paid to Class A
Certificateholders to the extent of funds available
therefor, and upon payment in full of the Class A
Breakage Costs, an amount equal to the Class B Breakage
Costs shall be paid to the Class B Certificateholders to
the extent of funds available therefor. Subsequent to
any reduction of the Class A Invested Amount as a result
of payments pursuant to this Section 11, the Class A
Invested Amount, may be increased pursuant to the terms
and conditions set forth in Section 6.15 of the
Agreement.
SECTION 12. Legends; Transfer and Exchange;
Restrictions on Transfer of Series 1997-1 Certificates;
Tax Treatment.
(a) Each Class A Certificate and Class B
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
SECURITIES 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
TRANSFEROR. EACH CERTIFICATE OWNER BY ACCEPTING A
BENEFICIAL INTEREST IN THIS CERTIFICATE IS DEEMED TO
REPRESENT AND WARRANT THAT IT IS A QIB PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE
ACCOUNT OF ANOTHER QIB. THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. EACH CLASS [A] [B] CERTIFICATE
OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS
CERTIFICATE FURTHER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT SUCH
PURCHASER IS NOT AND WILL NOT BECOME A PARTNERSHIP,
SUBCHAPTER S CORPORATION OR GRANTOR TRUST FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES FOR SO LONG AS
SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS
CERTIFICATE.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR
SOLD, TRADED OR TRANSFERRED TO A PERSON WHO IS NOT
EITHER (A)(I) A CITIZEN OR RESIDENT OF THE UNITED
STATES, (II) A CORPORATION, PARTNERSHIP OR OTHER
ENTITY ORGANIZED IN OR UNDER THE LAWS OF THE UNITED
STATES OR ANY POLITICAL SUBDIVISION THEREOF OR (III)
A PERSON NOT DESCRIBED IN (I) OR (II) WHOSE
OWNERSHIP OF THE CLASS [A] [B] CERTIFICATES IS
EFFECTIVELY CONNECTED WITH SUCH PERSON'S CONDUCT OF
A TRADE OR BUSINESS WITHIN THE UNITED STATES (WITHIN
THE MEANING OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE")) AND ITS OWNERSHIP OF ANY
INTEREST IN A CLASS [A] [B] CERTIFICATE WILL NOT
RESULT IN ANY WITHHOLDING OBLIGATION WITH RESPECT TO
ANY PAYMENTS WITH RESPECT TO THE CLASS [A] [B]
CERTIFICATES BY ANY PERSON (OTHER THAN WITHHOLDING,
IF ANY, UNDER SECTION 1446 OF THE CODE) OR (B) AN
ESTATE THE INCOME OF WHICH IS INCLUDIBLE IN GROSS
INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES
OR ANY TRUST IF A COURT WITHIN THE UNITED STATES IS
ABLE TO EXERCISE PRIMARY SUPERVISION OVER THE
ADMINISTRATION OF THE TRUST AND ONE OR MORE UNITED
STATES FIDUCIARIES HAVE THE AUTHORITY TO CONTROL ALL
SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE (OR ANY INTEREST THEREIN) SHALL BE MADE
UNLESS THE TRANSFEROR SHALL HAVE GRANTED ITS PRIOR
CONSENT THERETO, WHICH CONSENT MAY NOT BE
UNREASONABLY WITHHELD. THIS CERTIFICATE MAY NOT BE
ACQUIRED, SOLD, TRADED OR TRANSFERRED, NOR MAY AN
INTEREST IN THIS CERTIFICATE BE MARKETED, ON OR
THROUGH (I) AN "ESTABLISHED SECURITIES MARKET"
WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE CODE
AND ANY PROPOSED, TEMPORARY OR FINAL TREASURY
REGULATION THEREUNDER, INCLUDING, WITHOUT
LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN
INTERDEALER QUOTATION SYSTEM THAT REGULARLY
DISSEMINATES FIRM BUY OR SELL QUOTATIONS OR (II) A
"SECONDARY MARKET" WITHIN THE MEANING OF SECTION
7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY
OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING A
MARKET WHEREIN INTERESTS IN THE CLASS [A] [B]
CERTIFICATES ARE REGULARLY QUOTED BY ANY PERSON
MAKING A MARKET IN SUCH INTERESTS AND A MARKET
WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID OR
OFFER QUOTES WITH RESPECT TO INTERESTS IN THE CLASS
[A] [B] CERTIFICATES AND STANDS READY TO EFFECT BUY
OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF
OR ON BEHALF OF OTHERS.
(b) Each Class A Certificate, Class B
Certificate and Class C Certificate will bear a legend
substantially in the following form:
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT, UNLESS
SUCH PURCHASER, AT ITS EXPENSE, DELIVERS TO THE
TRUSTEE, THE SERVICER AND THE TRANSFEROR AN OPINION
OF COUNSEL SATISFACTORY TO THEM TO THE EFFECT THAT
THE PURCHASE OR HOLDING OF A CLASS A CERTIFICATE,
CLASS B CERTIFICATE OR CLASS C 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
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED ("ERISA") AND THE CODE AND WILL NOT
SUBJECT THE TRUSTEE, THE TRANSFEROR OR THE SERVICER
TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN
THE POOLING AND SERVICING AGREEMENT, SUCH PURCHASER
IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE
PROVISIONS OF TITLE I OF ERISA, (II) A PLAN
DESCRIBED IN SECTION 4975(e)(1) OF THE CODE, (III) A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF
ERISA, SUBJECT TO ANY FEDERAL, STATE, OR LOCAL LAW
WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE, (IV) AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE PLAN ASSETS (AS DEFINED IN 29 C.F.R. SECTION
2510.3-101 OR OTHERWISE UNDER ERISA) BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY OR (V) A PERSON
INVESTING PLAN ASSETS OF ANY SUCH PLAN (INCLUDING
FOR PURPOSES OF CLAUSES (IV) AND (V), ANY INSURANCE
COMPANY GENERAL ACCOUNT, BUT EXCLUDING ANY ENTITY
REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940,
AS AMENDED).
(c) Each Class C 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
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 INCOME TAX
CHARACTERIZATION OF ANY OUTSTANDING SERIES OF
INVESTOR CERTIFICATES. THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE (OR ANY INTEREST THEREIN) SHALL BE MADE
UNLESS THE TRANSFEROR SHALL HAVE GRANTED ITS PRIOR
CONSENT THERETO, WHICH CONSENT MAY NOT BE
UNREASONABLY WITHHELD. NOR MAY AN INTEREST IN THIS
CERTIFICATE BE MARKETED, ON OR THROUGH (I) AN
"ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING
OF SECTION 7704(b)(1) OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE") AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-
MARKET OR AN INTERDEALER QUOTATION SYSTEM THAT
REGULARLY DISSEMINATES FIRM BUY OR SELL QUOTATIONS
OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING A MARKET WHEREIN INTERESTS IN THE CLASS C
CERTIFICATES ARE REGULARLY QUOTED BY ANY PERSON
MAKING A MARKET IN SUCH INTERESTS AND A MARKET
WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID OR
OFFER QUOTES WITH RESPECT TO INTERESTS IN THE CLASS
C CERTIFICATES AND STANDS READY TO EFFECT BUY OR
SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR
ON BEHALF OF OTHERS.
(d) Upon surrender for registration of
transfer of a Class A Certificate, Class B Certificate or
Class C Certificate at the office of the Transfer Agent
and Registrar, accompanied by a certification by the
potential purchaser substantially in the form attached as
Exhibit E executed by such purchaser or by such
purchaser's attorney thereunto duly authorized in
writing, such Class A Certificate, Class B Certificate or
Class C Certificate shall be transferred upon the
register, and the Transferor shall execute, and the
Trustee shall authenticate and deliver, in the name of
the designated transferees one or more new registered
Class A Certificates, Class B Certificates or Class C
Certificates of any authorized denominations and of a
like aggregate principal amount and tenor. Transfers and
exchanges of Class A Certificates, Class B Certificates
and Class C Certificates shall be subject to the
restrictions set forth in this Section 12, to such
restrictions as shall be set forth in the text of the
Class A Certificates, Class B Certificates and Class C
Certificates, and, with respect to Transfers other than
by an SPCPC to its Program Banks, such reasonable
regulations as may be prescribed by the Transferor.
Successive registrations and registrations of transfers
as aforesaid may be made from time to time as desired,
and each such registration shall be noted on the
register.
(e) The Transferor shall be prohibited
from transferring any interest in or portion of the Class
C 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 income tax characterization of any
outstanding Series of Investor Certificates. In no event
shall any interest in or portion of the Class C
Certificate be transferred to Fingerhut. Prior to the
transfer of any interest in the Class C Certificate by
the Transferor the conditions specified in Section 13 of
this Series Supplement must be satisfied.
(f) No transfer of a Class A Certificate,
Class B Certificate or Class C 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 A Certificate, Class B Certificate or
Class C 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 Internal Revenue
Code and will not subject the Trustee, the Transferor or
the Servicer to any obligation in addition to those
undertaken in the Agreement. Unless such opinion is
delivered, each person acquiring a Class A Certificate,
Class B Certificate or Class C Certificate or the
beneficial ownership of a Class A Certificate, Class B
Certificate or Class C Certificate will be deemed to
represent to the Trustee, the Transferor and the Servicer
that it is not (i) an employee benefit plan (as defined
in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (ii) a plan described in
Section 4975(e)(1) of the Internal Revenue Code, (iii) a
governmental plan, as defined in Section 3(32) of ERISA,
subject to any federal, state or local law which is, to a
material extent, similar to the provisions of Section 406
of ERISA or Section 4975 of the Internal Revenue Code,
(iv) an entity whose underlying assets include plan
assets (as defined in 29 C.F.R. Section 2510.3-101 or
otherwise under ERISA) by reason of a plan's investment
in the entity or (v) a person investing plan assets of
any such plan (including for purposes of clauses (iv) and
(v), insurance company general account, but excluding any
entity registered under the Investment Company Act of
1940, as amended).
(g) The Class A Certificateholders and
Class B Certificateholders shall comply with their
obligations under Section 3.7 of the Agreement with
respect to the tax treatment of the Class A Certificates
and Class B Certificates, except to the extent that a
relevant taxing authority has disallowed such treatment.
(h) In accordance with Section 6.2 of the
Agreement, no sale, assignment, participation, pledge,
hypothecation, transfer or other disposition (a
"Transfer") of a Class A Certificate, Class B Certificate
or Class C Certificate (or any interest therein) shall be
made unless the Transferor shall have granted its prior
consent thereto, which consent may not be unreasonably
withheld; provided, however, that for purposes of this
sentence, it shall in all cases be reasonable for the
Transferor to withhold consent to such proposed sale,
assignment, participation, pledge, hypothecation,
transfer or other disposition of all or any part of a
Class A Certificate, Class B Certificate or Class C
Certificate (or any interest therein) if the transaction
would, if effected, give rise to any adverse tax
consequence or if such Transfer would create more than an
insubstantial risk that the Trust would be classified for
federal or any applicable state tax purposes as an
association or publicly traded partnership taxable as a
corporation, each as determined in the sole and absolute
discretion of the Transferor; provided, further, that any
attempted Transfer that would cause the number of
Targeted Holders (as defined herein) to exceed one-
hundred shall be void.
(i) Each purchaser of an interest in a
Class A Certificate, Class B Certificate or Class C
Certificate shall certify that it is a Person who is
either (A)(i) a citizen or resident of the United States,
(ii) a corporation or other entity organized in or under
the laws of the United States or any political
subdivision thereof or (iii) a Person not described in
(i) or (ii) whose ownership of the Class A Certificates,
Class B Certificates or Class C Certificates is
effectively connected with such person's conduct of a
trade or business within the United States (within the
meaning of the Internal Revenue Code) and whose ownership
of any interest in a Class A Certificate, Class B
Certificate or Class C Certificate will not result in any
withholding obligation with respect to any payments with
respect to the Class A Certificates, Class B Certificates
or Class C Certificates, as applicable, by any Person or
(B) an estate the income of which is includible in gross
income for United States federal income tax purposes or
any trust if a court within the United States is able to
exercise primary supervision over the administration of
the trust and one or more United States fiduciaries have
the authority to control all substantial decisions of the
trust. Each such purchaser shall agree that if they are
a Person described in clause (A)(iii) above, they will
furnish to the Person from whom they are acquiring a
Class A Certificate, Class B Certificate or Class C
Certificate, the Servicer and the Trustee, a properly
executed U.S. Internal Revenue Service Form 4224 and a
new Form 4224, or any successor applicable form, upon the
expiration or obsolescence of any previously delivered
form (and such other certifications, representations or
opinions of counsel as may be requested by the
Transferor, the Servicer or the Trustee).
(j) Each purchaser of an interest in a
Class A Certificate, Class B Certificate or Class C
Certificate shall certify that if it is not created or
organized under the laws of the United States or any
State thereof (including the District of Columbia) it
will, upon written notice by the Transferor that the
Transferor intends, pursuant to Section 1446 or other
applicable section of the Internal Revenue Code, to
withhold U.S. tax (a "Withholding Tax") from amounts paid
or accruing hereunder to such purchaser (such
determination being a "Withholding Event"), for tax years
for which the purchaser has already filed U.S. federal
income tax returns (each a "Prior Tax Year") prior to
proper notice of such Withholding Event, provide (A) a
signed officer's certificate of such purchaser stating
that amounts paid or accruing hereunder have been
included in such purchaser's U.S. federal income tax
returns for each such Prior Tax Year, which certificate
may be relied on by the Transferor in asserting to the
Internal Revenue Service the applicability of Section
1463 of the Internal Revenue Code with respect to any
Withholding Tax for each such Prior Tax Year and (B)
provide information to the Transferor or, at the option
of such purchaser, to the Internal Revenue Service in
support of the application of Section 1463 of the
Internal Revenue Code for each such Prior Tax Year.
(k) Each purchaser of an interest in a
Class A Certificate, Class B Certificate or Class C
Certificate shall certify that it is not and will not
become a partnership, subchapter S corporation or grantor
trust for United States federal income tax purposes for
so long as such purchaser holds a beneficial interest in
such Class A Certificate, Class B Certificate or Class C
Certificate, respectively.
(l) Each purchaser of an interest in a
Class A Certificate, Class B Certificate or Class C
Certificate shall certify that it has neither acquired
nor will it Transfer the Class A Certificate, Class B
Certificate or Class C Certificate (or any interest
therein) or cause the Class A Certificate, Class B
Certificate or Class C Certificate (or any interest
therein) to be marketed on or through (i) an "established
securities market" within the meaning of Section
7704(b)(1) of the Internal Revenue Code, and any treasury
regulation thereunder, including, without limitation, an
over-the-counter market or an interdealer quotation
system that regularly disseminates firm buy or sell
quotations or (ii) a "secondary market" within the
meaning of Section 7704(b)(2) of the Internal Revenue
Code and any treasury regulation thereunder, including a
market wherein the Class A Certificates, Class B
Certificates or Class C Certificates (or any interest
therein) are regularly quoted by any person making a
market in such interests and a market wherein any person
regularly makes available bid or offer quotes with
respect to the Class A Certificates, Class B Certificates
or Class C Certificates (or any interest therein) and
stands ready to effect buy or sell transactions at the
quoted prices for itself or on behalf of others. Such
purchaser shall acknowledge that it is aware that the
opinion of special tax counsel to the Transferor
regarding the Trust's status is dependent in part on the
accuracy of the preceding sentence.
(m) No subsequent transfer of a Class A
Certificate, Class B Certificate or Class C Certificate
is permitted unless (i) such transfer is of a Class A
Certificate, Class B Certificate or Class C Certificate
with a minimum principal amount of at least $500,000 and
(ii) the condition specified in clause (h) above shall
have been satisfied; provided, that any attempted
transfer that would cause the number of Targeted Holders
to exceed one-hundred shall be void.
SECTION 13. Sale of Class C Certificates. The
Transferor may at any time, without the consent of the
Class A Certificateholders or the Class B
Certificateholders, (i) sell or transfer all or a portion
of the Class C Certificates in one or more classes and
(ii) in connection with any such sale or transfer, enter
into a supplemental agreement with the Trustee or an
amendment and restatement of this Series Supplement
pursuant to which the Transferor and the Trustee may set
forth the amount of monthly interest due Class C
Certificateholders, provide for the payment of additional
amounts with respect to any shortfall in payments of such
interest and provide for such other provisions with
respect to the Class C Certificates as may be specified
in such agreement, provided that in each such case (A)
the Transferor shall have given notice to the Trustee,
the Servicer and any Rating Agencies then rating the
outstanding Class A Certificates or Class B Certificates
at the request of the Transferor of such proposed sale or
transfer of the Class C Certificates and such agreement
at least five Business Days prior to the consummation of
such sale or transfer and the execution of such proposed
agreement or if the Class A Certificates or Class B
Certificates are not then rated, Certificateholders
evidencing Undivided Interests aggregating more than
66 2/3% of the aggregate Class A Invested Amount and
Class B Invested Amount shall have consented to the
consummation of such sale or transfer and the execution
of the proposed amendment; (B) the Rating Agency
Condition shall have been satisfied prior to the
consummation of such proposed sale or transfer of Class C
Certificates or the execution of such agreement; (C) the
Transferor shall have delivered an Officer's Certificate,
dated the date of the consummation of such sale or
transfer and the effectiveness of such agreement, to the
effect that, in the reasonable belief of the Transferor,
such action will not, based on the facts known to such
officer at the time of such certification, cause a Pay
Out Event to occur with respect to any Series; and (D)
the Transferor will have delivered an Opinion of Counsel
dated the date of such sale or subdivision to the effect
that (i) the certificates issued and sold to third
parties will be characterized as indebtedness or an
interest in a partnership (not taxable as a corporation)
for Federal income tax purposes, (ii) the subdivision
will not adversely affect the Federal income tax
characterization of any outstanding Series of investor
certificates or outstanding Class of Series 1997-1
Certificates and (iii) the subdivision will not be
treated as a taxable sale, exchange or other disposition
for Federal income tax purposes; provided, further, as a
condition to the sale or transfer of all or a portion of
the Class C Certificates the transferee shall be required
to agree not to institute against, or join any other
Person in instituting against, the Trust or the
Transferor any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding
under any federal or state bankruptcy or similar law, for
one year and one day after all Investor Certificates are
paid in full.
SECTION 14. Purchases of Certificates by the
Transferor. The Transferor may from time to time,
purchase Certificates on the secondary market and request
the Trustee to cancel such Certificates held by the
Transferor and reduce the Invested Amount by a
corresponding amount; provided, however, that any such
offer by the Transferor to purchase Class A Certificates
or Class B Certificates shall be made to each such
Certificateholder and such purchase will be made pro rata
from each of the Certificateholders that agrees to sell
such Certificates to the Transferor.
SECTION 15. Increased Costs. (a)
Notwithstanding any other provision herein, if after the
Closing Date, 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 A Certificateholder or Class B
Certificateholder that is a commercial bank or controlled
by a commercial bank of the principal of or interest on
any Class A Certificate or Class B Certificate (other
than changes in respect of taxes imposed on the overall
net income of such Class A Certificateholder or Class B
Certificateholder by the jurisdiction in which such Class
A Certificateholder or Class B Certificateholder has its
principal office or by any political subdivision or
taxing authority therein), and the result shall be to
increase the cost to such Class A Certificateholder or
Class B Certificateholder of holding any Class A
Certificate or Class B Certificate or to reduce the
amount of any sum received or receivable by such Class A
Certificateholder or Class B Certificateholder hereunder
(whether of principal or interest) in respect thereof by
an amount deemed by such Class A Certificateholder or
Class B Certificateholder to be material, then the
Trustee will pay to such Class A Certificateholder or
Class B Certificateholder upon demand such additional
amount or amounts as will compensate such Class A
Certificateholder or Class B Certificateholder for such
additional costs incurred or reduction suffered.
Notwithstanding any other provision herein, if after the
Closing Date, 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 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 any Class A Certificateholder or Class B
Certificateholder or, with respect to any SPCPC, any
related Program Bank, or shall impose on such Class A
Certificateholder, Class B Certificateholder or Program
Bank or the London interbank market any other condition
affecting this Series Supplement or any Class A
Certificate or Class B Certificate owned by such Class A
Certificateholder or Class B Certificateholder, and the
result of any of the foregoing shall be to increase the
cost to such Class A Certificateholder, Class B
Certificateholder or Program Bank of holding any Class A
Certificate or Class B Certificate or to reduce the
amount of any sum received or receivable by such Class A
Certificateholder or Class B Certificateholder hereunder
(whether of principal or interest) in respect thereof by
an amount deemed by such Class A Certificateholder or
Class B Certificateholder to be material, then the
Trustee will pay to such Class A Certificateholder or
Class B Certificateholder upon demand such additional
amount or amounts as will compensate such Class A
Certificateholder or Class B Certificateholder for such
additional costs incurred or reduction suffered. Any
Class A Certificateholder or Class B Certificateholder
claiming any additional amounts payable pursuant to this
Section 15 shall use reasonable efforts (consistent 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
applicable 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 Class A
Certificateholder or Class B Certificateholder, be
otherwise disadvantageous to such Class A
Certificateholder or Class B Certificateholder.
(b) If any Class A Certificateholder or
Class B Certificateholder that is a commercial bank or
controlled by a commercial bank, or with respect to any
Class A Certificateholder or Class B Certificateholder
that is an SPCPC, any Program Bank, shall have determined
that the adoption after the Closing Date of any other
law, rule, regulation or guideline 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 interpretation or administration
thereof, or compliance by any such Class A
Certificateholder or Class B Certificateholder (or any
lending office of such Class A Certificateholder or Class
B Certificateholder) or, with respect to any SPCPC, any
related Program Bank or any such Class A
Certificateholder's, Class B Certificateholder's or
Program Bank'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 Class A
Certificateholder's, Class B Certificateholder's or
Program Bank's capital or on the capital of such Class A
Certificateholder's, Class B Certificateholder's or
Program Bank's holding company, if any, as a consequence
of this Series Supplement or the Class A Certificates or
Class B Certificates owned by such Certificateholder or,
with respect to Program Banks, the related SPCPC to a
level below that which such Certificateholder, Program
Bank or such Certificateholder's or Program Banks holding
company could have achieved but for such adoption, change
or compliance (taking into consideration such
Certificateholder's or Program Bank's policies and the
policies of such Certificateholder's or Program Bank's
holding company with respect to such capital adequacy) by
an amount deemed by such Certificateholder or Program
Bank to be material, then from time to time the Trustee
shall pay to such Certificateholder or, with respect to
Program Banks, the related SPCPC such additional amount
or amounts as will compensate such Certificateholder,
such Program Bank or such holding company for any such
reduction suffered after the date hereof.
(c) A certificate of a Class A
Certificateholder or Class B Certificateholder setting
forth such amount or amounts, along with the 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 the Servicer 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 on the Distribution Date
immediately succeeding the Monthly Period in which such
certificate is delivered; provided however, that the
amounts owing by the Trustee pursuant to this Section 15
shall be payable to Class A Certificateholders solely
from amounts available therefor pursuant to subsection
4.9(a)(ix) of the Agreement and to Class B
Certificateholders solely from amounts available therefor
pursuant to subsection 4.9(a)(x) of the Agreement.
(d) Failure on the part of any eligible
Class A Certificateholder or Class B Certificateholder to
demand compensation for any increased costs or reduction
in amounts received or receivable or reduction in return
on capital with respect 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; provided, however, that no
Certificateholder shall be entitled to compensation for
any such increased costs or reductions unless it shall
have submitted a certificate under subsection 15(c) of
this Series Supplement 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 15, no Certificateholder shall demand
compensation for any increased cost or reduction referred
to above if it shall not at the time be the general
policy of such Certificateholder to demand such
compensation in similar circumstances under comparable
provisions of credit or other similar agreements, and
each Certificateholder shall in good faith endeavor to
allocate increased 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 15 shall be
available to each Class A Certificateholder or Class B
Certificateholder that is a commercial bank or controlled
by a commercial bank and, with respect to any Class A
Certificateholder or Class B Certificateholder that is an
SPCPC, the related Program Bank, regardless 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.
(e) Each Program Bank with respect to an
SPCPC that becomes a Program Bank for such SPCPC on or
after April 22, 1997 shall be entitled to receive any
payments pursuant to this Section 15 only to the extent
that any of the Program Banks with respect to such SPCPC
existing on April 21, 1997 would be entitled to such
payment.
SECTION 16. Replacement of Certain Investor
Certificateholders. In the event that (i) a Class A
Certificateholder or Class B Certificateholder requests
compensation pursuant to Section 15 of this Series
Supplement, (ii) a Holder of Investor Certificates (a
"Non-Consenting Holder") does not consent to an
amendment, supplement, waiver or other modification with
respect to this Series Supplement or to the Agreement, as
provided in Section 20 of this Series Supplement within
the time period specified for delivery of such consent
pursuant to the documentation associated therewith and
the amendment, supplement, waiver or other modification
is not approved in accordance with said Section 20 of
this Series Supplement, or (iii) an Investor
Certificateholder fails to approve any Extension
requested by the Transferor pursuant to Section 6.17 of
the Agreement, the Transferor shall have the right to
replace such Holder with a Person or Persons meeting the
requirements of Section 12 of this Series Supplement, by
giving three Business Days prior written notice to the
Trustee and such Holder, specifying the date on which
such Holder s Certificates 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 16.
In the event of the replacement of an Investor
Certificateholder, such Investor Certificateholder agrees
to assign, without recourse, its rights and obligations
hereunder to a replacement Holder selected by the
Transferor upon payment by the replacement Holder to such
Investor Certificateholder in immediately 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 certification or other
document required to be delivered pursuant to Section 12
of this Series Supplement.
SECTION 17. FCI Note. The Transferor has
received a note from Fingerhut Companies, Inc. in the
amount of $18,000,000 (such note, together with any
additional notes of Fingerhut Companies, Inc. held by the
Transferor at any time, the "FCI Note"). The Transferor
hereby agrees that at no time shall aggregate the
principal amount of the FCI Note be less than $1,000,000
(the "FCI Note Required Amount"). The FCI 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 FCI
Note.
SECTION 18. GOVERNING LAW. THIS SERIES
SUPPLEMENT 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 19. Instructions in Writing. All
instructions or other communications given by the
Servicer or any other person to the Trustee pursuant to
this Series Supplement shall be in writing, and, with
respect to the Servicer, may be included in a Daily
Report or Settlement Statement.
SECTION 20. Amendments; Consents. Solely with
respect to any amendment pursuant to Section 13.1 of the
Agreement, 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 Series 1997-1 Certificates and not
less than 51% of the Class A Invested Amount to the
extent that such Class 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 1997-1 Certificates then issued and
outstanding; provided, however, that no such amendment
under this Section 20 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 or reduce any percentage of the Invested Amount
of the Series 1997-1 Certificates required to consent to
any action hereunder if such percentage is greater than
66 2/3%, in each case without the consent of all such
Investor Certificateholders.
The Transferor and the Series 1997-1
Certificateholders hereby agree that commencing on the
Business Day upon which (i) the Series 1994-2
Certificates are no longer outstanding or (ii) the Series
1994-2 Certificates are no longer rated by the Rating
Agency specified in the Series 1994-2 Supplement, for the
Transferor to take any action which pursuant to the
Agreement requires consent of any Rating Agency or
satisfaction of any Rating Agency Condition or the
confirmation of existing ratings by any Rating Agency but
does not require Certificateholder consent, such action
can only be taken by the Transferor upon receiving
written consent of the Holders of Investor Certificates
evidencing Undivided Interests aggregating not less than
51% of the Invested Amount of the Series 1997-1
Certificates. Prior to the occurrence of the events
specified in (i) and (ii) above, the Transferor does not
have to receive Series 1997-1 Certificateholder consent
for any such actions except as specifically provided for
herein (including the immediately preceeding paragraph)
and in the Agreement; provided, however, for the
Transferor to take any action which does not otherwise
require the consent of the Series 1997-1
Certificateholders and which has received any required
Rating Agency consent or with respect to which the Rating
Agency has confirmed existing ratings but which will have
a material adverse effect on the outstanding Series 1997-
1 Certificates and shall not have such a material adverse
effect on Series 1994-2, the Transferor can only take
such action upon receiving written consent of the Holders
of Investor Certificates evidencing Undivided Interests
aggregating not less then 51% of the Invested Amount of
the Series 1997-1 Certificates.
The Transferor hereby agrees that it will not
agree or consent to the sale or transfer of any interest
in or portion of the Series 1994-1 Class D Certificates.
The Transferor hereby agrees that it will not
decrease the Discount Factor unless the Transferor shall
have given notice to the Trustee, the Servicer and any
Rating Agencies then rating the outstanding Class A
Certificates or Class B Certificates at the request of
the Transferor of such proposed reduction of the Discount
Factor at least five Business Days prior to such
reduction or if the Class A Certificates or Class B
Certificates are not then rated it shall have received
written consent of each Class A Certificateholder and
Class B Certificateholder.
SECTION 21. Ratification of Agreement. (a) 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.
(b) For so long as any of the Class A
Certificates or Class B Certificates are outstanding,
each of the Transferor, the Servicer and the Trustee
agree to cooperate with each other to provide to any
Class A Certificateholder or Class B Certificateholder
and to any prospective purchaser of Class A Certificates
or Class B Certificates designated by such a Class A
Certificateholder or Class B Certificateholder upon the
request of such Class A Certificateholder or Class B
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 22. Counterparts. This Series
Supplement may be executed in any number of counterparts,
each of which so executed shall be deemed to be an
original, but all of such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Transferor, the
Servicer and the Trustee have caused this Series 1997-1
Supplement to be duly executed by their respective
officers as of the day and year first above written.
FINGERHUT RECEIVABLES, INC.
Transferor
By:_______________________
Name:
Title:
FINGERHUT NATIONAL BANK
Servicer
By:_________________________
Name:
Title:
THE BANK OF NEW YORK (DELAWARE)
Trustee
By:_________________________
Name:
Title:
Exhibit A
[FORM OF CLASS A VARIABLE FUNDING TRUST 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 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
TRANSFEROR. EACH CERTIFICATE OWNER BY ACCEPTING A
BENEFICIAL INTEREST IN THIS CERTIFICATE IS DEEMED TO
REPRESENT AND WARRANT THAT IT IS A QIB PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE
ACCOUNT OF ANOTHER QIB. THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. EACH CLASS A CERTIFICATE OWNER
BY ACCEPTING A BENEFICIAL INTEREST IN THIS
CERTIFICATE FURTHER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT SUCH
PURCHASER IS NOT AND WILL NOT BECOME A PARTNERSHIP,
SUBCHAPTER S CORPORATION OR GRANTOR TRUST FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES FOR SO LONG AS
SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS
CERTIFICATE.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR
SOLD, TRADED OR TRANSFERRED TO A PERSON WHO IS NOT
EITHER (A)(I) A CITIZEN OR RESIDENT OF THE UNITED
STATES, (II) A CORPORATION, PARTNERSHIP OR OTHER
ENTITY ORGANIZED IN OR UNDER THE LAWS OF THE UNITED
STATES OR ANY POLITICAL SUBDIVISION THEREOF OR (III)
A PERSON NOT DESCRIBED IN (I) OR (II) WHOSE
OWNERSHIP OF THE CLASS A CERTIFICATES IS EFFECTIVELY
CONNECTED WITH SUCH PERSON'S CONDUCT OF A TRADE OR
BUSINESS WITHIN THE UNITED STATES (WITHIN THE
MEANING OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE")) AND ITS OWNERSHIP OF ANY
INTEREST IN A CLASS A CERTIFICATE WILL NOT RESULT IN
ANY WITHHOLDING OBLIGATION WITH RESPECT TO ANY
PAYMENTS WITH RESPECT TO THE CLASS A CERTIFICATES BY
ANY PERSON (OTHER THAN WITHHOLDING, IF ANY, UNDER
SECTION 1446 OF THE CODE) OR (B) AN ESTATE THE
INCOME OF WHICH IS INCLUDIBLE IN GROSS INCOME FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY
TRUST IF A COURT WITHIN THE UNITED STATES IS ABLE TO
EXERCISE PRIMARY SUPERVISION OVER THE ADMINISTRATION
OF THE TRUST AND ONE OR MORE UNITED STATES
FIDUCIARIES HAVE THE AUTHORITY TO CONTROL ALL
SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE (OR ANY INTEREST THEREIN) SHALL BE MADE
UNLESS THE TRANSFEROR SHALL HAVE GRANTED ITS PRIOR
CONSENT THERETO, WHICH CONSENT MAY NOT BE
UNREASONABLY WITHHELD. THIS CERTIFICATE MAY NOT BE
ACQUIRED, SOLD, TRADED OR TRANSFERRED, NOR MAY AN
INTEREST IN THIS CERTIFICATE BE MARKETED ON OR
THROUGH (I) AN "ESTABLISHED SECURITIES MARKET"
WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE CODE
AND ANY PROPOSED, TEMPORARY OR FINAL TREASURY
REGULATION THEREUNDER, INCLUDING, WITHOUT
LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN
INTERDEALER QUOTATION SYSTEM THAT REGULARLY
DISSEMINATES FIRM BUY OR SELL QUOTATIONS OR (II) A
"SECONDARY MARKET" WITHIN THE MEANING OF SECTION
7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY
OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING A
MARKET WHEREIN INTERESTS IN THE CLASS A CERTIFICATES
ARE REGULARLY QUOTED BY ANY PERSON MAKING A MARKET
IN SUCH INTERESTS AND A MARKET WHEREIN ANY PERSON
REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH
RESPECT TO INTEREST IN THE CLASS A CERTIFICATES AND
STANDS READY TO EFFECT BUY OR SELL TRANSACTIONS AT
THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT, UNLESS
SUCH PURCHASER, AT ITS EXPENSE, DELIVERS TO THE
TRUSTEE, THE SERVICER AND THE TRANSFEROR AN OPINION
OF COUNSEL SATISFACTORY TO THEM TO THE EFFECT THAT
THE PURCHASE OR HOLDING OF A CLASS A 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 THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA") AND THE
CODE AND WILL NOT SUBJECT THE TRUSTEE, THE
TRANSFEROR OR THE SERVICER TO ANY OBLIGATION IN
ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND
SERVICING AGREEMENT, SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I
OF ERISA, (II) A PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE CODE, (III) A GOVERNMENTAL PLAN,
AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY
FEDERAL, STATE, OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE PROVISIONS OF SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE
UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE
ENTITY OR (V) A PERSON INVESTING PLAN ASSETS OF ANY
SUCH PLAN (INCLUDING FOR PURPOSES OF CLAUSES (IV)
AND (V), ANY INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
No.
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST
CERTIFICATE, SERIES 1997-1, CLASS A
Evidencing an undivided interest in a trust,
the corpus of which consists of receivables generated
from time to time in the ordinary course of business from
a portfolio of installment sale contracts or loans
generated or to be generated by Fingerhut Corporation
("Fingerhut") or Fingerhut National Bank (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 Receivables, Inc., Fingerhut, the Bank or
any affiliate thereof.)
This certifies that _________ (the
"Certificateholder") is the registered owner of a
fractional undivided interest in the Fingerhut Master
Trust (the "Trust") issued pursuant to the Amended and
Restated Pooling and Servicing Agreement, dated as of
January 12, 1997 (the "Pooling and Servicing Agreement";
such term to include any amendment thereto) by and
between Fingerhut Receivables, Inc., as Transferor (the
"Transferor"), the Bank, as Servicer, and The Bank of New
York (Delaware), as Trustee (the "Trustee"), and the
Amended and Restated Series 1997-1 Supplement, dated as
of April 21, 1997 (the "Series 1997-1 Supplement"), among
the Transferor, the Bank as Servicer and the Trustee (the
Pooling and Servicing Agreement, as supplemented by the
Series 1997-1 Supplement, is herein referred to as the
"Agreement"). The corpus of the Trust consists of all of
the Transferor's right, title and interest in, to and
under the Trust Property (as defined in the Agreement)
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,
benefits, 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
Class of Certificates entitled the "Fingerhut Master
Trust Variable Funding Trust Certificates, Series 1997-1,
Class A" (the "Class A Certificates"), each of which
represents a fractional undivided interest in the Trust,
and is issued under and is subject to the terms,
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, as
amended from time to time, the terms of the Agreement
shall govern.
The Transferor has structured the Agreement and
the Class A Certificates with the intention that the
Class A Certificates will qualify under applicable tax
law as indebtedness, and both the Transferor and each
holder of Class A Certificates (a "Class A
Certificateholder") or any interest therein by acceptance
of its Certificate or any interest therein, agrees to
treat the Class A Certificates for purposes of federal,
state and local income or franchise taxes and any other
tax imposed on or measured by income, as indebtedness.
Except in limited circumstance described in the
third succeeding paragraph no principal will be payable
to the Class A Certificateholders before the first
Business Day in the Amortization Period. Except in
connection with a payment of Class C Daily Principal, the
Class C Certificates will not have the right to receive
payments of principal until the Class A Invested Amount
has been paid in full.
Upon issuance, the Class A Certificates
represents the right to receive, on each Business Day, an
amount equal to the lesser of (x) the Available Series
1997-1 Imputed Yield Collections for such Business Day
and (y) the sum of (A) 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
immediately preceding Business Day to but excluding such
Business Day, and the denominator of which is 360, and
(iii) the Class A Outstanding Principal Amount on such
Business Day after giving effect to all transactions on
such Business Day plus an amount equal to Carryover Class
A Interest for such Business Day (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 on deposit in the Interest Funding Account
with respect thereto on such Business Day.
Notwithstanding anything to the contrary herein, the
portion of Carryover Class A Interest that constitutes
Class A Additional Interest shall be payable or
distributable to Class A Certificateholders only to the
extent permitted by applicable law.
Principal will be distributed to the Class A
Certificateholders on each Distribution Date with respect
to the Amortization Period following the Series 1994-1
Funding Date.
On any Business Day the Transferor may specify,
upon the issuance of a new Series pursuant to an Exchange
made at any time during the Revolving Period that the
proceeds of such issuance be deposited into the
Defeasance Account for payment to the Class A
Certificateholders pursuant to Section 11 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 Pay Out Commencement
Date, 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 Certificates (or at such
Certificateholder's option, in its internal books and
records) the date and amount of any Additional Class A
Invested Amount purchased by it, and each repayment
thereof; provided that failure to make any such
recordation on such grid or any error in such grid shall
not adversely affect such 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" shall mean, when used
with respect to any Business Day, an amount equal to (a)
$59,600,000, plus (b) the aggregate principal amount of
any Additional Class A Invested Amounts purchased
pursuant to Section 6.15 of the Agreement, minus (c) the
aggregate amount of principal payments made to Class A
Certificateholders through and including such Business
Day, minus (d) the aggregate amount of Class A Investor
Charge-Offs for all prior Distribution Dates, minus (e)
the Class A Invested Amount represented by any Class A
Certificates purchased by the Transferor on the secondary
market which have been cancelled by the Trustee at the
Transferor's request in accordance with Section 14 of the
Series Supplement, plus (f) the sum of (x) the aggregate
amount allocated with respect to Class A Investor Charge-
Offs and available on all prior Distribution Dates
pursuant to subsection 4.9(a)(vi) of the Agreement and,
with respect to such subsection, pursuant to subsections
4.10(a) and (b) and Section 4.14 of the Agreement, and
(y) the amount designated pursuant to subsection 4.13(d)
of the Agreement for the purpose of reinstating amounts
reduced pursuant to the foregoing clause (d).
Subject to the Agreement, payments of principal
are limited to the unpaid Class A Invested Amount of the
Class A Certificates, which may be less than the unpaid
balance of the Class A Certificates pursuant to the terms
of the Agreement. All principal of and interest on the
Class A Certificates is due and payable no later than the
October 2002 Distribution Date, unless a different date
shall be set forth in any Extension Notice (the
"Scheduled Series 1997-1 Termination Date"). After the
Scheduled Series 1997-1 Termination Date neither the
Trust nor the Transferor will have any further obligation
to distribute principal or interest on the Class A
Certificates. In the event that the Class A Invested
Amount is greater than zero on the Scheduled Series
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 and the Class C Invested Amount at the close of
business on such date (but not more than the total amount
of Receivables allocable to the Investor Certificates),
and shall pay the proceeds to the Class A
Certificateholders pro rata in final payment of the Class
A Certificates, then to the Class B Certificateholders
pro rata in final payment of the Class B Certificates,
then to the Class C Certificateholders pro rata in final
payment of the Class C Certificates.
Unless the certificate of authentication hereon
has been executed by or on behalf of the Trustee, by
manual signature, this Certificate shall not be entitled
to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused
this Certificate to be duly executed.
FINGERHUT RECEIVABLES, INC.
By:
Name:
Title:
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates
referred to in the within-mentioned Pooling and Servicing
Agreement.
THE BANK OF NEW YORK
By:
Name:
Title:
Beginning Ending
Principal Principal
Date Balance Additions Payments Balance Percentage
Exhibit B
[FORM OF CLASS B FLOATING RATE ACCOUNTS
RECEIVABLE TRUST 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 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
TRANSFEROR. EACH CERTIFICATE OWNER BY ACCEPTING A
BENEFICIAL INTEREST IN THIS CERTIFICATE IS DEEMED TO
REPRESENT AND WARRANT THAT IT IS A QIB PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE
ACCOUNT OF ANOTHER QIB. THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN. EACH CLASS B CERTIFICATE OWNER
BY ACCEPTING A BENEFICIAL INTEREST IN THIS
CERTIFICATE FURTHER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT SUCH
PURCHASER IS NOT AND WILL NOT BECOME A PARTNERSHIP,
SUBCHAPTER S CORPORATION OR GRANTOR TRUST FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES FOR SO LONG AS
SUCH PURCHASER HOLDS A BENEFICIAL INTEREST IN THIS
CERTIFICATE.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR
SOLD, TRADED OR TRANSFERRED TO A PERSON WHO IS NOT
EITHER (A)(I) A CITIZEN OR RESIDENT OF THE UNITED
STATES, (II) A CORPORATION, PARTNERSHIP OR OTHER
ENTITY ORGANIZED IN OR UNDER THE LAWS OF THE UNITED
STATES OR ANY POLITICAL SUBDIVISION THEREOF OR (III)
A PERSON NOT DESCRIBED IN (I) OR (II) WHOSE
OWNERSHIP OF THE CLASS B CERTIFICATES IS EFFECTIVELY
CONNECTED WITH SUCH PERSON'S CONDUCT OF A TRADE OR
BUSINESS WITHIN THE UNITED STATES (WITHIN THE
MEANING OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE")) AND ITS OWNERSHIP OF ANY
INTEREST IN A CLASS B CERTIFICATE WILL NOT RESULT IN
ANY WITHHOLDING OBLIGATION WITH RESPECT TO ANY
PAYMENTS WITH RESPECT TO THE CLASS B CERTIFICATES BY
ANY PERSON (OTHER THAN WITHHOLDING, IF ANY, UNDER
SECTION 1446 OF THE CODE) OR (B) AN ESTATE THE
INCOME OF WHICH IS INCLUDIBLE IN GROSS INCOME FOR
UNITED STATES FEDERAL INCOME TAX PURPOSES OR ANY
TRUST IF A COURT WITHIN THE UNITED STATES IS ABLE TO
EXERCISE PRIMARY SUPERVISION OVER THE ADMINISTRATION
OF THE TRUST AND ONE OR MORE UNITED STATES
FIDUCIARIES HAVE THE AUTHORITY TO CONTROL ALL
SUBSTANTIAL DECISIONS OF THE TRUST.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE (OR ANY INTEREST THEREIN) SHALL BE MADE
UNLESS THE TRANSFEROR SHALL HAVE GRANTED ITS PRIOR
CONSENT THERETO, WHICH CONSENT MAY NOT BE
UNREASONABLY WITHHELD. THIS CERTIFICATE MAY NOT BE
ACQUIRED, SOLD, TRADED OR TRANSFERRED, NOR MAY AN
INTEREST IN THIS CERTIFICATE BE MARKETED ON OR
THROUGH (I) AN "ESTABLISHED SECURITIES MARKET"
WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE CODE
AND ANY PROPOSED, TEMPORARY OR FINAL TREASURY
REGULATION THEREUNDER, INCLUDING, WITHOUT
LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN
INTERDEALER QUOTATION SYSTEM THAT REGULARLY
DISSEMINATES FIRM BUY OR SELL QUOTATIONS OR (II) A
"SECONDARY MARKET" WITHIN THE MEANING OF SECTION
7704(b)(2) OF THE CODE AND ANY PROPOSED, TEMPORARY
OR FINAL TREASURY REGULATION THEREUNDER, INCLUDING A
MARKET WHEREIN INTERESTS IN THE CLASS B CERTIFICATES
ARE REGULARLY QUOTED BY ANY PERSON MAKING A MARKET
IN SUCH INTERESTS AND A MARKET WHEREIN ANY PERSON
REGULARLY MAKES AVAILABLE BID OR OFFER QUOTES WITH
RESPECT TO INTERESTS IN THE CLASS B CERTIFICATES AND
STANDS READY TO EFFECT BUY OR SELL TRANSACTIONS AT
THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT, UNLESS
SUCH PURCHASER, AT ITS EXPENSE, DELIVERS TO THE
TRUSTEE, THE SERVICER AND THE TRANSFEROR AN OPINION
OF COUNSEL SATISFACTORY TO THEM TO THE EFFECT THAT
THE PURCHASE OR HOLDING OF A CLASS B CERTIFICATE 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 THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA") AND THE
CODE AND WILL NOT SUBJECT THE TRUSTEE, THE
TRANSFEROR OR THE SERVICER TO ANY OBLIGATION IN
ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND
SERVICING AGREEMENT, SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I
OF ERISA, (II) A PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE CODE, (III) A GOVERNMENTAL PLAN,
AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY
FEDERAL, STATE, OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE PROVISIONS OF SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE
UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE
ENTITY OR (V) A PERSON INVESTING PLAN ASSETS OF ANY
SUCH PLAN (INCLUDING FOR PURPOSES OF CLAUSES (IV)
AND (V), ANY INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
No.
FINGERHUT MASTER TRUST
FLOATING RATE ACCOUNTS RECEIVABLE TRUST
CERTIFICATE, SERIES 1997-1, CLASS B
Evidencing an undivided interest in a trust,
the corpus of which consists of receivables generated
from time to time in the ordinary course of business from
a portfolio of installment sale contracts or loans
generated or to be generated by Fingerhut Corporation
("Fingerhut") or Fingerhut National Bank (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 Receivables, Inc., Fingerhut, the Bank or
any affiliate thereof.)
This certifies that _________ (the
"Certificateholder") is the registered owner of a
fractional undivided interest in the Fingerhut Master
Trust (the "Trust") issued pursuant to the Amended and
Restated Pooling and Servicing Agreement, dated as of
January 12, 1997 (the "Pooling and Servicing Agreement";
such term to include any amendment thereto) by and
between Fingerhut Receivables, Inc., as Transferor (the
"Transferor"), the Bank, as Servicer, and The Bank of New
York (Delaware), as Trustee (the "Trustee"), and the
Amended and Restated Series 1997-1 Supplement, dated as
of April 21, 1997 (the "Series 1997-1 Supplement"), among
the Transferor, the Bank as Servicer and the Trustee (the
Pooling and Servicing Agreement, as supplemented by the
Series 1997-1 Supplement, is herein referred to as the
"Agreement"). The corpus of the Trust consists of all of
the Transferor's right, title and interest in, to and
under the Trust Property (as defined in the Agreement)
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,
benefits, 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
Class of Certificates entitled the "Fingerhut Master
Trust Floating Rate Accounts Receivable Trust
Certificates, Series 1997-1, Class B" (the "Class B
Certificates"), each of which represents a fractional
undivided interest in the Trust, and is issued under and
is subject to the terms, provisions and 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, as amended from time to time, the terms of the
Agreement shall govern.
The Transferor has structured the Agreement and
the Class B Certificates with the intention that the
Class B Certificates will qualify under applicable tax
law as indebtedness, and both the Transferor and each
holder of Class B Certificates (a "Class B
Certificateholder") or any interest therein by acceptance
of its Certificate or any interest therein, agrees to
treat the Class B Certificates for purposes of federal,
state and local income or franchise taxes and any other
tax imposed on or measured by income, as indebtedness.
Except in limited circumstance described in the
third succeeding paragraph no principal will be payable
to the Class B Certificateholders before the first
Business Day in the Amortization Period. Except in
connection with a payment of Class C Daily Principal, 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.
Upon issuance, the Class B Certificates
represents the right to receive, on each Business Day, an
amount equal to the lesser of (x) the Available Series
1997-1 Imputed Yield Collections for such Business Day
and (y) the sum of (A) the product of (i) the Class B
Certificate Rate, (ii) a fraction the numerator of which
is the actual number of days from and including the
immediately preceding Business Day to but excluding such
Business Day, and the denominator of which is 360, and
(iii) the Class B Outstanding Principal Amount on such
Business Day after giving effect to all transactions on
such Business Day plus an amount equal to Carryover Class
B Interest for such Business Day plus (B) the excess, if
any, of the amount payable to the Class B
Certificateholders pursuant to clause (A) on each prior
Business Day over the amount on deposit in the Interest
Funding Account with respect thereto on such Business
Day. Notwithstanding anything to the contrary herein,
the portion of Carryover Class B Interest that
constitutes Class B Additional Interest shall be payable
or distributable to Class B Certificateholders only to
the extent permitted by applicable law.
Principal will be distributed to the Class B
Certificateholders on each Distribution Date with respect
to the Amortization Period following the Series 1994-1
Funding Date.
On any Business Day the Transferor may specify,
upon the issuance of a new Series pursuant to an Exchange
made at any time during the Revolving Period that the
proceeds of such issuance be deposited into the
Defeasance Account for payment to the Class B
Certificateholders pursuant to Section 11 of the
Agreement. The Class B Invested Amount will be reduced
by an amount equal to the amount of any such payments
made.
"Class B Invested Amount" shall mean, when used
with respect to any Business Day, an amount equal to (a)
$51,100,000, minus (b) the aggregate amount of principal
payments made to Class B Certificateholders through and
including 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 the
Class C Invested Amount has not been reduced for all (y)
prior Business Days, minus (e) the Class B Invested
Amount represented by any Class B Certificates purchased
by the Transferor on the secondary market which have been
cancelled by the Trustee at the Transferor's request in
accordance with Section 14 of the Series Supplement, and
plus (f) the sum of (x) the aggregate amount allocated
and available on all prior Business Days pursuant to
subsection 4.9(a)(vii) of the Agreement and, with respect
to such subsection, pursuant to subsections 4.10(a) and
(b) and Section 4.14 of the Agreement, and (y) the amount
designated pursuant to subsection 4.13(d) of the
Agreement for the purpose of reinstating amounts reduced
pursuant to the foregoing clauses (c) and (d).
Subject to the Agreement, payments of principal
are limited to the unpaid Class B Invested Amount of the
Class B Certificates, which may be less than the unpaid
balance of the Class B Certificates pursuant to the terms
of the Agreement. All principal of and interest on the
Class B Certificates is due and payable no later than the
October 2002 Distribution Date, unless a different date
shall be set forth in any Extension Notice (the
"Scheduled Series 1997-1 Termination Date"). After the
Scheduled Series 1997-1 Termination Date neither the
Trust nor the Transferor will have any further obligation
to distribute principal or interest on the Class B
Certificates. In the event that the Class B Invested
Amount is greater than zero on the Scheduled Series
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 Invested Amount at the close of business on such
date (but not more than the total amount of Receivables
allocable to the Investor Certificates), and shall pay
the proceeds to the Class A Certificateholders pro rata
in final payment of the Class A Certificates, then to the
Class B Certificateholders pro rata in final payment of
the Class B Certificates and then to the Class C
Certificateholders pro rata in final payment of the Class
C Certificates.
Unless the certificate of authentication hereon
has been executed by or on behalf of the Trustee, by
manual signature, this Certificate shall not be entitled
to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused
this Certificate to be duly executed.
FINGERHUT 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
By:
Name:
Title:
Beginning Ending
Principal Principal
Date Balance Additions Payments Balance Percentage
Exhibit C
[FORM OF CLASS C 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 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
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 INCOME TAX
CHARACTERIZATION OF ANY OUTSTANDING SERIES OF
INVESTOR CERTIFICATES. THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO CERTAIN CONDITIONS SET
FORTH IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
NO SALE, ASSIGNMENT, PARTICIPATION, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION OF THIS
CERTIFICATE (OR ANY INTEREST THEREIN) SHALL BE MADE
UNLESS THE TRANSFEROR SHALL HAVE GRANTED ITS PRIOR
CONSENT THERETO, WHICH CONSENT MAY NOT BE
UNREASONABLY WITHHELD. NOR MAY AN INTEREST IN THIS
CERTIFICATE BE MARKETED ON OR THROUGH (I) AN
"ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING
OF SECTION 7704(b)(1) OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE") AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-
MARKET OR AN INTERDEALER QUOTATION SYSTEM THAT
REGULARLY DISSEMINATES FIRM BUY OR SELL QUOTATIONS
OR (II) A "SECONDARY MARKET" WITHIN THE MEANING OF
SECTION 7704(b)(2) OF THE CODE AND ANY PROPOSED,
TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING A MARKET WHEREIN INTERESTS IN THE CLASS C
CERTIFICATES ARE REGULARLY QUOTED BY ANY PERSON
MAKING A MARKET IN SUCH INTERESTS AND A MARKET
WHEREIN ANY PERSON REGULARLY MAKES AVAILABLE BID OR
OFFER QUOTES WITH RESPECT TO INTERESTS IN THE CLASS
C CERTIFICATES AND STANDS READY TO EFFECT BUY OR
SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR
ON BEHALF OF OTHERS.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE
BENEFIT OF FINGERHUT RECEIVABLES, INC. THAT, UNLESS
SUCH PURCHASER, AT ITS EXPENSE, DELIVERS TO THE
TRUSTEE, THE SERVICER AND THE TRANSFEROR AN OPINION
OF COUNSEL SATISFACTORY TO THEM TO THE EFFECT THAT
THE PURCHASE OR HOLDING OF A CLASS C 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 THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA") AND THE
CODE AND WILL NOT SUBJECT THE TRUSTEE, THE
TRANSFEROR OR THE SERVICER TO ANY OBLIGATION IN
ADDITION TO THOSE UNDERTAKEN IN THE POOLING AND
SERVICING AGREEMENT, SUCH PURCHASER IS NOT (I) AN
EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
ERISA) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I
OF ERISA, (II) A PLAN DESCRIBED IN SECTION
4975(e)(1) OF THE CODE, (III) A GOVERNMENTAL PLAN,
AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY
FEDERAL, STATE, OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE PROVISIONS OF SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE, (IV) AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS (AS
DEFINED IN 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE
UNDER ERISA) BY REASON OF A PLAN'S INVESTMENT IN THE
ENTITY OR (V) A PERSON INVESTING PLAN ASSETS OF ANY
SUCH PLAN (INCLUDING FOR PURPOSES OF CLAUSES (IV)
AND (V) ANY INSURANCE COMPANY GENERAL ACCOUNT, BUT
EXCLUDING ANY ENTITY REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED).
No.
FINGERHUT MASTER TRUST
VARIABLE FUNDING TRUST
CERTIFICATE, SERIES 1997-1, CLASS C
Evidencing an undivided interest in a trust,
the corpus of which consists of receivables generated
from time to time in the ordinary course of business from
a portfolio of installment sale contracts or loans
generated or to be generated by Fingerhut Corporation
("Fingerhut") of Fingerhut National Bank (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 Receivables, Inc., Fingerhut, the Bank or any
affiliate thereof.)
This certifies that _________ (the
"Certificateholder") is the registered owner of a
fractional undivided interest in the Fingerhut Master
Trust (the "Trust") issued pursuant to the Amended and
Restated Pooling and Servicing Agreement, dated as of
January 12, 1997 (the "Pooling and Servicing Agreement";
such term to include any amendment thereto) by and
between Fingerhut Receivables, Inc., as Transferor (the
"Transferor"), the Bank, as Servicer, and The Bank of New
York (Delaware), as Trustee (the "Trustee"), and the
Amended and Restated Series 1997-1 Supplement, dated as
of April 21, 1997 (the "Series 1997-1 Supplement"), among
the Transferor, the Bank as Servicer and the Trustee (the
Pooling and Servicing Agreement, as supplemented by the
Series 1997-1 Supplement, is herein referred to as the
"Agreement"). The corpus of the Trust consists of all of
the Transferor's right, title and interest in, to and
under the Trust Property (as defined in the Agreement)
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,
benefits, 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
Class of Certificates entitled "Fingerhut Master Trust
Variable Funding Trust Certificates, Series 1997-1, Class
C" (the "Class C Certificates"), each of which represents
a fractional undivided interest in the Trust, and is
issued under and is subject to the terms, 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, as amended from time to time,
the terms of the Agreement shall govern.
[The Transferor has structured the Agreement,
the Class C Certificates, the Fingerhut Master Trust
Variable Funding Trust Certificate, Series 1997-1, Class
A (the "Class A Certificates ) and the Fingerhut Master
Trust Floating Rate Accounts Receivable Trust
Certificate, Series 1997-1, Class B (the "Class B
Certificates") with the intention that the Class A
Certificates, 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 Certificateholder") 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 imposed on or
measured by income, as indebtedness.]
Principal will be payable to the Class C
Certificateholders on the Class C Principal Payment
Commencement Date, which is the Distribution Date either
on or following the Distribution Date on which the Class
A Invested Amount and the Class B Invested Amount has
been paid in full. Except in connection with a payment
of Class C Daily Principal, principal will not be payable
to the Class C Certificateholders until all principal
payments have been made to the Class A Certificateholders
and the Class B Certificateholders.
"Class C Invested Amount" shall mean, when used
with respect to any Business Day, an amount equal to (a)
upon the initial issuance of the Class C Certificate,
zero, plus (b) the aggregate principal amount of any
Additional Class C Invested Amounts pursuant to Section
6.16 of the Agreement, minus (c) the aggregate amount of
principal payments made to Class C Certificateholders
through and including such Business Day, minus (d) the
aggregate amount of Class C Investor Charge-Offs for all
prior Distribution Dates pursuant to subsections 4.13(a)
and 4.13(d) of the Agreement, 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)(viii) 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).
Subject to the Agreement, payments of principal
are limited to the unpaid Class C Invested Amount of the
Class C Certificates, which may be less than the unpaid
balance of the Class C Certificate pursuant to the terms
of the Agreement. All principal of and interest on the
Class C Certificate is due and payable no later than the
October 2002 Distribution Date, unless a different date
shall be set forth in any Extension Notice (the
"Scheduled Series 1997-1 Termination Date"). After the
Scheduled Series 1997-1 Termination Date neither the
Trust nor the Transferor will have any further obligation
to distribute principal or interest on the Class C
Certificates. In the event that the Class C Invested
Amount is greater than zero on the Scheduled Series 1997-
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 Invested Amount at the close of business on such
date (but not more than the total amount of Receivables
allocable to the Investor Certificates), and shall pay
the proceeds to the Class A Certificateholders pro rata
in final payment of the Class A Certificates, then to the
Class B Certificateholders pro rata in final payment of
the Class B Certificates and then to the Class C
Certificateholders pro rata in final payment of the Class
C Certificates.
Unless the certificate of authentication hereon
has been executed by or on behalf of the Trustee, by
manual signature, this Certificate shall not be entitled
to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Transferor has caused
this Certificate to be duly executed.
FINGERHUT 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 Servicing Agreement.
THE BANK OF NEW YORK
By:
Name:
Title:
Beginning Ending
Principal Principal
Date Balance Additions Payments Balance Percentage
Exhibit D
[Form of Monthly Certificateholders' Statement]
Exhibit E
____________, ____
Fingerhut Receivables, Inc.
4400 Baker Road
Suite F480
Minnetonka, MN 55343
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Re: Fingerhut Master Trust, Class [A] [B] Certificates,
Series 1997-1
Ladies and Gentlemen:
In connection with our proposed purchase of
Fingerhut Master Trust, Variable Funding Trust
Certificates, Series 1997-1, Class [A] [B] Certificates
(the "Class [A] [B] Certificates"), we confirm that:
1. We have received such information and
documentation as we deem necessary in order to make our
investment decision. We understand that such information
and documentation speaks only as of its date and that
such information and documentation may not be correct or
complete as of any time subsequent to such date.
2. We agree to be bound by the restrictions and
conditions set forth in the Amended and Restated Pooling
and Servicing Agreement, dated as of January 12, 1997, as
supplemented by the Amended and Restated Series 1997-1
Supplement dated as of April 21, 1997 (the "Series 1997-1
Supplement" and together with the Pooling and Servicing
Agreement, each as amended from time to time, the
"Pooling and Servicing Agreement"), each by and among
Fingerhut Receivables, Inc., as Transferor, Fingerhut
National Bank, as Servicer, and The Bank of New York
(Delaware), as Trustee, relating to the Class [A] [B]
Certificates, including the obligation to purchase
Additional Class A Invested Amounts, as specified in
Section 6.15 of the Pooling and Servicing Agreement, and
agree to be bound by, and not reoffer, resell, pledge or
otherwise transfer (any such act, a "Transfer") the Class
[A] [B] Certificates except in compliance with, such
restrictions and conditions including but not limited to
those in Section 12 of the Series 1997-1 Supplement.
3. We understand that the Class [A] [B]
Certificates have not been and will not be registered
under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities law and agree
that the Class [A] [B] Certificates may be reoffered,
resold, pledged or otherwise transferred only in
compliance with the Securities Act and other applicable
laws and only (i) to the Transferor or (ii) pursuant to
Rule 144A under the Securities Act to an institutional
investor that we reasonably believe 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 we have
informed, in each case, that the reoffer, resale, pledge
or other transfer is being made in reliance on Rule 144A.
4. We have neither acquired nor will we Transfer
any Class [A] [B] Certificate we acquire (or any interest
therein) or cause any Class [A] [B] Certificate (or any
interest therein) to be marketed on or through (i) an
"established securities market" within the meaning of
Section 7704(b)(1) of the Internal Revenue Code of 1986,
as amended (the "Code") and any proposed, temporary or
final treasury regulation thereunder, including, without
limitation, an over-the-counter-market or an interdealer
quotation system that regularly disseminates firm buy or
sell quotations or (ii) a "secondary market" within the
meaning of Section 7704(b)(2) of the Code and any
treasury regulation thereunder, including a market
wherein the Class [A] [B] Certificates (or any interest
therein) are regularly quoted by any person making a
market in such interests and a market wherein any person
regularly makes available bid or offer quotes with
respect to the Class [A] [B] Certificates (or any
interest therein) and stands ready to effect buy or sell
transactions at the quoted prices for itself or on behalf
of others. We acknowledge that we are aware that the
opinion of special tax counsel to the Transferor
regarding the Trust's status is dependent in part on the
accuracy of the preceding sentence.
5. We are not and will not become, for so long as
we hold any interest in the Class [A] [B] Certificates, a
partnership, Subchapter S corporation or grantor trust
for United States federal income tax purposes.
6. We are a person who is either (A)(i) a citizen
or resident of the United States, (ii) a corporation or
other entity organized in or under the laws of the United
States or any political subdivision thereof or (iii) a
person not described in (i) or (ii) whose ownership of
the Class [A] [B] Certificates is effectively connected
with a such person's conduct of a trade or business
within the United States (within the meaning of the Code)
and our ownership of any interest in a Class [A] [B]
Certificate will not result in any withholding obligation
with respect to any payments with respect to the Class
[A] [B] Certificates by any person or (B) an estate the
income of which is includible in gross income for United
States federal income tax purposes or any trust if a
court within the United States is able to exercise
primary supervision over the administration of the trust
and one or more United States fiduciaries have the
authority to control all substantial decisions of the
trust. We agree that if we are a person described in
clause (A)(iii) above, we will furnish to the person from
whom we are acquiring a Class [A] [B] Certificate, the
Servicer and the Trustee, a properly executed U.S.
Internal Revenue Service Form 4224 and a new Form 4224,
or any successor applicable form, upon the expiration or
obsolescence of any previously delivered form (and such
other certifications, representations or opinions of
counsel as may be requested by the Transferor, the
Servicer or the Trustee). We recognize that if we are a
tax-exempt entity, payments with respect to the Class [A]
[B] Certificates may constitute unrelated business
taxable income.
7. We understand that if we are not created
or organized under the laws of the United States or any
State thereof (including the District of Columbia) we
will, upon written notice by the Transferor that the
Transferor intends, pursuant to Section 1446 or other
applicable section of the Internal Revenue Code, to
withhold U.S. tax (a "Withholding Tax") from amounts paid
or accruing hereunder to us (such determination being a
"Withholding Event"), for tax years for which we have
already filed U.S. federal income tax returns (each a
"Prior Tax Year") prior to proper notice of such
Withholding Event, provide (A) a signed officer's
certificate stating that amounts paid or accruing under
the Certificates have been included in such purchaser's
U.S. federal income tax returns for each such Prior Tax
Year, which certificate may be relied on by the
Transferor in asserting to the Internal Revenue Service
the applicability of Section 1463 of the Internal Revenue
Code with respect to any Withholding Tax for each such
Prior Tax Year and (B) provide information to the
Transferor or, at our option, to the Internal Revenue
Service in support of the application of Section 1463 of
the Internal Revenue Code for each such Prior Tax Year.
8. We understand that no subsequent Transfer of a
Class [A] [B] Certificate is permitted unless (i) such
Transfer is of a Class [A] [B] Certificate with a minimum
principal amount of at least $500,000 and (ii) the
Transferor consents in writing to the proposed Transfer;
provided, that any attempted Transfer that would cause
the number of Targeted Holders to exceed one-hundred
shall be void.
9. We are a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) purchasing
for our own account or for the account of a "qualified
institutional buyer" and we understand that the sale to
us is being made in reliance on Rule 144A under the
Securities Act.
10. We are acquiring each of the Class [A] [B]
Certificates purchased by us for our own account or for a
single account (each of which is a "qualified
institutional buyer") as to which we exercise sole
investment discretion.
11. We are 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 Code, (iii) a
governmental plan, as defined in Section 3(32) of ERISA,
subject to any federal, state or local law which is, to a
material extent, similar to the provisions of Section 406
of ERISA or Section 4975 of the Code, (iv) an entity
whose underlying assets include plan assets (as defined
in 29 C.F.R. Section 2510.3-101 or otherwise under ERISA)
by reason of a plan's investment in the entity, or (v) a
person investing plan assets of any such plan (including
for purposes of clauses (iv) and (v) any insurance
company general account, but excluding any entity
registered under the Investment Company Act of 1940, as
amended).
12. We understand that any purported Transfer of
any Class [A] [B] Certificate in contravention of the
restrictions and conditions in paragraphs 1 through 11
above shall be null and void and the purported transferee
shall not be recognized by the Trust or any other person
as a Class [A] [B] Certificateholder for any purpose.
13. We further understand that, promptly following
any proposed resale, pledge or transfer of any Class [A]
[B] Certificates, we will be required to furnish to the
Trustee and the Registrar, such certification and other
information as the Trustee or the Registrar may
reasonably require to confirm that the proposed sale
complies with the foregoing restrictions and with the
restrictions and conditions of the Class [A] [B]
Certificates and the Pooling and Servicing Agreement
pursuant to which the Class [A] [B] Certificates were
issued and we agree that if we determine to Transfer any
Class [A] [B] Certificate, we will cause our proposed
transferee to provide the Transferor, the Servicer and
the Trustee with a letter substantially in the form of
this letter. We further understand that Class [A] [B]
Certificates purchased by us will bear a legend to the
foregoing effect.
14. The person signing this letter on behalf of the
ultimate beneficial purchaser of the Class [A] [B]
Certificates has been duly authorized by such beneficial
purchaser of the Class [A] [B] Certificates to do so.
15. The Class [A] [B] Certificates purchased by us
should be registered in the name and issued in the
denominations set forth on Schedule 1 hereto. All
payments on the Class [A] [B] Certificates held by us
should be wired to us in accordance with the instructions
set forth on Schedule 1 hereto unless we otherwise notify
the Transferor, the Servicer and the Trustee in writing.
You are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the
matters covered hereby.
Very truly yours
[NAME OF PURCHASER]
By:
Name:
Title:
Schedule 1
Registration and Payment Instructions
Registration Instructions:
Full Legal Name of Purchaser:__________________________
Number of Certificates:________________
Payment Instructions:
Name of Bank: ____________________
Address of Bank:____________________
Account Name: ___________________
Account Number:___________________
ABA Number: ___________________
Reference: ___________________
Exhibit F
FORM OF EXTENSION NOTICE
FINGERHUT MASTER TRUST, SERIES 1997-1
The undersigned, a duly authorized
representative of Fingerhut Receivables, Inc., a Delaware
corporation (the "Transferor"), as Transferor pursuant to
the Amended and Restated Pooling and Servicing Agreement
dated as of January 12, 1997 (the "Pooling and Servicing
Agreement"), by and among the Transferor, Fingerhut
National Bank, as servicer (the "Servicer"), and The Bank
of New York (Delaware), as trustee (the "Trustee"), as
supplemented by the Amended and Restated Series 1997-1
Supplement, dated as of __________, 1997 (the "Series
1997-1 Supplement"), by and between the Transferor, the
Servicer and the Trustee (the Pooling and Servicing
Agreement, as supplemented by the Series 1997-1
Supplement, and as each may from time to time be amended,
supplemented, or modified, the "Agreement"), does hereby
notify the Trustee (or any successor Trustee) and the
Investor Certificateholders:
A. 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
sections and subsections of the Agreement.
B. 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.
C. This Certificate is being delivered
pursuant to Section 6.17(a) of the Agreement.
D. The Transferor is the Transferor under the
Agreement.
E. No Pay Out Event has occurred that has not
been remedied pursuant to the provisions of the
Agreement.
F. The Certificate is being delivered to the
Trustee on or before the date specified in subsection
6.17(a) for delivery.
G. 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 1997-1
on the Current Extension Date pursuant to the provisions
of Section 6.17, until the date set forth below (such
extension, the "Extension").
H. 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 one-hundred percent of each of the aggregate
principal amount of Class A Certificates, Class B
Certificates and Class C Certificates, respectively,
shall return properly executed Election Notices approving
the Extension by the Election Date (as defined below).
Any Investor Certificateholder electing to approve the
Extension must deliver 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
previous 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 CERTIFICATEHOLDERS
HOLDING THE REQUIRED AGGREGATE PRINCIPAL AMOUNT OF CLASS
A CERTIFICATES AND CLASS B CERTIFICATES 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.
I. 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
[ , ].
[(3) The new Scheduled Series 1997-1
Termination Date shall be [,].]
[(4) The following are additional provisions
that will apply to the Investor Certificates on and after
the Extension Date:
INSERT PROVISIONS]
J. 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 RECEIVABLES, INC.
By:
Name:
Title:
Exhibit G
FORM OF INVESTOR CERTIFICATEHOLDER ELECTION NOTICE
[INSERT NAME
AND ADDRESS OF TRUSTEE]
Re: Fingerhut Master Trust:
Election Notice to Extend Series 1997-1
Ladies and Gentlemen:
The undersigned hereby elects to approve the
extension of the Revolving Period for Series 1997-1 until
the Amortization Period Commencement Date set forth in
the Extension Notice dated [ , ] (the
"Extension Notice") and delivered to the undersigned
pursuant Section 6.17(a) of the Amended and Restated
Pooling and Servicing Agreement, dated as of January 12,
1997, including the Amended and Restated Series 1997-1
Supplement thereto, dated as of April 21, 1997, each by
and among Fingerhut Receivables, Inc., as transferor,
Fingerhut National Bank, as servicer, and The Bank of New
York (Delaware), as trustee (collectively, and as each
may be amended, supplemented or modified from time to
time, the "Pooling and Servicing Agreement"). The
undersigned hereby acknowledges that, commencing on the
Current Extension Date (as defined in the Extension
Notice), the terms and provisions 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):__________________
